Direct Air Deals, Future Technology Grab IBTA's Focus
Direct Air Deals, Future Technology Grab IBTA's Focus
Marshall: BA is open to direct corporate deals
By David Meyer and Amon CohenEdinburgh, Scotland - British Airways chairman Sir Colin Marshall kicked off the 22nd International Business Travel Association Congress late last month by clearly indicating his airline's interest in expanding direct dealings with corporate travel planners.
In his keynote address, delivered to the crowd of more than 450 delegates representing 13 mostly European national business travel associations, Marshall said that the structure of the distribution system in the near term would largely be determined by the corporate buyer.
"We have no wish to stop working with travel agents, so long as arrangements with them are progressive and productive," he said. "The option of dealing direct with an airline or through an agent rests with the customer."
Meanwhile, he said, technological advances are rapidly changing the equation. "We simply cannot cling to traditional sales and distribution systems in the face of new technology," he said. "Competitive advantage depends quite crucially on the extent and quality of direct relationships with the customer."
Marshall paraphrased George Orwell in underscoring the importance of corporate customers. When it comes to customers, he said, "business travelers are more equaller than others."
He also quoted Richard Cornwell, U.K. corporate travel manager for Price Waterhouse and chairman of the Institute of Travel Management, who said that "educating travelers to generate value-based expectations is more important than pure cost savings." ITM, which is the U.K. member of the IBTA, held its annual meeting in conjunction with this year's IBTA event.
Following his speech, Marshall said that BA was developing automated booking tools that would expedite direct relations between the airline and its corporate customers. He said BA would begin testing a U.K. version of USAir's Priority Travel Works by year-end, but added it would probably take five years before the full potential of automated tools would be realized because it must be universally accessible and requires a heavy investment.
Attendees had a chance to check out a new automation tool on the IBTA exhibition floor-Lufthansa's new self-service checkin machine. The airline began using 50 of these machines at the beginning of last month for domestic German travel only. The machines cut checkin time to 40 seconds for passengers holding its smart cards and who have only carry-on luggage. Once checkin is complete, the machine issues an itinerary card with a magnetic stripe that can serve as backup in case problems arise. Lufthansa officials estimate that 100,000 of its frequent flyers currently hold its ChipCard. They intend to work with the International Air Transport Association to develop an international standard for this technology this summer.
As ever, the future of technology was one of the major themes of the conference. Jeffrey Hoffman, chairman and CEO of Virtual Shopping Inc., is a well-known speaker in the United States but was clearly a revelation to U.K. audiences. Jaws visibly dropped around the conference hall as he spelled out his vision of an online future and warned travel managers not to let the dust settle before deciding how to invest in it. The dust will never settle on technology because it is developing at too rapid a pace, he said.
An earlier session on the future of CRSs was equally thought-provoking. Peter Dennis, European marketing automation manager for Marriott Hotels International, said that a move to online reservations was inevitable because the cost per transaction was so cheap-as low as 25 cents in some cases.
He also looked forward to the day, not far off, when travelers will book their flights simply by talking to their computers.
However, despite his enthusiasm for what he called the "spooky" new world of online media, Dennis said there also was a future for CRSs. "There is no question that our industry will not throw away the amount of money we have invested in those machines, but they will have to add value if they are to survive," he said. "They will have to move away from being hardware suppliers to become search engines."
In the IBTA Open Forum session, which hyped next May's IBTA Congress in Malmo, Sweden, delegates learned that Germany's travel management association is ''90 percent'' of the way back to rejoining IBTA after walking out over a disagreement on direction three years ago. The Germans had planned to rejoin formally by attending an IBTA educational conference in Luxembourg on Nov. 9 and 10, but that idea has been shelved because it clashes with an event the Germans are staging at the same time. An announcement of a precise date is expected soon.
Meanwhile, The Australian Business Travel Association (known as TABTA to avoid confusion with the long-standing Association of British Travel Agents) has joined IBTA. TABTA was formed in February of this year.
Sparks flew at the last session of the conference, a controversial debate on how airlines should cut distribution costs. The session started with British Airways manager of global deals Bernard Harrop trotting out the standard presentation the airline has been giving for the past six months when called on to explain why it is reducing payments to agents. Costs of sale have gone up, said Harrop, but yields have come down.
Next was Lufthansa's new sales chief, Alexander Arafa, who warned that incentivizing both agent and client for the same ticket was on its way out. "We cannot afford to continue double-dipping any longer," he said.
But the gloves really came off when Richard Lovell, U.K. managing director and Northern Europe executive vice president of Carlson Wagonlit Travel, took the floor.
"Those of you close to the front will see I am wearing a tie with pandas on it," was his first remark. "This is an expression of my solidarity with other endangered species."
After the laughter subsided, Lovell launched a blistering attack on the airlines for singling out agents in their attempt to cut distribution costs. It is not commissions and overrides that have gone up, he said, but all the other self-inflicted expenses, such as those for frequent flyer programs, advertising and computer reservations systems fees. Lovell noted that both the airline speakers represented carriers with major interests in CRSs and therefore profited from these fees.
"My first message to airlines is welcome to the competitive marketplace!" he declared to a round of applause from delegates.
But Lovell then produced gasps among the audience as he made a personal attack on Sir Colin Marshall for saying on the previous day that BA would not spurn corporates who approached the airline directly. Lovell pointed out that Sir Colin is a non-executive director of Inchcape, a large U.K. holding company whose car distribution subsidiary has been campaigning against Korean vehicle manufacturer Daewoo for selling direct to the public.
"Two words come to mind-double standards," Lovell said.
To understand the strength of Lovell's feelings, one has to look no further than the marketing agreements BA has issued to agents in the U.K. Although not as severe as feared at first, overrides have been abolished on first class and drastically reduced in all classes across the Atlantic. At press time, the U.K.'s big three agencies-Carlson Wagonlit, American Express and Hogg Robinson BTI-had not signed their agreements, even though the deadline was March 31. Most of their smaller rivals have signed-if they have been offered a deal at all, that is.
After Lovell's speech, everything else was tame in comparison. The last speaker, Barclays Bank travel procurement manager Pat Smith, warned that BA's point of view was understandable and travel managers would have to move smartly to avoid picking up the tab for consequent changes in the travel industry. Smith also pleaded for airlines to start issuing net fares, a phenomenon that is still extremely rare in Europe.
One of the biggest surprises of the gathering took place the day after the conference, when IBTA national leaders met and voted to invite multinational travel management companies to become members of the association for the first time. The companies that will be invited to take up immediate membership of the IBTA Allied Council of suppliers are American Express, Business Travel International, Carlson Wagonlit Travel, Rosenbluth International, Woodside Travel Trust and Internet.
This represents a sea change for IBTA, which traditionally has believed it best to keep travel agents out of the association, as is the case with NBTA and the U.K.'s Institute of Travel Management. Although U.S., U.K. and French leaders were instructed by their respective associations to vote against the move, the groundswell of positive opinion among most continental European associations ruled the day.
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