Enter Microsoft

By Cheryl Rosen

Allies With Amex For Online Corporate Travel

Redmond, Wash. - It's a summer wedding between two dynasties as software giant Microsoft Corp. finally makes its entry into the travel industry on the arm of American Express, the world's largest agency.

Microsoft plans to announce today a two-year exclusive alliance with American Express to develop and market a "comprehensive online corporate travel solution that integrates corporate policies and negotiated rates."

Already under development and using technology Microsoft has been working on for some months for its new leisure Website, the corporate system will be demonstrated in prototype form at the NBTA show next week, go into beta testing in January and be generally available to Amex customers in the first half of next year. The product will be offered in three versions-client-server, Internet and intranet. Among the first Amex customers to try it will be Microsoft itself.

As part of the pact, Microsoft will supply the booking engine for Amex's public Web page, at www.americanexpress.com/travel.

When the two-year contract expires, Amex will retain the right to use and market the system, and Microsoft will "decide whether to continue its exclusive relationship or resell the technology," said Greg Slyngstad, product unit manager for the Microsoft Travel Group.

At American Express, the product will be the first focus of the new, 50-person Interactive Travel Group, headed by senior vice president and general manager Mike Mulligan and charged with developing online solutions, electronic ticketing and smart-card travel applications.

The booking system will be bundled with Amex's existing management reporting and expense reporting software to provide an integrated suite of real-time travel products, following the tack taken by major industry players like Sabre and Carlson Wagonlit Travel.

At Microsoft, the anouncement capped a year of total secrecy about its plans for the online travel market, followed by a busy two weeks in the spotlight. At the Hotel Electronic Distribution Network Association meeting in Toronto earlier this month, Microsoft hotel project manager Erik Blachford rocked the travel agency community by announcing the company's plans to open the first "online agency" on the Web, to receive formal ARC accreditation as a travel agency and to "absolutely undercut" the 10 percent commission that vendors currently pay to travel agents.

The Microsoft Website will offer air, hotel and car rental reservations, with 27,000 hotel offerings and an 800 number travelers can call if they need to also speak to a human "travel expert," Blachford told HEDNA. "You don't really need to have all these agents between the customer and the hotel," he said. "We'll be a full-service travel agency that is really, really cheap."

Some agents were up in arms, and the United States Travel Agency Registry and the Association of Retail Travel Agents filed a joint letter of complaint with the Department of Transportation against Microsoft and Worldspan, its CRS. "Worldspan is saying, 'the heck with travel agencies-we're going to explore a new channel,' " fumed USTAR president Bruce Bishins. "It's a vicious betrayal of their core business and their core customers. The whole point of USTAR's Genesis Project is not to support the CRS channel that is working against us, and to build an alternative."

Microsoft lead travel products manager Rich Barton said the transaction-based pricing policy Blachford outlined refers only to hotel bookings. Microsoft is "in discussion with the airlines to work toward a new business model," he said, and plans to deliver air and car bookings at less than the standard 10 percent commission, although it will not necessarily charge on a per-transaction basis.

Even while preparations for its leisure site were under way, Microsoft had been talking with Amex about partnering on the corporate side for some time-since Warren Buffett extolled Amex's strength in the marketplace on a trip to China with Bill Gates some months ago, Slyngstad said.

In a joint interview with BTN, both sides seemed pleased with what they had wrought. "This partnership is about taking the strongest company in the software industry and the strongest in the travel industry, and bringing together their complementary customer relationships, supplier relationships, marketing and technological skills," Mulligan said.

Agreed Slyngstad, "We got into the travel business in the online booking arena because we feel it's about accessing information and presenting that information in an easy-to-understand fashion, and that's a skill we've developed over the years. As the travel purchasing process moves to the desktop, it's going to involve integration with corporate computing solutions they have in place, and therefore to a partnership of the travel manager and the MIS manager. We're the best at marketing to MIS managers, and American Express knows how to market to travel managers."

Amex will integrate the new booking system with its Expense Manager expense reporting system, now being used by 20 customers, with about 25 more waiting for implementation. It also will continue to offer T&E Mail, its e-mail-based booking system, which has about 50 corporate customers. But, Mulligan acknowledged, "we believe the market is moving toward real time and that clients now want full-service solutions."

While the partnership will develop a "distributed" system-that is, one that sits on a central corporate server that is permanently linked to the computers on travelers' desktops-Mulligan seemed to feel that Web-based products will garner an important, and increasing, market share. The interest in booking systems that run over private corporate intranet sites (BTN, Feb.12) is "dramatically increasing," he said.

"Travel is a great application for technology, but companies aren't going to change their Internet strategy just to develop a travel solution, and we have to live within their framework," he said.

Meanwhile, Microsoft's entry into the leisure travel market-and, no doubt, the promotional blitz that will accompany it-should entice more consumers to try the Web in general, and travel sites in particular. Microsoft plans to offer Web access to everyone who purchases a PC with Windows 95 or Windows NT, as well as to buyers of the next version of Microsoft Office, its suite of business-related software programs, which dominates more than 90 percent of the market.

In the future, Blachford told HEDNA, Microsoft Office users will one day be able to enter an appointment in their online calendar and have the computer automatically book the air, hotel and car reservations they need to get to the meeting.

Mulligan sees great promise as well in the other charter of the American Express Interactive Travel Group, the development of smart card technology. Such cards, he said, offer a huge potential "to provide security, to be your airline ticket and conceivably to download your hotel room key. Travelers will one day swipe the card to get on the plane and swipe it again to get into your hotel room and to download expense information."

At Carlson Wagonlit Travel, the second biggest provider of U.S. travel agency services behind Amex, travel group president Travis Tanner, interviewed about Microsoft's leisure Website before the Microsoft-Amex partnership announcement, mused about the possibility of just such a deal. "I'd love to compete against American Express and Microsoft," he said. "If those two big companies form an exclusive partnership, that gives us the rest of the world."

Travel industry consultant Harold Seligman of Stamford, Conn.-based Management Alternatives noted that Microsoft's leisure site will be "a temptation to travelers to start doing things themselves." Travel managers will either need to tighten up corporate travel policy to stem their losses, or join the great electronic migration and offer travelers an online system, he said. "Everybody is looking at cost containment," he said, "and if you eliminate a middleman, you reduce costs."

Consultant Tom Wilkinson, president of Travel Management Group in Alexandria, Va., suggested that travel managers can build support for automated systems among travelers and line managers by distributing information on the savings opportunities the systems offer, and trusting travelers to do the right thing.

"Automated booking systems have tremendous promise because of the fare matrices they can show," Wilkinson said. "You have to get line managers to pay attention to this by showing them how large the savings can be. On the telephone, an agent can only offer one choice at a time, but an automated system allows the traveler to see all the choices-those that involve a small inconvenience in return for a huge savings, and those that involve a huge inconvenience for a small savings. A travel manager in an office in the Midwest cannot do a lot to affect the travelers' decision, but the line manager can."

Travel managers should be looking at technology products as a new opportunity, rather than simply writing them off as something their travelers neither want nor need, Wilkinson said.

"Two years ago, if you'd asked anybody, they would have said people will never move off the phones," he said. "But travelers will use these systems if they are cheaper than using an agency.