Salt Lake City - The National Business Travel Association at its annual convention here this month offered attendees a heavy courseload in the possibilities of travel management without the global distribution systems. Yet, however educational the sessions on Web fares, the super PNR and direct connections may have been, they did not meaningfully allay rising industry confusion.
Meanwhile, a Business Travel News straw poll of 111 corporate travel buyers took the air out of the supposed reverse online auction trend, which also was featured in a couple of sessions. Buyers expressed interest in the concept, but only 18 had conducted such an auction for buying travel in the past 12 months.
However, 39 travel buyers said they would conduct an auction—or were considering doing so—in the next 12 months. A number of buyers are curious about the practice, but said it still is too new and experimental for its ramifications on their programs to be fully understood. Overall, buyers said they considered auctions to move managed travel more in the direction of a "commodities buy." Buyers who said their companies had a "procurement culture" were more likely to be attempting auctions than those whose companies had not taken up the procurement model in other areas.
Technology aside, the two buyers on the Evaluating Hotel Reverse Auctioning—Is It Right for Your Program? panel did not view their experiences with reverse auctions as significantly different from the traditional request for proposal approach to soliciting bids for their hotel programs.
"Hotel sales managers assume that auctions are solely about rate, but that really wasn't the case at all," said Deborah Matarazzo, global hotel manager for Compaq Corp., which since has become part of Hewlett-Packard Co. "Location remained a prime concern, and we were looking for value-added amenities, such as complimentary breakfast and having telephone charges waived.
"The time savings is a misconception," said Jo Ann Gallardo, hotel and meeting coordinator for Dell Computer Corp. "For an auction to be truly successful, you have to be sure the properties invited to participate are all alike in terms of location, price point and service levels and that takes considerable legwork upfront." Both Matarazzo and Gallardo conducted their first auctions for 2002 rates and are considering—but wouldn't commit—to using the channel again for 2003.
Speaking for hotels on the panel, Dan Seplow, regional vice president of sales for Wellesley Inns & Suites, and Chad Goodnough, director of business travel sales for Wyndham International, spelled out the lodging industry's "fear factors" when it comes to auctions. Echoing Gallardo's point, Seplow said the industry's main concern was that insufficient care would be taken in assembling the list of properties in a market participating in an auction and that, inadvertently, a mixed batch of hotels would be included, thereby making for an uneven playing field.
Addressing the subject of ground transportation auctions, Scott Solombrino, president and CEO of Dav El Chauffeured Transportation Network, said: "Often, passenger service is sacrificed, because low-bid providers have to cut costs somewhere if they're going to show a profit."
"Chaos" was the key word in describing the effects of Web fares on managed travel programs in a session similarly titled and moderated by Mary Savoie-Stephens, PeopleSoft Inc. senior travel manager.
Continental Airlines senior director of corporate programs Dave Bartels said that "95 percent of Continental's Web fares are published retail fares," which are filed through ATPCO and available through any global distribution system. When business travelers are quoted a significantly lower price by a Web site than a travel agency, Bartels added, it is "never due to Web fares. It's not anything we've filed, but a glitch or a technical problem." Some glitches he mentioned included the timing of fare changes and inventory updates; GDS fare rule interpretation; GDS fare and route building logic; and traveler selection of alternate dates or times. The latter is "the most common reason, and it is really comparing apples to oranges." Noting that he was "not here to bash the GDSs, because they serve a valuable purpose and push the lowest fare 98 percent to 99 percent of the time, it's that 1 percent that everybody hears about. Even if buyers had access to all Web fares, these problems would still exist because of the technical problems."
Sandy Prosser, WorldTravel BTI director of customer strategy, said travel managers should "really study Web profiles and use Web fares where it makes sense." She suggested that buyers use a standard test matrix focusing on the company's top 10 city pairs, sampling many different Web search engines, including public sites, agency sites and consolidators. Also factor in agency cost impact, departure windows and connections, international travel and transborder Canada and Mexico travel, then follow through with the bookings: "What you see may not be what you get," she cautioned.
According to Bob Langsfeld, Outtask senior vice president, technology is the answer. "Self-booking systems enforce your policy," he said. "Web fares are very disruptive to managed travel programs, but there are other ways to save money—using alternative distribution channels—but we need a higher level of technology to accomplish the task."
Prior to Sept. 11, Bruce Finch, The Gillettte Co. manager of U.S. travel operations, had no Web fares policy. A year later, there is a new global travel policy, which will include a no Web fares mandate. Gillettte travelers will not be reimbursed if they accept a Web fare that does not save the company a minimum of $250 and follow the proper process, including notifying the travel department, agency and faxing the data. "If employees do not follow the process, they will not be reimbursed," he said, adding that the mandate will be enforced by the CFO.
One panel discussing the development of the super passenger name record sung the praises of its potential applications, but acknowledged that questions still exist regarding who should own super PNR data. The panel of global distribution system executives, an online booking system CEO and a corporate buyer reached no firm conclusions on that dilemma, but said the two-year-old super PNR, though complex, offered travel managers a higher level of data access due to its ability to retrieve data booked through a variety of distribution mechanisms. "The super PNR lets us access that data regardless of where it is stored and allows us to package and present it to travelers and the corporate travel group," said Richard Case, Microsoft program manager for travel and corporate card. "It helps us track, manage and leverage data."
The GDS executives—Galileo vice president of business development John Hach and Worldspan vice president of marketing Cheryl Weldon—spoke of the super PNR's ability to incorporate the management of such ancillary traveler data as restaurant bookings, golf and leisure expenditures into the travel program, but Case preferred to focus on more direct applications. "I just want people to go to the right hotel," Case said. "Restaurants and those things are overwhelming at first, but really they're just icing on the cake. I want to improve efficiency, increase what we have control over and better negotiations."
Outtask CEO Tom DePasquale said a potentially more valuable super PNR functionality would be the incorporation of travel avoidance policies. "The super PNR can help determine whether to travel at all," he said. "It can allow people to find the right technology—teleconferencing, Web meetings, videoconferencing. This technology should go not to restaurants, but to booking tools that book interaction, not just trips."
According to Forrester Research Inc. senior analyst Henry Harteveldt, who moderated the Leveraging Direct Connections session, the airlines last year paid $1.4 billion in global distribution fees. With costs rising for both buyers and suppliers, is now the time to see direct connects/links/settlement, he asked?
Matthew Hausmann, E-Travel global corporate solutions senior director of business development, said there are some instances in which direct connections will happen soon. "Orbitz will have them operational very soon," he said. "But the managed corporate environment is more complicated, there are issues about settlement, so it may take longer there. The crux of the issue is traveler services. Also, how do you synchronize all the systems?"
The difference between the GDSs and consumer sites is the transparency, said Stephen Smith, Universal Air Travel Plan Inc. vice president of business development. "I wouldn't want every flight possibility dumped on me," he added. "It's counterproductive."
Hausmann agreed: "The format is not useful, so the data is not manageable." Direct links must offer a front-end display that gives buyers as manageable a format as possible, he added.
According to Harteveldt, the Internet could be the backbone that pulls it all together. In what he termed, "Integrated Direct Connect," all of a company's preferred suppliers, as well as relevant pricing—including negotiated and Web fares—would be made available on the Web. "The problem then is back-end integration," he said.
Direct settlement could be a solution, Smith said, since it pulls in off- and online data. Only a couple of buyers in the audience said they'd like carriers to approach them about direct settlement alternatives.
Buyers want all the capabilities of the GDS—they want the process exactly how it works now—but with a direct connect, Hausmann said. However, he added, buyers are willing to accept a change in the process if they see benefits, including financial, traveler and manager benefits, as well as better content, flights and upgrades. When Harteveldt polled the audience, most buyers said they would "reduce their reliance on GDSs if direct links to their preferred suppliers gave them corporate fares, inventory, etc."
A Texas Instruments rep agreed, saying, "Suppliers once said they'd share with corporations the savings of bypassing the GDSs. Now, they're not, so buyers are wondering why they should. It will cost corporations money to change the systems, so if there's no financial benefit, then are my travelers benefiting?"
However, a rep from American Express said the GDSs "are still a damn efficient way to do business." The GDSs offer a "pretty inexpensive way to wade through" the various service issues, he said, adding that "direct connects will increase costs to the end-users because of the change in processes and the inefficiencies built into those processes." Harteveldt said: "There is no question change is coming. The GDSs are economically inefficient." The only question, he added, is whether the change will be in the process, technology, economics or a combination.
In the Global Airline Deals: Beneficial But As Tricky As Ever session, Gabriel Eshaghian, manager of global airline and car rental programs for PricewaterhouseCoopers, detailed what he termed "common misconceptions" of global airline deals, including that discounts are based purely on volume, identical discounts can be negotiated regardless of point of sale, benchmarking is the best way to quantify success and using the fewest number of carriers will provide the best results. "Instead, you should diversify your portfolio to maximize your leverage in the future and not put all your eggs in one basket," he said. He also stressed the importance of data analysis, including corporate spends and marketshare and carrier fair marketshare. "Airlines usually negotiate for share targets that are at least 1.5 times their capacity share," Eshaghian said. "This indicates support on a particular route or on an entire network greater than the natural demand in the marketplace. Also, marketshare should only be negotiated on the class of service that discounts apply to," he added, noting the clear trend of carriers eliminating lower-fare buckets from corporate agreements.
Norma Rohrbach, vice president of global services sourcing at Citigroup, strongly encouraged buyers to focus on point-of-sale discounts, which are easier to manage and more understandable for travelers. "Since Sept. 11, I have seen carriers come back and ask for back-end rebates," she said. "But why would you do that and worry about reconciliation?"
Dave Hilfman, vice president of multinational sales and revenue programs at Continental, gave buyers a stern warning. "When terms and goals are not met, global deals become incredibly expensive. Both sides must live up to the agreement or these programs will disappear," he said. "Things will change. Huge financial losses will mean that people will change how they do business."
Frank Laurie, United Airlines manager of global accounts, explained to delegates the various benefits of global deals, including consolidated data, agency expansion beyond the United States, cost avoidance by sticking with a particular grouping of preferred suppliers and related corporate program compliance. Moderator John Heilner, vice president of Management Alternatives, added: "Recognize commissions still exist in some other key countries. Work through this with overseas colleagues."
Corporate buyers on a panel regarding commodity-based airline negotiations questioned the movement toward share-based agreements instead of volume-based ones. "Why is share the right approach?" asked Michael Lyons, travel commodity manager with Avery Dennison in Brea, Calif. Some buyers prefer share as a measure of corporate airline contracts because it does not penalize them for lower overall spending. "Our preference is revenue, which gives us flexibility in choosing partners."
"I like to tell airlines that my CFO takes cash, not marketshare, to the bank," said Peter Turso, director of strategic sourcing at New Brunswick, N.J.-based Johnson & Johnson. "Our marketshare hangup is that it tends to be a shell game. Our policy requires the lowest logical fare, and in a hub, the home carrier will tend not to price the lowest, so it becomes self-defeating to commit marketshare. The antidote is guaranteed pricing and availability—with those, we're not opposed to marketshare deals."
Other buyers already are comfortable with them. "I've been in a market-share environment for the past five or six years," said travel manager Cheryl Geib with Chicago-based Grant Thornton, speaking from the audience. "It can work if you have the data."
"We've been in the media" about some airlines' requirements that buyers send data to Albuquerque, N.M.-based The Prism Group for cleansing, Turso said. "Our position is not a secret."
Lyons echoed that position in saying, "Our concern is about data privacy. We have struggled with it but found a compromise with the airlines. For my comfort, I walked with my agency through the data masking as it was sent."
The purported purpose of Prism is to narrow the gap between buyers and sellers about volumes and other negotiating details—including the age-old debate about using flown versus booked or bought data. "I think flown calculations are very self-serving," Turso said. "We have a situation now where there's a $10 million gap between flown and card data. I'm not going to take that lightly, so we're looking for a more balanced approach."
Buyers affirmed a strong rise in the use of nonrefundable tickets during the E-Tickets: Tracking Their Trail session. Nancy Carlin, vice president of value-add business at American Express, estimated that nonrefundables now account for between 40 percent and 50 percent of all tickets issued to corporations. Still, trip cancellations using these tickets can result in a loss of between 2 percent and 8 percent of the spend of these tickets, estimated Susan Hopley, TRX executive vice president and general manager of data services.
Lynn Brunner, travel manager with Health Corp. of America, has seen savings of $350,000 by using low-cost carrier Southwest Airlines and American Express' TicketTrax—a manual program in which the agency examines the traveler's record. However, the latter relies on the traveler to notify the agency that the ticket went unused.
Michael Stewart, Sabre travel manager, said Sabre's roots with American Airlines pushed the company toward an immediate mandate of e-tickets in 1996, when they first were rolled out. Sabre runs a report weekly to discern unused e-tickets. Stewart noted that not all airlines allow for name changes on unused tickets. Brunner said HCA's policy is to ignore unused tickets that fall below $50.
"Nonrefundables are endangered by Web fares," Carlin said.
NBTA's Agency RFP task force, charged in January with the task of creating a standardized RFP for the complex and time-consuming process of selecting a travel management company, unveiled its agency prequalification form at the Today's Agency RFP session.
The prequalification form is the first half of what will be a two-part RFP, said committee co-chair Sheri Carlsen, director of global travel services with EMC Corp. "The prequalification document encourages agencies and buyers to define their needs and their philosophies before submitting RFPs," she said. "A lot of preliminary thinking needs to be done before travel buyers ask agencies to complete an entire RFP." It typically costs agencies between $10,000 and $40,000 to complete an RFP and successfully bid on a corporate account, according to Danny Hood, president of WorldTravel BTI and a member of NBTA's Agency RFP task force.
The second part of NBTA's agency RFP, which will cover specific terms of service and financials, will be finished early next year, Carlsen said. The prequalification form already is available on NBTA's Web site.
Chicago-based consultant Ralph Brown, president of EBuyerSolutions.com, an online RFP marketplace for buyers and vendors, said parties on both sides of the fence want to expedite the agency bidding process: "We've had very good feedback from agencies and buyers that have seen our RFP. They don't have to reinvent the wheel." EbuyerSolutions went live with its agency RFP in May and, in June, had its first customer, Chicago's W.W. Grainger Inc. Fifteen agencies, including all of the megas except American Express, accept bids from EBuyerSolutions. The site also features hotel RFPs.
Travel Procurement Solutions, a unit of WorldTravel BTI, showed off two new products made available in the past few months. Travel Pattern Analysis, a scaled-down version of the existing Air Program Manager
(BTN, Oct. 22, 2001), targets smaller clients, as well as larger ones that may opt only for high-level analysis. It uses historical travel information and airline marketshare to project a company's minimum and maximum segment share on preferred and potential preferred carriers without factoring in pricing.
Meanwhile, the Measuring and Tracking tool was launched in February with Aventis and Willis North America. According to Bob Brindley, WorldTravel BTI vice president, the software uses agency data to track targets, calculate incremental and comparative savings and assess market opportunities. "This provides power to the client to determine why performance may be coming up short," he said, noting the tool will be integrated within 90 days with TRX Screen Highlighter.
Travel Analytics also displayed its contract monitoring tool, Bravo. The product's "contract dashboard," which has been in testing with Hewlett-Packard for about a year, can detail performance by preferred carrier, city pair, point of sale, region and various other subsets, and determines reasons for unfulfilled commitments. Bravo also includes risk analysis, indicating the buyer's risk of achieving goals. Travel Analytics CEO Scott Gillespie said Web-based reporting will be available within a few weeks and integration with point- of-sale tools now is in development. He also said two airlines are interested in applying Bravo for their own contract monitoring purposes.
The NBTA technology committee showed version one of its corporate online booking adoption calculator, an active Excel spreadsheet now available on the association's Web site that automatically generates penetration rates and calculates fare- and fee-based savings. Requiring some Excel experience, the spreadsheet uses data from agency reports of ticketed air transacations and dollars. The tech committee said the calculator is not intended for formal audits.