Online Booking Cuts Prices 20%

<B>Online Booking Cuts Prices 20%</B>

By Cheryl Rosen

Two corporations have approved large implementations of online booking systems based on pilots that saw their average ticket prices fall about 20 percent when using a self-service model.

Motorola's semiconductors products sector in Phoenix has taken its detailed return on investment figures so seriously that it has mandated the use of American Express's AXI system for travel to its top five city pairs, which account for about half of its $10 million domestic air volume. Effective July 1, it will expand that mandate to include all domestic travel. And at Lucent Technologies, a pilot of GetThere.com has rolled out to 60,000 travelers in a program sold to senior management based on savings of about 25 percent.

"We rolled out the system to all the folks in Lucent, taking a very conservative approach and being very quiet about announcing anything until everything was worked out," said Lucent travel manager Janet Lasten. Without a mandate, or even much promotion, Lucent quickly achieved a 5 to 10 percent adoption rate, and an average ticket price that "has consistently remained 24 to 26 percent below the average agency price since testing began."

Lasten has examined closely the average ticket price number, aware that it could be skewed if travelers were using the online system for less complicated trips or those of shorter distances. But she is convinced that the savings are real, she said, proof that if travelers are shown a wide variety of travel options, they will scout out the ones that put the smallest dent in their travel budgets.

"It isn't because it's only simple round trips," she told Business Travel News. "People are saying they never knew they had all these opportunities. Before, they weren't seeing everything the travel counselor was seeing."

Lasten has been at Lucent for about 18 months, brought in by director of corporate travel and meetings services Judy Bauer specifically to focus on travel technology and commodity management. It fell to her to sell the concept of online booking to senior management in "a business case that developed the concept of the lower ticket price. Financial people do not like to have fuzzy numbers. So at first I took numbers that I had seen published and cut them 50 percent and then another 50 percent, to cut out the smoke and mirrors. But when we started to actually test, with a 'look only' site, we found the ticket prices fell to a very attractive cost. And that feedback helped substantiate the business case."

Lasten's presentation to senior management detailed not only savings from lower average ticket prices, but also from lower transaction fees from the company's corporate travel agency on bookings that come in online. "On transaction fees, I used what I thought were realistic numbers in the business case and achieved it," she said.

At Motorola, meanwhile, global travel manager Colleen Guhin--an online booking veteran who helped put GetThere.com on the map with a large rollout at Texas Instruments in 1997 (<I>BTN</I>, June 23, 1997)--took an even stricter approach to measuring ROI before putting her case for a mandate before the director of sector finance.

"I took the data and really tore it apart, looking at the average ticket price and at how far in advance people were booking," Guhin said. "You have to normalize the data to be fair, so I compared the average ticket price on the same city pairs."

Part of the savings comes from the fact that online systems offer more options than an agent normally reads to customers over the phone, Guhin said, so that travelers get "a little more time and opportunity than the agency offers. Where we tell our agents to offer a two-hour time window, for example, travelers can see schedules for all day long online. They are more flexible because they see more, and they book farther in advance."

But isn't it possible that the lower ticket prices are simply the result of travelers booking further in advance? Perhaps to a certain extent, she acknowledged. Still, she noted, "I found that even tickets booked far in advance through the system were 15 to 20 percent lower than those booked over the phone."

These findings corroborate what other travel managers have been reporting. Cindy Heston at Thomson Consumer Electronics in Indianapolis, for example, found her average ticket price fell 25 percent with Worldspan's TripManager, while Mary Kay Bellersen, vice president of global travel management at Citibank, reported lowering fares 20 to 25 percent (<I>BTN</I>, Oct. 25, 1999).

Guhin also has seen savings in her agency fees, based on a contract that offers tiered savings based on her total percentage of tickets booked online. Discounts begin at 35 percent and get larger as volume increases--which it surely will when the Motorola semiconductors products sector moves to a full mandate on July 1.

All domestic divisions of Motorola--the nation's 16th-largest travel buyer, with a 1998 global air volume of $240 million (<I>BTN</I>, Aug. 16, 1999)--have rolled out AXI, but only Guhin's sector has mandated it.

Motorola's Asia division, however, this summer mandated that its 8,700 employees in 12 countries, from Australia to China, use Sabre BTS (<I>BTN</I>, Aug. 9, 1999).

Lucent also has negotiated lower transaction fees from its agency, though "it took a while," Lasten said. "We argued that online bookings required less work, especially since we do 75 to 80 percent e-tickets. Now we'll see a 28 percent difference in what we pay for a regular versus an online transaction, in a tiered process."

And indeed, even greater savings beckon for those willing to step to the cutting edge of technology tryouts.

"I've got people beating my door down saying they can fulfill online reservations for $8 or $10," Lasten said. "We certainly have to take a look at this for the future."

Also on the drawing board is a plan to launch a direct online connection with one air and one hotel supplier by the end of the year, though Lasten said "there are a lot of things that have to happen as far as the reporting and the payment to make that feasible." Still, she said, "I'm intrigued by the possibilities, so long as travelers have the option of looking at all the opportunities and queuing their reservations to wherever I need to ticket them."

On the back end, pay-as-you-go options, under which Lucent would not pay for airline tickets until travelers actually board the plane, hold out hope for even more savings on settlement.

Lasten also is signing on for GetThere's Cognos-based Global Observer data reporting system, in hopes of using it to produce its own global reports.

Online booking, meanwhile, likely will debut next in Canada, then Asia, "which seems to be keen on technology. Latin America also seems to be fertile territory. The Europe/Middle East/Africa region, however, includes 26 countries and is a very complex environment, so we're exploring the proper approach to take to be successful there," she said.

But Lucent is not even considering Motorola's mandated approach at this point. Now rolled out to 60,000 corporate card holders, "whether they travel once a year or every day," Lucent Travel On-line has rolled out with little promotion. "We don't mandate things in Lucent--we do what's right for our business," Lasten said. "We research a program like this and get customer feedback and support until they see for themselves that this is the best way to do the job."

To that end, Lucent recently added its Year 2000 hotel program--its first global hotel initiative--to the travel site, loading its negotiated rates and preferred suppliers. Next, Lasten and the travel team are planning to nudge adoption upward through personal visits and seminars at 25 corporate sites.

Also on the agenda is a plan to implement point-of-sale fees, under which the company will charge the transaction fee for each ticket back to the individual traveler's corporate card, so the traveler sees the savings of booking online. Lucent plans to implement this "across the country within the year," Lasten said.

For other travel managers considering online booking rollouts, though, Lasten suggested that there is more to success than measuring ROI. "I have to say that the IT organization has been my lifeline. They have been the co-owner of the process and that's been a key element," she said. "But one thing we did learn was to get the right people on the technology side at the agency involved right at the get-go, especially for profile synchronization."

For a company with mandating in mind, Guhin recommended a leisurely approach.

Given the chance to do it over, "I'd give travelers a heads-up of maybe two or three weeks rather than just sending an e-mail saying the mandate is effective immediately," she acknowledged. "In the first two weeks, I had over a thousand e-mails, most of them about getting set up. And though I offered several training classes in the past year, I'd plan for more, because with the mandate, everybody said they needed one. They're not interested in training until they have to use the system, but then it adds to their comfort level."

Finally, she would look closely at the company's network capabilities, not just at headquarters but in remote locations around the world. "Some locations have better servers and networks than others, and that impacts response time," Guhin noted. "We didn't recognize that was going to be an issue until everybody started using the system--and found that in some locations it was very slow."

Those are lessons Motorola itself may put to good use with its next technology rollout. Guhin already is working with a Motorola team in Austin, Texas, on improving or replacing the company's five-year-old automated expense reporting system. "We aren't urgently looking, but we are investigating Web-based systems," Guhin said. "We're trying to decide if we should do it ourselves or put money into a new product."

Whatever the decision, that's one rollout Guhin will have to miss. For now, she is moving to On Semiconductor, a Motorola spinoff for which Guhin has agreed to become the first travel manager. "I get to start their travel program from scratch, and since they're used to me from Motorola, I'm going to do everything all at once--the agency, the corporate card, the preferred suppliers, expense reporting and online booking," she said. "And I'm going to senior management to recommend a mandate.