Anticipating radical changes in the year ahead, Business Travel Newseditors identified 10 top trends for travel buyers to watch in 2002.
Security
Gear up for a year of action and debate on how to meet new security requirements while minimizing cost in both dollars and time. Security concerns and service cutbacks—from fewer airline flights, airline club closings and fewer airport parking spaces to room-key checks in hotel lobbies and limited hours of operation in hotel restaurants, business centers and health clubs—add up to less convenience for business travelers. "Premium" services offered to frequent travelers, and perhaps to top corporate accounts, will be expanded, as evidenced by the separate security lines already offered to frequent flyers at some airports by American and United airlines.
On the government side, a major issue is how well the new Transportation Security Administration will implement the Aviation and Transportation Security Act (see story, page 6). Finally, the security of traveler and travel management data continues to be of utmost concern.
The Economy
The big unknown: Predictions are sharply divided on whether the economy will rebound in the second half of the year, or whether the recession will continue, albeit at a lesser pace. One thing is certain: Profitability will elude many travel vendors in 2002.
Consolidation
Can the acceleration of this ongoing trend be understated? Even before Sept. 11, a number of entities were rumored to be for sale. While nearly every travel vendor is suffering and considering its options—as a buyer or a seller—it is the highly anticipated consolidation among business travel management companies that may hit closest to home for corporate buyers.
According to TRX Inc. CEO Trip Davis, "We believe in a scenario we call the 'clash of the titans,' in which probably three major groups are acquiring distribution volume. The target number would be $20 billion to $40 billion in gross distribution volume, and you can sort of pick out the titans. Most likely, they will own some major GDS, then go aggregate volume on both the leisure and corporate side." For buyers, the key concern is whether the fewer companies that emerge in any given market gives them a tighter grip on pricing.
Air Alliances
Will this be the year that American Airlines and British Airways finally gain approval for an immunized transatlantic alliance? The answer to that question, still being mulled over by regulators on both sides of the pond, will have a profound impact on international travelers, multinational corporate contracts and the competitive balance of the entire industry.
Noting that several carriers are ready to serve London Heathrow if provided slots that are divested by AA-BA, UBS Warburg analyst Sam Buttrick said new market entrants "would result in more competitive services from more cities from more carriers to London than exist today—precisely the opposite of what has transpired in unconstrained gateways."
Either way, Delta Air Lines and Air France will seek to leverage their newfound immunity and the Star Alliance will continue presenting a unified front for global corporate clients. Meanwhile, 2002 also may be the year Continental and Northwest airlines officially decide to expand their domestic partnership into an international one including KLM Royal Dutch Airlines.
Fare Business
Pressure is nothing new for airlines, but 2002 may see an unprecedented level of contempt among corporate travel managers for airlines (see story, page 4), which, many say, stubbornly are sticking to a fare structure that is out of date. Critics argue the Internet offers travelers too much information for airlines to continue trying to segment them. If airlines had their way, each passenger would have a different price because each passenger is willing to pay a different price—that is, until he or she hears about the fare a person sitting next to them bought.
Corporate travel buyers believe the fact that they do not even have access to the lowest fares, with few exceptions, is irksome; that the carriers won't give clients credit for purchases they make outside of "authorized" channels, they say, is downright anti-partnership.
Negotiations
The current crisis in the airline industry, expected to persist throughout 2002, will color corporate contracting on both sides of the negotiating coin (see story, page 4). On one side, buyers may uncover attractive deals from revenue-starved airlines fighting for survival and others desperate to shore up share in competitive business markets. On the other, a rationalized approach by airlines frustrated with underperforming contracts means a challenging environment for even the larger corporate clients.
"We will see every airline go in a different direction," said Steve Shook, vice president of strategic sourcing at Carlson Wagonit Travel. "Some are pulling contracts back and some are taking a wait-and-see approach. That is why it is very unique right now."
In the hotel sector, the second half of 2001 already was marked by hotels' unsolicited offers to buyers to renegotiate room rates in return for their ability to deliver greater market share. Should business not improve, such renegotiations may well become the norm this year. Another trend in hotel negotiations likely to come to a head in 2002 is buyers' increasing preference for midprice properties at the expense of their upscale, upper upscale and deluxe counterparts. Corporations understandably are wary of putting travelers up at expensive hotels at the same time they're announcing layoffs and plant closings.
Automation
As ever, it's a mega-trend. Look for continued feverish interest on the part of travel management companies and corporate accounts to automate manual processes. What happens when, for many buyers, telephone-based bookings become the exception?
Some vendors see a convergence of online and offline, at least in terms of agency operations and fulfillment. Also, look for certain technology vendors to win massive contracts to support the government's effort to shore up travel security.
The Midmarket
Suppliers will continue to pick through the low-hanging fruit of massive corporate travel accounts toward the top of the business travel tree, seeking a piece of the giant, but fragmented, midmarket. While a number of suppliers already have programs for this sector of the market, buyers can expect additional activity from hotels, car rental firms and self-service technology vendors.
Fees Pile Up
Travel supplier surcharges continue to proliferate, accounting for an increasingly higher proportion of corporate travel budgets. Look for vendors to come up with new nickels and dimes in addition to the new security airline ticket tax and such older fees as passenger facility charges, fuel surcharges, hotel telephone fees and car rental surcharges.
Some say mileage fees on car rentals could be introduced this year and rising insurance premiums are driving up the cost of corporate card-related coverage.
Not The Only Way To Fly
Corporations will continue to explore cost-saving alternatives for their travelers, increasing the usage of low-cost airlines and charters, limited-service hotels and videoconferencing. The trend particularly is pronounced in air travel: More than half of the passengers on Air Tran, Frontier and JetBlue are business travelers, some flying on corporate contracts, and Ryanair and EasyJet actually grew their revenues during the past year.
Will remote conferencing tools secure a permanent toehold in travel management programs or are they a passing fad? Are companies going to realize they are missing out by cutting back too much on travel?