Cisco, Credit Suisse Favoring Volume Over Share For Air Deals - Business Travel News

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Cisco, Credit Suisse Favoring Volume Over Share For Air Deals

February 19, 2013 - 03:25 PM ET

By Jay Campbell

London - One year ago, a Travel Procurement article about the pros and cons of airline contracting prompted Cisco director of global travel procurement Susan Lichtenstein to comment that corporate travel buyers "need to move away from marketshare contracts and towards revenue-based contracts." Now Cisco is doing just that, not only for air, but also for lodging.

"We want to move away from the whole conversation on market share," said Cisco travel manager for Europe and emerging markets Leighton Simms here this month at the Business Travel Show. "We want to focus on volume. We've been incredibly successful with policy and with preferencing logic on our booking tool, driving spend to our preferred carriers. We're not going to talk about market share."

The shift is a key part of the company's 2013 airline negotiations, now underway.

Suppliers are "not totally receptive to it, but that's the way we're trying to frame the conversation," Simms said. "It's a mindset change on both the air and the hotel side. A lot of hoteliers are focused on market share, as well."

"There's a groundswell to go back to more volume-related [airline deals] rather than market share," said Credit Suisse global head of corporate travel and events Bernadette Basterfield, who also spoke at the conference. "We're in contract discussions now on the airline program. We're certainly having those protracted discussions on volume too. I think what's [behind] that is that a lot of policies now drive [travelers] to lowest logical airfares, so basically [suppliers would] get a chunk of the pie at the right price point. But [they] can't come at us and say 'I want 60 percent share for that price,' because what if that price isn't lowest-logical? Most policies I'm looking at now are on the lowest-logical basis."

A third buyer speaking at the event, Coca-Cola Co. European travel manager Michael Hill, was less prescriptive. "Our key route is London-Atlanta," he said. "We spend oodles of money on that route, and we have great rates on that because our share is in the high 80s for one carrier. You have to talk about your key cities, and it's up to an airline to come in and make the best offer, whether on market share or on volume. Whatever works. If they will give me a convincing argument on one or the other, it's up to me to buy into it."

There are various types of contracts in the corporate travel world. In recent years and in mature markets, though, airline deals in particular trended toward the marketshare basis.

It's not clear whether a change from that is underway. TCG Consulting air practice director Barry Rogers said he didn't think so. "Volume is great as long as your volume is going up, but when it goes down because the economy softens then suddenly you're not performing anymore," he said, acknowledging that "market share has its challenges. A segment in first class counts the same as an economy-class segment."

He advocates the development of a contracting model based on client profitability, and said he has heard of at least one airline seriously looking into that.

This report originally was published by The Beat. 

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