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
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.
originally was published by The Beat.