Managing ancillary fees for business travel, especially for air travel, continues to be a vexing topic for travel management professionals and a primary focal point at industry forums. Even as airlines continue to unbundle their products by charging extra for many service attributes, solutions for managing a la carte pricing are on the horizon, according to speakers here at a National Business Travel Association event. Meanwhile, hotels are raising various commonplace add-on fees they have charged for years and imposing several new ones, according to NYU professor Bjorn Hanson.
On the airline side, Amadeus plans with three airlines to go live with electronic miscellaneous documents next month, initially in such direct channels as consumer Web sites, according to director of airline distribution strategy Robert Buckman. [Standalone or in association with an electronic ticket, EMDs are the new, standardized records that would contain information about ancillary servicessold by travel agents or self-booking systems to travelers at the point of purchase. Full, global implementation across all airlines, global distribution systems and settlement entities isn't expected for years.]
"The full, utopian solution still is some time off," Buckman acknowledged. "However, we will have a well-established technology proposition in the marketplace this year and into the first half next year, meaning a transparency with pricing data, feeding that data in the mid- and back-office, hand in hand with development and implementation of EMD. Once [IATA's Bank Settlement Plan] and ARC are ready toward end of this year, then we will have the green light to begin porting that transparency to an EMD offering for travel agencies."
ARC expects to be ready for the first phase of the EMD solution "around the end of September," according vice president of marketing, sales and customer care Mike Premo. When asked about implementation by BSPs around the globe, Premo said, "I am not familiar with their rollout plan. You have this 2013 deadline [mandated by the International Air Transport Association] out there. I asked [the BSPs] if there was anything I could say at this conference about their plans and they were not very forthcoming." [According to IATA, at the end of 2009 there were 88 BSPs covering 160 countries.]
Though it will take years to implement global EMD capabilities across all channels, U.S. airlines are advancing their unbundling strategies. Continental Airlines last week, for example, announced plans to charge for food in economy class on domestic flights less than six hours, starting this fall. As the last major U.S. carrier to make such a decision, Continental will stop offering "free meals at meal times" on some flights. " We need to changeto reflect today's market and customer preferences," according to a statement from chief marketing officer Jim Compton.
Travel Management ImpactMany travel management professionals no longer dwell on why airlines are breaking up products and pricing; most understand an acute need for incremental revenue that offsets a general inability to raise fares to levels that would sustain profits. The focus this year is how to manage through the added complexity.
BCD Travel president of the Americas Danny Hood said lowest logical airfares no longer are the goal for client bookings, but rather lowest logical trip cost. But finding that--at least for now--requires a manual, time-consuming process. "No client I talk to wants an Air Canada repeat, where with Flight Passwe were taking about three times as long to do a transaction, at first," he said. "Our clients really do not want us to spend that much talk time with the travelers and travel arrangers if its going to be outside their policy. They are not going to want 90 percent no-touch [online transaction rate] to go to 60 percent no-touch because of ancillaries."
One audience member raised the issue of transaction fees and urged caution. "We have had to have our agents notate that it is a seat [assignment] and not a ticket transaction because we do have clients that we charge transaction fees on the back end rather at the time of ticketing and you really can't charge them a full transaction fee just for doing a seat or a bag or some other thing," she said. "So, please be careful."
Another audience member asked about the productivity loss in "having agents spend all this time on the phone, asking eight or nine questions, and then the trip cancels?"
In response, Amadeus' Buckman said the company is developing the means to manage ancillary services during the ticket reissues "so that we can fully automate that process for the travel management companies. It takes into account if that seat that the customer purchases is no longer available. Is it refundable? Not refundable? Re-usable? All that is taken into account."
Meanwhile, faced with task of constantly updating corporate policies defining allowable ancillary purchases, "Some people are saying, 'It's too much. I don't want to deal with these $5 and $10 nuisance fees,' " according to one audience member. "Corporations are saying, $'100 per trip. That's it. Buy a drink, check your bag, pick your seat. Do whatever you want to do with the car rental, the hotel, whatever. Spend it however you want to spend it.' "
Another attendee offered a different perspective on the amount of time spent managing and explaining fees: "Thanks for the job security."
'Hybrid Transactions'
As airline product offerings evolve, business travelers' habits are changing. TRX chairman Trip Davis described "hybrid transactions" which start as bookings "through a traditional supply chain model yet during the travel experience the traveler decides to buy something directly from the supplier."
At the same time, according to BCD's Hood, "70 percent of business travelers are not checking bags today (and most of those who do have elite status that exempts them from bag fees) and its now overhead bin space and [planeside checked baggage] tickets that we are dealing with today more and more." He added that "lots of people are changing behavior," noting surges in ski and golf club rentals.
"Airlines have done what the hotels have been doing for years and the issues at the core of the airlines are the same issues that have been there about the hotel booking process," said Maria Chevalier, global director of travel and meetings services at Johnson & Johnson. "As much as it is about the data, it's about the information at the point of sale. It's not new; the difference is that it's the airlines."
More Fees Coming For Hotel Stays
The unbundling trend also is evident for car rental, and is accelerating at hotels, which for years have charged extra for parking, business centers, breakfast and Internet connections. According to Hood, ancillary revenues currently account for 18 percent of total hotel revenue. Of the ancillary charges incurred by corporate travelers, he said, "only 90 percent is reimbursed by the corporation."
"More hotels are getting aggressive at collecting fees, and more are charging more fees," said New York University hospitality associate professor Bjorn Hanson, also speaking here last week at the NBTA Strategic Travel Symposium. "There will be more fees charged by more hotels and hotels will be less willing to negotiate these and bundle them. Hotels are less willing to remove these based on guest complaints.
"It's extremely hard for hotels to bundle some services in corporate rates because property management systems don't let hotels do the accounting that way," Hanson continued. "It's kind of hard for the PMS to sweep through the folios looking for room service delivery charges and figure out which companies get charged [or not]. And then for you on the buy side, to try to audit to find out if you got what you negotiated is also very difficult."
New fees, according to Hanson's presentation, include mini-bar restocking charges, additional business center and room service charges, meeting surcharges for set-up and break down, and stricter cancellation and early departures penalties. Hanson described baggage holding fees--incurred, for example, when a traveler checks out at noon but leaves a bag with the front desk until later--as "one of the newer and more peculiar fees."
A new charge for "master folio billing," according to Hanson, "is just a plain old gutsy one. Hotels have a choice. You can put the event or the stay on the Amex card and the hotel pays a commission on that, or it can be billed as a corporate bill where there's no card commission. What hotels are doing, even though they're not paying a credit card commission, is they're starting to charge a fee for the accounting process of those master folios. On large events this can be as much as $1,500. It's not a big number, but a really annoying number."
Related resource:
American Express Business Travel's " Ancillary Fees: Charges Changing The Airfare Landscape"