To borrow a phrase from James Carville during the 1992 U.S.
presidential election cycle—it’s the economy, stupid. In 1991, we haven’t yet heard
that crystalized remark. Still, it rings true for the struggling travel
industry that year.
Airlines limped into 1991 on unsteady financial footing. The
situation turned terminal for three carriers that year: Eastern Airlines, Midway
and Pan American all operated their final flights in 1991. TWA ended the year
with what looked to analysts like “desperate” pricing tactics designed to grab
cash. Yet TWA would hang on for more than a decade.
The federal government eventually would step in that year to
propose rules to spur airline competition.
The United States in January 1991 officially entered into
war in the Persian Gulf after six months of military build up in the region. The
conflict had immediate impact on business travel with some companies outright
banning travel amid increased threat of terror attacks and heightened security
measures at airports. Agencies reported as much as a 30 percent drop in
transactions in the immediate aftermath of the military action. (The
environment initiated a re-think of how revenue-share agreements were structured
between agencies and clients—a re-think that persisted beyond the acute wartime
pinch.)
The National Business Travel Association, nevertheless, held
its first global convention in Germany in January, just prior to the Desert
Storm invasions. The Association of Corporate Travel Executives announced in
February it would cancel its annual conference scheduled for San Diego, citing economic
conditions coupled with members’ war-induced travel restrictions.
Gulf War combat lasted just six weeks, but travel restrictions
lingered much longer in what developed into a mild recession in the U.S. in
1991. The leisure market did not fare better. According to a 2022 article in Travel
Weekly, hotel room demand pullback across the U.S. in 1991 was four times
worse than GDP contraction.
None of this helped travel suppliers. What was quickly becoming
a have-and-have-not picture in the airline industry resulted in second-tier
airlines struggling in certain instances for their very existence. And hotels
were losing occupancy and rate in 1991, according to STR, as supply outpaced
demand. A New
York Times article from 1993 proposed that recovery was only then “underway.”
In this environment, travel suppliers were eager to capture
reliable corporate business. Direct corporate deals, more customized to the
company’s needs, began to be discussed more openly. Hotels, for sure, were
striking agreements with deep discounts for large-volume clients; airlines, as
well, were on the hunt for direct relationships with companies able to spend
some decent coin, even if it meant getting that business for significantly
reduced rates. A June BTN article cited an ITT deal with American for 40 percent discounts on 25
domestic routes.
At the same time, however, many airlines were trying to
stanch the financial bleeding by eliminating or restructuring more broadly
available discounts in the form of advance purchase fares and walk-up fares. Hotels,
on the other hand, were experimenting with offering advance purchase rates,
modeled on the fare structures that airlines were trying to close down.
Marriott started that trend amid industry criticism but would be joined by
other hoteliers later in the year.
Travel buyers, however, were getting pushed into greater
austerity measures by their organizations due to sluggish general economic
performance. As a result, they were getting more disciplined with ways to realize
savings and finding ways to manage demand and enforce compliance.
Volume and marketshare commitments were in play in direct
deals with travel suppliers, and both sides of the negotiating table were
getting more sophisticated in what they required from one another in order to
strike an agreement. Travel management companies, for their part, were
delivering more management reports to buyers.
New capabilities from Lifeco (provided directly to corporate
clients) and Prism (selling capabilities to agencies) focused on pre-trip
reporting—the analysis of which, providers touted, would allow companies to prevent
nonessential travel (uh, uh, uh!) and also identify noncompliant bookings that should
be shifted to preferred suppliers (easier said than done, we all found out, but
we’re still learning!)
American Express Travel Related Services delivered to Texas
Instruments enough quality data globally that the corporation felt confident
that it could negotiate a global supplier deal, rather than work regionally—i.e.
the company could leverage a larger volume. (It’s also clear by 1991, by the
way, that globalizing travel programs is the next frontier, but not many have
done it.)
We’re not talking data modeling dashboards and automated
messaging, here. We’re talking management data that requires manual analysis
and follow up. Still, these reports were more than travel managers ever had
before, and the business intelligence provided by early data innovations
eventually would transform the value proposition for TMC partners across the
board.
Advancing information services came none too soon. While
airlines would initiate a variety of promotions, mileage deals and discounting
strategies throughout 1991, the fast-and-loose corporate airline deals would begin
to dry up toward the close of the year. The strongest airlines—American, Continental,
Delta and United—weren’t as keen to play ball.
BTN’s front page headline on September 30 read “Where Have
All the Airline Deals Gone?” followed by November 18’s “Airlines Get ‘Rational,’”
which quotes a Continental executive as saying, “We will sit down with travel
managers and take a rational, analytical approach to corporate deals.”
Hey, at least we’re openly discussing direct deals now, but
agencies aren’t out of the volume discussions by a longshot.
In December, two agencies with an affinity for data
innovation and ambitions for globalized capabilities make a big merger
announcement. American Express Travel Related Services at $3.2 billion in
revenue and Lifeco with $1.2 billion will tie the knot to dominate the
mega-agency market. The move sets the stage for a global-sized future for
travel management.
There's always more to explore than I can write about in one column, so check out the highlights of 1991 below.
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After six months of military build up in the Persian Gulf, the United States and a 42-country coalition declared war on Iraq. Officially, the Desert Storm conflict would last just six weeks, ending with the liberation of Kuwait at the end of February.
NBTA, in the immediate lead-up to Desert Storm, held its first global conference under threat of terrorist attacks in Germany, a prime target for Iraq militants. In the U.S., the FAA invoked the highest level of airport security and corporates banned or severely limited travel to both Europe and the Middle East.
Pan American Airlines avoided a shutdown during bankruptcy proceedings by selling most of its London routes to United Airlines.
American Airlines preempted pilot union "sick-outs" by cutting 11
percent of flights after a holiday season marred by pilot strife.
Eastern Airlines folds, leaving a huge gap in the Atlanta market, where it offered 315 daily flights. Industry fears of less competition in the market soon come true as carriers serving Eastern routes soon eliminate advance purchase discounted fares.
Agencies report corporate travel bookings have fallen by up to 30 percent, and some began laying off employees. Some have reached out to renegotiate revenue-sharing payments to corporates. That said, just three weeks later, a BTN headline suggests that travel is already returning.
Airports begin to enhance security measures at airports, with plans to "open or X-ray" all checked baggage, restrict passengers to a single check-on bag and match up all luggage with owners, even on domestic flights.
American Express Travel Related Services introduces a gold-colored Executive Corporate Card.
ACTE cancels its third annual ACTE One conference in San Diego, citing a down economy and war-inducd business travel bans.
A BTN poll of business travel managers indicates a shift back to pre-war travel policies and spend levels, but some say companies like the impact to the bottom line of less travel, especially in a continue soft economy.
Lifeco delivers daily data feeds for pre-trip visibility, enabling queries that allow companies to prevent travel for nonessential or noncompliant trips or to identify group travel.
American Airlines initiated—and other airlines followed—a major airfare restructure that eliminated walk-up discount fares, eliminated three-day advanced purchase and shifted advance-purchase discounts out farther, with seven-day fare shifting to 14 days and 14-day advance purchase discount shifting to a 30-day requirement.
U.S. and UK governments hammer out new bilateral agreements for flights into Heathrow, removing restrictions that were preventing the final sale of Pan Am routes to United and TWA routes to American (agreed in Dec. 1990); bankrupt Pan Am had already missed a loan payment of $100M without United's $290M for the routes and TWA was in danger of bankruptcy as well. The UK gained a number of concessions from the U.S. in terms of new routes and access to U.S. cities, not only for British Airways but for a second carrier—Virgin Atlantic.
Continental Airlines and USAir began paying $25 commissions per segment on major New York routes, striking concern that agents would push bookings on those routes against corporate preferred agreements. Travel managers were urged to scrutinize agency bookings.
Hyatt lands systemwide discount deal directly with Exxon Mobile, a part of "Hyatt's continuing effort to establish customized volume agreements with major companies through its national accounts sales team." It is notable for its deeper discount of up to 25 percent and that it does not seem to have an expiration date.
Conference centers break from package pricing—the CMP, complete meetings package—to compete with hotels in capturing corporate meetings business in tough economy.
Auditors find that travel agencies, overall, have slipped in finding lowest airfares for their clients; question whether it is technology or commission driven.
Marriott, which had experimented with advanced-purchase discounts akin to airline structures, now leans into the strategy amid criticism from other hotel groups. Sheraton experiments with the same structure a few months later.
Northern Telecom Ltd. consolidates a global program under American Express Travel Related Services for a two-year contract. The "global" consolidation does not include Canada and covers only about 75 percent of the company's volume.
Congressional aviation leaders launch hearings to address ailing airline industry, with the aim to pass legislation that will promote competition and "will not re-regulate" the industry.
Corporate direct airline deals are openly discussed, as carriers compete intensely to satisfy the needs of large accounts with customized agreements. "The number of crazy deals has been increasing during the last few months," said an unnamed executive with a major carrier, who also insisted airlines were holding clients to their volume commitments. ITT cuts airfare deal with American for 40 percent discounts on 25 domestic routes.
It's a buyers market for hotel deals, and hotel executives are looking to fewer amenities, less frequent renovations and more automation to make ends meet. Discount and promotion offers prevail in a sluggish economy.
Texas Instruments says it's getting enough quality data from Amex Travel Related Services on its Europe-based travel that the company may embark on a global contract negotiation with travel suppliers.
Financially straightened TWA and Pan Am offer 'triple miles' throughout their systems, interfering with managed travel compliance.
NBTA poll reveals sentiment among members of a 'closed' leadership structure that inhibits travel managers from active participation. NBTA cites feelings of 'cliqueishness" around committees and makes commitments to open up participation opportunities more broadly in the lead-up to convention elections the following month.
Citibank sets up a 'unique' program structure, with four major TMCs in the U.S. to encourage competition among them. The set-up in the next decade becomes a strategic best practice, particularly for globalized programs. However, it proves to be ahead of its time: Citi scraps the strategy in November.
Prism gets into the pre-trip data game, with its Travel Manager's Workstation designed to run pre-trip reports that allow companies to prevent nonessential trips or correct noncompliance.
Direct car rental agreements gain prominence as corporates squeeze every value from their programs in a down economy.
As Pan American World Airways divests its European routes and its eastern shuttle to Delta Air Lines, travel managers brace for impact to their corporate agreements, given Delta's more conservative corporate sales approach.
Hidden-city ticketing becomes a flashpoint as companies look to reap travel savings any way they can.
John Hintz challenges former NBTA president Jack Witherspoon in the race to be named the association's new president. Hintz, part of an alternate slate, ultimately wins the spot.
Radisson eschews its small account discount deal in favor of large corporations that will pool their transient and group travel toward negotiated discounts. "It's harder to enforce travel policies in a smaller company, since often there isn't a full-time travel manager," according to Radisson at the time.
Airlines Face Moment of Truth reads the Sept. 14 headline of BTN, with consultants predicting imminent demise for carriers currently in bankruptcy, with clear demarcations forming for first-tier airlines American, Delta and United.
Delta absorbs Pan Am's Worldpass frequent flier program, but decreases the value of the miles toward free tickets.
As airline industry consolidation quickens, a new financial conservatism emerges that includes retrenchment on corporate deals as negotiating season begins. Weaker carriers, however, try to expand their offers.
On the heels of a lawsuit it filed against an agency earlier in the year, American Airlines rolls out new audit system that it says will "catch" agencies extending meetings fares for individual corporate travel. A memo sent to agencies did not specify whether the airline would take legal action against rate abusers.
American Society of Travel Agents puts travel suppliers on blast at its World Travel Congress for dealing directly with corporates and bypassing agencies to negotiate deals, though the practice is becoming more established, especially for the largest corporate customers.
International markets relax restrictions on corporate purchases through airline ticket consolidators and some corporates leverage the new permissiveness to find deals on international routes.
American Express Travel Related Services rolled out new outsourcing options to card clients for T&E reconciliation and reimbursement.
Gillette intensifies efforts to recover value-added tax as a "virtually untapped" area of savings for corporate programs.
Talks for a linkage between Sabre and Amadeus computerized reservation systems peter out.
Mastercard International partners with Air Travel Card for a new set of corporate cards that introduce competition to a market dominated by American Express. Seven domestic and 21 international airlines gain access to Mastercard's "thousands of issuing banks" to create a card program it believes will meet the needs of the corporate customer.
Car rental companies eager to increase rates for corporates are stymied by the weak economy and persistent business travel cutbacks.
Midway Airlines ceases operations after Northwest Airlines withdrew its purchase offer. The shutdown wiped out more than half the service at Chicago Midway Airport.
Pan American World Airways operates its final flight.
Industry analysts call TWA's business class and first class fare discounts "desperate" as the carrier aims to hang on.
DOT delay in new rules around CRS the commercial relationships between them and their customers begins to handcuff providers in contracting business and developing technology for future.
United is sued for offering discounted airfares to agencies that used its Apollo CRS.
$3.2 billion Amex Travel Related Services $1.2 billion Lifeco agencies look to consummate a merger at the close of the year, aiming to increase leverage especially with airline providers and, therefore, deliver more value to clients in an increasingly tough market.
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Elizabeth West is the editorial director of the
BTN Group. She has reported on the business travel and meetings industries for
24 years. Beth was editor-in-chief of Meeting News from 2006 to 2008 and
director of content solutions for ProMedia Travel from 2008 to 2011, when
ProMedia was acquired by Northstar Travel Media and merged with BTN. She became
editor-in-chief of BTN in 2015 and editorial director of the BTN Group in
2019.
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