BTN Weekend is back after a holiday hiatus. Picking up in 2004, we are just half way through our journey, but we're not stopping until we time travel through each year of BTN's archive. We at BTN hope your present-day 2024 was a great success, and we're ready for more transformation in 2025. But for now let's look back...
By 2004, the one-two punch of the internet and low cost carriers has turned the industry upside down. Aside from any challenges (and opportunities) the World Wide Web presented, however, airlines had their own struggles that seemed entirely separate from business travel program operations and were predicated on their own organizational inefficiencies, financial turmoil still extending from the 2001 terrorist attacks in the U.S. but also a lagging business travel recovery due economic uncertainty from 2003 and, now, in 2004 massive fuel pricing increases.
The Age of Airline Anxiety
While it may sound quaint to us in 2025, after a couple of years at $80, $90 and even $100+ for a barrel of crude (and now settled around $75 since December), oil prices rising in 2004 to $42 per barrel from $32 the year prior, and then continuing to rise in 2005 plagued the airline industry.
At the same time, however, low-cost carriers—particularly Southwest, but also JetBlue, Frontier and AirTran—were busy exacting some gleeful revenge on mainline carriers after all those years of getting boxed out of markets by deep-pocketed carriers getting all the prime airport slots and undercutting point-to-point fare structures with their "shuttle" concepts. Now financially stricken, and several like US Airways and United literally in bankruptcy proceedings (or falling back into them, in the case of US Airways), fighting against the Southwest Effect was an excruciating exercise for traditional hub-and-spoke airlines.
But airline troubles had become so common that travel managers had grown somewhat desensitized to the volatility—as long as their airlines remained operational, and most of them did even in bankruptcy. Plus, corporates were looking to LCCs to place more of their volume. Because why not? The prices were right and the carriers seemed more stable. Obviously, the routes had to be there, but with JetBlue competing in New York and Southwest in Dallas and a host of carriers homing in on developing their traffic out of Chicago, the options were more robust in that segment than ever.
Southwest saw the writing on the wall and formed its first corporate travel sales department led by Rob Brown, who is still with Southwest today after taking a short break to work with the good people at nuTravel Technology Solutions. The LCC also took the leap into some limited participation with global distribution system Sabre (JetBlue did as well) and via a partnership with technology developer BookingBuilder allowed agencies limited access to its fares, but only agents could do those bookings. They weren't available via corporate booking tools. I mean, SWABIZ wasn't going to give up direct bookings that fast.
So even in the midst of the chaos, travel program administrators saw—and took—some of the options opening to them. And not just on the airline front.
Market Rates, Internet Transparency Drive Hotel Rate Benchmarking
The internet did a lot of things, but exposing market hotel rates had a big impact on managed travel—and the providers of managed travel. Agencies since the beginning had offered negotiated consortia rates to corporate customers. While they would never really be as good as a rate negotiated directly with a hotel by a qualified corporate account, consortia rates were a reliably discounted option for secondary and tertiary cities where a company didn't have the volume to negotiate.
Or were they?
The internet called that into deep question for both buyers and agencies. As markets showed rates rising significantly in 2004 and occupancy as well, could agencies or their hotel partners afford to extend that fixed consortia rate? The consensus by the end of the year was an emphatic "no." American Express and Marriott started the motion toward what they called "fluid" rates and then quickly changed to "dynamic." Hilton and InterContinental followed pretty quickly as did more agencies.
One of the biggest drivers on this trend was online travel agencies and their deeply discounted merchant rates, which for those entities—Expedia Corporate Travel, Travelocity Business and Orbitz for Business—transformed into a de facto consortia rate. These were never fixed, reliable rates—but they were cheap, and business travelers were willing to book them even with some of the restrictions in place like prepayment, like very narrow cancellation windows. Travel managers saw their utility for their programs and some of them reported realizing significant savings with them.
Putting exact numbers on those savings was more difficult. American Express looked to solve that issue with a Rate Trax, a benchmarking tool that not only audited whether the company was getting its negotiated rate but also compared the booked rate against the lowest rate in the GDS and the AAA rate. The tool couldn't get a visual on those merchant rates or hit dead center on the rate in the market, but it was the first tool known to BTN that attempted to offer that point of view for the travel manager.
Other benchmarking tools would follow. Concur rolled out via a partnership with Runzheimer International a benchmarking services that estimated market pricing and compared an individual client's spend to that of other companies’ spending on air, car, hotel, meals and per diems.
And what if the data says they should change their deals? NBTA rolled out a new version of its electronic RFP to support mid-year renegotiations in a market that is moving too fast for an annual-only process.
Major M&A Sets Big Changes in Motion
Finally, mergers and acquisitions weren't at peak in 2004, but TMC ownership and alliance changes happened in 2004 that would reverberate for years in the corporate travel market. Carlson Wagonlit Travel bought Maritz Corporate Travel—but not the meetings and incentive business at Maritz—cementing its position as the second largest travel management company in the world. American Express was still first, but the CWT-Maritz merger bumped Navigant down to No. 3 on the list.
In buying Maritz, however, CWT separated the company from its partnership with TQ3 Travel Solutions, the Germany-based business travel arm of leisure travel giant TUI (CWT had also bought TQ3's partner in France Protravel Solutions, resulting in the loss of that partner). TQ3 quickly aligned itself with Navigant, making its strongest market the U.S. But Navigant had its own problems, which the industry was made privvy to later that year.
The company had not kept up with the move to online self booking or touchless transactions. In its Q3 earnings report, it cited only 2 percent to 3 percent of its overall bookings were executed online without an agent. That compared to around 30 percent of touchless transactions at its rival American Express. It was the reddest of flags that the company was not keeping up with the technology and efficiency demands the industry was laying down fast.
Within two years Navigant also would sell to Carlson Wagonlit Travel.
TUI would sell TQ3 Travel Solutions to a Netherlands-based company BCD Holdings, which already owned Atlanta-based WorldTravel BTI. The combination of the acquired companies formed the basis for what we know today as BCD Travel.
There was one more wrinkle that became clear in 2004, and that was the fact that it wasn't just going to be TMCs bidding on TMCs for recombinations of resources, geographic coverage and services. Both Cendant and Sabre Holdings bid on Maritz Corporate Travel. Neither one got it. But the idea that a GDS or an online travel company would buy a traditional TMC was becoming a real possibility and would represent a big industry shift. Yes, it had already happened once, when Expedia bought Metropolitan Travel in Seattle as the foundation of Expedia Corporate Travel. But what would the future hold?
In the near future, at least, Cendant bought Orbitz in October 2004, getting itself a counterpart leisure and corporate booking tool to chief rival Sabre's Travelocity. It would only hold onto Orbitz (and Galileo, for that matter) for two years before selling both to Blackstone.
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January
Department of Transportation deregulates global
distribution system relationships with airlines; the process begins in January
2004 but complete elimination of rules under which GDSs have structured their
relationships with airlines since the 1980s is pushed to July.
American Express and TQ3 Travel Solutions phase out fixed consortia rates for business travel clients in favor of
flexible rates that could fluctuate daily. Such rates become known as “dynamic”
and are a result of market rate transparency that has come courtesy of internet
travel booking sites.
Orbitz for Business’ pre-IPO Securities and Exchange
Commissions filing in December raises ire among agencies and other players for
incentivizing airlines for referring their corporate customers to Orbitz as
their agency of record. The provisions ultimately seem to go unused by airlines,
which have no interest in alienating their other agency partners.
Companies face Sarbanes-Oxley Act, spurring corporate
travel managers to redefine travel policies and re-examine reporting practices
and set internal controls that restrain expense abuses in efforts to support
company compliance with the legislation.
February
TQ3 and Deloitte partner to debut corporate travel
consulting unit Advito.
The National Business Travel Association recasts its
hotel request for proposal to a modular format separated into evergreen modules
and modules that can change during the course of a calendar year, enabling
hotel program managers to react to market conditions as well as their own
changing programs needs as they relate to sourcing lodging.
Department of Homeland Security’s proposed computer
assisted passenger prescreening system (CAPPS II) developed in the wake
of 9/11 comes under fire from travel managers for lack of privacy and due
process afforded to passengers. CAPPS II is scrapped by summer.
Casto Travel cuts costs in half by using a 40-seat
call center in the Philippines, after an eight month venture in the region. American
Express is the only other agency servicing North American travelers via
more economical offshore locations. Casto is a frontrunner in an offshoring
strategy that will spread in 2004 and beyond.
Delta Air Lines and JetBlue power struggle
over New York JFK spells lower fares and more flights for corporate travelers,
especially on transcontinental flights.
March
Carlson Wagonlit Travel acquires Maritz Corporate
Travel (but not the meetings and incentive side of the business), leaving Germany-basedTQ3 Travel Solutions without a North American partner. The move sets off
a cascade of consolidations and ownership changes that unfold over the next 2 years
and ultimately results in the formation of BCD Travel. Immediately, however,
TQ3 Travel Solutions aligned itself with Navigant in a partnership that
would last a little more than 2 years.
Visa and Mastercard increase payment rates to
issuing banks, supercharging rebate opportunities for corporate buyers. Merchants
ultimately bear the brunt of the increases in higher merchant fees paid to the
credit card brands. Issuers report winning business “competing solely on price,”
and cite a 3x increase in rebates over the previous 10 years.
Corporate cardholders and employers prepare to cash in on separate
class action lawsuits alleging deceptive disclosure of currency conversion fees
by American Express in one suit and Visa and Mastercard in
others. Amex proposes its own settlement of $66 million and settles the case in
January 2005.
United Airlines and US Airways each asked for and
received more time to complete restructuring programs and regain financial
stability. United’s bankruptcy judge granted a reprieve until May 8 to
officially file a reorganization plan; a government board granted US Airways more
time to make good on loan payments and seek buyers for certain parts of its operations.
The additional breathing room for both airlines is set on a decelerating recovery
environment for airlines in 2004.
Midprice hotels like Best Western, Residence Inn, TownePlace
Suites, Spring Hill Suites, Hampton Inn and Holiday Inn begin to roll out
free high-speed internet, as full-service hotels continue to charge upwards of
$10 per day to access the internet.
April
Southwest continues litigation to prevent what it
describes as ‘unauthorized’ access to its website by third parties. Still, Galileo and Expedia have developed methods to access Southwest fares and flight
information as part of their services. Meanwhile, the LCC forms a corporate
sales team for the first time in its (then) 30-year history. The team is led byRob Brown.
Diners Club, which had faced years of dwindling
volume by 2004, aligns with MasterCard International to pursue an
partnership that provides Diners Club with enhanced global acceptance to North
American cardholders. MasterCard, however, will not be accepted by merchants
that only accept Diners Club. Citibank owned the Diners Club network at the
time of the deal.
The U.S. Transportation Security Administration announces it will begin testing in June the contractor that will run the
three-month test of the new Registered Traveler initiative. Registered
Traveler goes through several iterations but still exists today as a
public-private partnership between the TSA and the Registered Traveler
Interoperability Consortium. The largest Registered Traveler program is Clear,
operated by Clear Secure, Inc. at 58 U.S. airports.
The transformation and competition around consortia hotel
rates continues to burn as online agencies promote their discount merchant
models to corporate travel buyers. Travelocity Business, Orbitz and Expedia
Corporate Travel all roll out such programs and address some of the restrictive
terms and conditions of the merchant model to make them palatable for business
travel programs.
June
Surging oil costs tank airline industry profitability,
derailing hopes for a commercial aviation sector recovery in 2004. The cost per
barrel of crude topped out at $42 in June; it ended the year around $38. In
2005, however, it would peak at $53 per barrel. In July 2008, for reference, it
peaked at $128; in Dec. 2024 it was around $74 per barrel.
Following the official close of their merger in May, Air
France-KLM launched the One Corporate Travel Solution, a single
sales and account management program for multinational corporate clients. The
carriers would not offer truly integrated corporate pricing for at least another
year.
American Express Corporate Travel introduces hotel
benchmarking as part of its new automated Rate Trax product, designed to
verify that negotiated rates are loaded into the GDS and also benchmarks rates
against the best available in the GDS as well as against AAA rates. It is the
first tool to offer hotel rate benchmarking.
Delta Air Lines prepares for possible bankruptcy, retaining
investment firm Blackstone Group and New York law firm Davis, Polk,
and Wardwell to handle dept restructuring and a possible filing. Delta ultimately
avoids bankruptcy in 2004 but filed in Sept. 2005.
Steve Tracas leaves US Airways for new role as
president of Orbitz for Business. He tells BTN the company is “looking
at our agreements, the technology requirements and the impact on customer
service involved with going direct with each individual airline.”
Congress denies additional aid to a struggling airline
industry. Then House transportation aviation subcommittee chairman John Mica
(R-Fla.) said Congress had already provided “significant assistance” to
airlines since the 2001 terrorist attacks, including more than $20 billion in
cash, loan guarantees, direct reimbursements and tax holidays.
Buyers flock to online reverse auctions for card programs,
and often pick the one offering the largest rebate—as card brands and banks
continue to up the ante to attract corporate business.
July
Hotel room availability concerns return as occupancy
increases to reach levels seen in 2000. Buyers again resort to paying last room
availability premiums.
Southwest asserts hegemony across an otherwise
struggling airline industry, initiating a systemwide fare sale that prompts
financially troubled mainline carriers to reduce already depressed airfares.
Other LCCs followed suit, pushing traditional carriers already under siege by
rising fuel costs closer to the brink.
August
Co-founder of TRX Jon Farrier takes over as CEO at an
emerging company GDSX, founded by ex-TRXers Becky and Bill Strahan.
The company is armed with a new generation of technology and a new business
model as it introduces its midoffice produce Compleat, which is still
offered today—now in the Concur portfolio.
American Express, long the industry’s only purveyor
of both charge cards and corporate travel management services, leverages both
sides of the house to merge travel booking and card payment data into merged
reports for joint customers.
Travelocity for Business revamps products, taking
some capability from GetThere and enhancing its fulfillment centers with
computer-integrated telephony and a new agent desktop. Meanwhile, it lands a small
piece of a big account, CitiGroup.
National Business Travel Association hotel committee
takes action to address hotel rate loading lapses among the corporate travel
supplier set. It says it will release in Sept. a details timeline that buyers
can use to ensure hotels remains on track as frustration with rate loading grows
and travel managers implementing penalties on or dropping properties that don’t
accurately load rates.
Concur and Runzheimer International launch an
expense benchmarking tool that compares expenses to current market prices and
other companies’ spending on air, car, hotel, meals and per diems. In October, Concur targets the service to U.S.
Bank corporate payment customers as an added-value service.
Buyers report expanding their hotel program partners in key
markets as occupancy rises and small and midsize hotels enter the corporate
field of visibility again with aggressive pricing and amenity inclusions;
meanwhile, RFP tech providers Lanyon and RFP Express each enhance
their tools with features that track supplier response times.
GDS deregulation, finalized in July, intensifies the fervor for
change and an appetite for direct connect technologies from both buyers and
airlines. Phrases like “attempting to maintain relevancy” pepper the comments
and musing about “how long can the GDS survive?” A long time, my friend… a long
time.
Northwest Airlines initiates the first battle in a
deregulated GDS environment, introducing a fee on travel agent bookings made
through those systems. No other airlines stood behind them, and Northwest
officials backed down, relieving agencies of any fees they incurred for the two
days that the initiative was in play. Eleven years later, Lufthansa would levy
a GDS fee, and they would not back down.
September
IHG yanks 3,500 hotel listings from Expedia.com and its business travel arm Expedia Corporate Travel, citing three key
issues: lack of transparency in how fees are presented to customers, lack of
automation (it was still fax driven) to confirm reservations and the tendency
for the site to list hotels as ‘sold out’ even when they were not. It was the
first time a major hotel company withheld content from an online TMC.
Sabre initiates monthly charges to agencies for ARC card settlement. The move is meant to lure more customers to use Sabre’s Card
Services settlement option that it launched in April.
US Airways begins a second court-supervised
restructuring with grim prospects of survival. Simultaneously, Delta Air
Lines CEO Gerald Grinstein urgently worked with the carrier’s pilots union
to delay a Chapter 11 filing. United Airlines begins to run out of time
to submit to the court its reorganization plan after 21 months of bankruptcy
proceedings and extensions.
Hiltons Hotels Corp. and Carlson Hotels Worldwide are the first major hotel companies to announce online checkin. Of course,
there is no such thing as a mobile key, so travelers still have to pick that up
at the front desk.
The U.S. General Services Administration deploys its
first end-to-end travel management system, including pre-trip authorization,
online booking, expense reporting and travel management company integration, as
part of its ETravel program. By September, 6 government agencies had signed
contracts with vendors selected by GSA. The program structure and rollout was
led by Tim Burke.
October
Transportation Security Administration mandates that
domestic carriers submit all passenger name record data for the month of June
2024 in order to test its proposed Secure Flight program designed to
match airline passenger names against terrorist watch list names. The move
raises privacy concerns, but the program was implemented officially in 2009 and
is still operating in much the same way today. It now includes international
flights into the U.S. as well.
Cendant Corp agreed to pay $1.25 billion for Orbitz.
Already the owner of the Apollo/Galileo GDS, Cendant via the Orbitz transaction
brought into its universe an analog to chief rival Sabre’s Travelocity
offering. Cendant would buy Worldspan in 2006, merge it with Apollo/Galileo and
become Travelport.
US Airways completes a reorganization that eliminated
several corporate sales positions while emphasizing newer distribution models,
analytical support and growth areas. It also changes course toward simplified
fare structures and a point-to-point network.
Delta, meanwhile, completes an agreement with pilots
but has a “matter of weeks” to get a new contract in place to avoid pilot
shortages and its own bankruptcy.
Northwest Airlines CEO Richard Anderson resigns; Doug
Steenland takes CEO post.
Hilton Hotels Corp. begins offering individual guests
at all 2,200+ properties the ability to log into an online folio retrieval system to ensure
accurate and complete expense reporting.
Hilton and InterContinental hotels each
announce they will end fixed TMC pricing. Fixed consortia rates transitioned to
dynamic rates on Jan. 1, 2005.
Southwest Airlines for the first time authorizes an
outside entity to automate interactions with its website, opening an unprecedented
opportunity for agencies to access the LCC’s fares. BookingBuilder provided
the software, but it only works on agency desktops and not online booking
tools.
United announces it will cut domestic capacity over
the next 6 months by 12 percent and increase international capacity by 14
percent for a total shrinkage of 3 percent. The move maximizes take on
high-yield international routes and reduces exposure to the effects of LCCs in
certain domestic markets.
Soaring fuel prices prompt airlines fare hikes and further
capacity cuts across U.S. airlines. Stinging fuel costs and enormous debt loads
threaten to drag additional carriers large and small into bankruptcy.
Starwood improves hotel room descriptions for content
that appears in global distribution systems, addressing complaints from
business travel buyers that such descriptors use jargon and coding not
understood by corporate travelers doing self-bookings.
November
Despite high-profile partnerships and acquisitions in 2004, earnings
reports from publicly held TMC Navigant flag weakness in its business
model and technological sophistication. The most surprising disclosure was the
company had between 2 percent and 3 percent of its overall transactions online.
That compared to American Express, the only other publicly traded
U.S.-based TMC at the time, citing online transactions at roughly 30 percent.
Department of Homeland Security implements
requirement for residents of Visa Waiver countries to have machine readable
passports to enter the U.S. The requirement was originally due Oct. 2023, but
was delayed to give countries more time to communicate and execute the new documents.
Sabre follows Amadeus in offering menu pricing
for GDS contracts following the U.S. Department of Transportation’s move to
deregulate the GDS sector. On the other side of the deregulation coin, small
LCC Independence Air began listing in Cendant’s Apollo/Galileo system. Like JetBlue and Southwest in Sabre, Independence took Galileo’s most
basic participation level.
Southwest Airlines CEO Gary Kelly indicates to BTN
that the carrier is waiting to see how tough the market will get for mainline
carriers—in the midst of domestic capacity and network reductions—before Southwest
makes final decisions on where it will place its 10 percent increase in
capacity and 29 fleet additions for 2025.
December
Hilton and Marriott pre-loaded negotiated rates for
2005 before negotiations were finalized, raising red flags for buyers that
rates would not be loaded correctly. It was particularly frustrating in a
market where hotels were proposing increases of 5 percent.
A BTN survey showed that only 17.5 percent of travel
managers worked in companies that had subscribed to an automated expense
reporting platform. Another 17.5 percent had homegrown automated systems, according
to the survey.
Continental Airlines’ CEO Gordon Bethune—by far, the
longest-serving airline CEO in the industry at that time—handed over the
carrier’s leadership post to Larry Kellner. Continental was among the
only mainline U.S. carriers that was not plagued with troubled finances in
2004. Kellner held the post for 5 years.
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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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