Consolidator Fares Pique Interest

Corporate travel buyers are reporting increased interest in consolidator fares, "wholesale" airline inventory often sold at a rate lower than published fares, but their use remains minimal and adoption does not come without some travel management pitfalls, show results of a Business Travel Coalition study released this month.

A BTC survey of 152 corporate travel buyers shows that 37 percent of respondents said there is increased interest among travelers in using ticket consolidators, though only 13 percent said they currently use consolidator fares, while an additional 15 percent are considering their use. The small population of consolidator adopters said they use such purchasing options no more than 10 percent of the time.

Though many respondents said there are potential savings opportunities from using consolidator fares, they come at the expense of less control over travel spending. Nearly 63 percent of the respondents said the use of fare consolidators could potentially reduce travel spending, and BTC chairman Kevin Mitchell noted, "It's not unusual, for example, for a $10,000 fare, available via a corporate travel program, to be offered by a consolidator for $5,000." Still, their usage also can trip up some fundamentals of a managed travel program.

Nearly 91 percent of respondents said tracking travelers purchasing such fares is difficult and about 81 percent said such tickets are largely nonrefundable, potentially diminishing any savings from a booking not followed by a trip. Further potential drawbacks to using such offerings, the survey shows, include an erosion in the value of a managed travel program, shifted bookings from preferred suppliers and difficulty in capturing usage in data travel management streams. There are also service issues. According to one respondent who uses consolidator fares, "90 percent of all our service complaints are the result of consolidator tickets."

BTC's Mitchell said usage of consolidator fares are more prevalent in Europe than in the United States, noting that "European TMCs indicated most of the drawbacks that U.S.-based corporations must consider are not applicable there, as successful TMCs have worked with scores of airlines to incorporate consolidator-type fare offerings into their business models."

Gary Hance, COO of U.K.-based travel management company Advanced Travel Partner said, "We're slightly different than the average TMC because we've grown our business largely on being a consolidator," noting that up to 35 percent of its fares sold are consolidator fares.

Hance said the agency acts as a consolidator with minimal inventory coming from third parties, relying instead on consolidator fares direct from the airlines to be distributed as live inventory in the global distribution systems. "It's no different than buying any other fare from us," he said. "We will sell them the most appropriate fare on the day for the journey they're taking, whether that be a consolidator or just regular published," Hance said of the agency's corporate clients.

He said GDS and agency integration enables the company to "fulfill all the corporate social responsibility stuff, the traveler tracking, the emergency locator, the MI, and offer fare alternatives and so on"—overcoming the pitfalls many buyers associate with consolidator fares. "We won't sign these deals with the airlines unless they make the inventory available to us through our GDS," Hance said.

Hance, however, noted that it's a different environment in Europe—particularly in the United Kingdom—than it is in the United States, where he said airlines have a "different method of channel marketing, which has taken the airlines down a far narrower distribution model through very limited consolidators."

Still, one issue not addressed by agency integration remains: The fares carry hefty restrictions and are difficult, if not impossible, to change after reserving. Hance, however, said, "I think that's a red herring. If you look at almost any ticket now in the States, you've got so many nonrefundables, and it's no different than that."

Hance added, "Perhaps it's a lesson for the U.S. travel management companies to learn. They should be looking for live access to this stuff, rather than going through the third parties. If I had to buy stuff and send wire transfers of credit card numbers to third party agencies, I wouldn't be happy and I'd try to avoid it, but the savings are significant. We're looking at up to 50 percent savings—and that's not an unusual savings at the front end of the airplane." That builds in margins for the agency and true savings to the corporation, he said.

"There's potentially a lot more margin to play with if you know what you're doing and you're prepared to do the extra work to find these fares," Hance said. "You do have the hassle of servicing them if the customer needs to change the booking overseas or refund it. It's definitely more work, but it can be worth it."

BTC's Mitchell said some U.S.-based respondents also have "created workarounds for some of the drawbacks by working with their TMCs."