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Corporations setting up travel management programs in Japan should spend most of their efforts on domestic expenditures, where high volumes and content fragmentation offer the greatest room for improvement, said speakers at the Association of Corporate Travel Executives conference here last month.
Japan's corporate travel market is estimated at $9.3 billion, of which half is considered unmanaged and 85 percent is handled by in-house or general travel agencies, according to Carlson Wagonlit Travel estimates. Many major Japanese companies have their own agencies, but CWT expects them to outsource travel services as TMC contracts become more cost-effective and commissions are phased out.
"Realistically, out of the $9 billion, probably less than 15 percent is managed through travel management companies," said Guy Mackee, executive vice president of Carlson Wagonlit Travel's joint venture with Japan's JTB Corp. "So the opportunity and the potential is enormous but that's not going to change unless some of the market dynamics change." Of the total, he estimated that $1.1 billion is spent by foreign multinationals doing business in the country.
Holding back development of managed travel programs are the many challenges associated with domestic travel, half of which is by rail. Distribution is fragmented, Mackee said, and at least five global distribution systems are needed to aggregate content. Content consolidation is expected to happen first with international airlines and then domestic air carriers, but rail content will be available "probably not in my lifetime," he said.
"Four out of five tickets we issue each day are domestic air or rail," Mackee added. "The challenges with domestic are the short lead times on domestic rail, traditional booking processes, low average ticket prices, low and diminishing commissions ... and it is difficult to track and capture data because domestic is booked through proprietary CRS or reservation systems."
It is impossible to ignore rail travel when setting up a domestic program in Japan, said Keiko Sund, country travel representative for the Japanese subsidiary of Cargill Inc. For example, even though the Tokyo-Osaka route is ranked as the world's fourth busiest air travel city-pair, the rail route between the two cities is even busier. However, it is still impossible to book both rail and air on one booking tool, she said.
"We unfortunately do not have a single tool that can book air and rail, and we cannot say we will just travel by air," Sund said.
Compounding the problem of adopting a single booking tool is that Japan's dominant domestic carriers--Japan Airlines and All Nippon Airways--each has its own booking tool with fares far below published rates. Fares through the carrier Web sites are 20 percent to 25 percent lower than published fares, Mackee said.
While lower fares are definitely within corporate objectives, Sund said capturing data is the true problem. Even credit card data is incomplete, she explained, as many business travelers still use cash. And while using external technology products to track spend is possible, it's difficult, according to Mackee.
"The opportunity for savings and convenience in handling bookings with short lead times overrides the challenge in training," Mackee said.
There is still some cultural resistance to travel technology products in the market, Mackee said. CWT-JTB developed a travel portal for clients last October that included links to booking tools. Of the company's 300 clients, only 15 have implemented the product so far. However, once companies in Japan do make the decision to adopt the tool, adoption rates typically average 80 percent to 85 percent.
"We say the readiness is low, but once we get the right tool out there and the proper support in the company and the mandate to use it, the adoption rate is very high," Mackee said, noting the importance of senior executive support.
However, companies in Japan are reluctant to employ mandates in their travel policies, and prefer guidelines, according to a 2005 white paper published by Carlson Wagonlit Travel. Japanese employees tend to follow corporate guidelines, but mandates are viewed as "too confrontational."
Air carriers in Japan face their own challenges with domestic programs, according to Steve Smith, vice president of passenger sales in the Americas for Japan Airlines. "Domestic air is regulated by a totally separate government group in Japan," he said. "Sometimes you see different policies and procedures and ways of working the business from the domestic and international side."
Four of the world's top 11 city-pairs are in Japan. "People find this hard to believe," Smith said, "but it just shows the density and amount of travel that's in Japan."
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