Thurs August 6, at 1:00 PM ETSponsored by: Cvent
Thurs, July 23 at 11am ET / 8am PTSponsored By: American Express Global Business Travel
Thurs, July 16 at 1:00 PM ET / 10 AM PTSponsored by: TripActions
Virtual Event - September 9-10, 2020
Convene: 225 Liberty Street - October 22-23, 2020
ExCeL London - 24-25 February 2021
Filter in or out as many as 200 cities, as well as hotel and car rental class and meals of the day and watch as the per-diem calculator automatically adjusts per diems to your program. Drill down into cost breakdowns and export the results.
Three years into a revamp of its business-to-business sales approach, United Airlines last week reported to investors the progress it has made--including $400 million in new corporate sales revenue during the past 24 months. The sales strategy includes a heavy reliance on analytics, as well as contract modeling and "disciplined contract management," according to the carrier's presentation to the investment community.
The main driver behind its "process-oriented" approach to B2B sales has been margin improvement--achieved partly by obtaining a "disproportionate high-yield revenue share"--through such efforts as improved corporate contract performance and deeper "middle market penetration."
It also has meant holding a tougher line when negotiating with corporations. "We didn't suit up on the other side of the table as a company or an industry," said chief revenue office John Tague, referring to the traditional approach. "We dealt with professional sourcers. We allowed them to keep the dialogue focused solely on price, and we stayed at the table for as long as they wanted us to stay until we either won or lost. We're not doing business that way anymore and we are seeing contract renewals with significant price increases.
"If you think about the reputation the industry had with the buying community, when we never refused a request for proposal based on the requirements, we never got up from the table. We were just standing there ready to be whacked," Tague continued. "[Low-cost carriers'] value proposition is not meaningful to our customers in terms of the reduction in worldwide spend that we can create. You have to walk in a room prepared to walk out. We have to go into that room owning an equal right to earn a margin that these buyers have in conducting business in their own companies. Until we get our heads wrapped around that, we'll just be manipulated."
As a result, United walks away from accounts that cannot or will not provide what it deems as an equitable "economic exchange," according to senior vice president of worldwide sales Jeff Foland. Rather than amassing as much corporate revenue as possible, he added, the airline has been "very disciplined with respect to the requirements one has to get into this portfolio." And once accounts are in that portfolio, they won't necessarily stay there, as United, at times, has decided "to purge them," Foland said. "We have been doing quite a bit of that over the last three years, which is very counter to what has been done in this industry."
Before sitting at the negotiating table, United now uses new "proprietary tools" to profile accounts and analyze how its network and a potential client's saved "productivity hours" stack up to competitors, Foland explained. Those tools cover "160 different dimensions" to help the airline "transcend well beyond what traditionally has been a relationship selling environment and an environment where you simply sell on price."
If an account does focus solely on price, United won't dispatch strategic account managers, Foland added. For companies seeking to build a deeper relationship, "we treat those very differently," he said. "There are many things we can do with pockets of individual travelers in their organization, to safety and security elements, to travel management consultation to help them manage their program, to doing things with them on a global basis" in conjunction with Star Alliance partners.
According to United, an expanding international network now accounts for 50.1 percent of total passenger revenue. Barbara Higgins, vice president of customer experience, suggested the airline's new international premium cabins would lead to increased first and business class market shares. She added that the airline this year also would improve airport lounges and pilot at Chicago O'Hare an "exclusive lobby (check-in) area for international first class and Global Services guests."
"Our strategy to win the premium customer experience is, we conservatively estimate, worth in excess of $200 million a year in gross revenue," added chief customer officer Graham Atkinson.
Overall, according to Foland's presentation, sales agreements with "large corporate buyers" now account for 20 percent of all passenger revenue. The yield realized on contracted corporate business, he said, is "nearly double all other." The next step for United is to bring its corporate sales process to other regions beyond North America.
On the travel agency front, United since the beginning of 2006 increased by one percentage point, to 3 percent, its North America revenue "share premium"--representing market share minus the share it would expect based on its network, schedule and total lift.
At the same time, United in two years reduced "agency incentive costs" by 14 percent. Though Foland did not detail how that was achieved, he said future cost reduction measures would impact commissions, form of payment and selling, general and administrative costs.
United said that "more than 50 percent" of its passenger revenue is "influenced via contracts and incentives" with large travel agencies and other distributors.
Vietnamese low-cost carrier Pacific Airlines has signed an agreement to adopt Sabre's Passenger...
Travel technology provider Accelya has completed its acquisition of Farelogix and is in the process of...
Sabre has launched a new customer service chatbot designed for use by airlines, online travel agencies...