Aggressive, flat discounts offered by low-cost carriers for corporate meetings have proved popular with travel buyers, but they continue to place the majority of corporate group volume on legacy carriers, according to a survey by Business Travel News and ACNielsen. After a tumultuous year of fare reforms and restructuring, major domestic airlines scored lower rankings for group pricing flexibility, but claimed they maintained edges in experience, capacity and zone fares, upgrades and earned ticket offerings.
Three low-cost carriers took top honors for flexibility in corporate group pricing, though their share of the market was limited, according to the eighth annual Business Travel News Airline Survey
(BTN, Nov. 14). This year, BTN's sister company ACNielsen for the first time conducted the survey, which compiled the responses of 265 qualified readers. Respondents were asked to rank airlines with which they had done business in 2005 on a scale of one (poor) to five (excellent) in 15 categories.
Frontier Airlines led the pricing category with a ranking of 3.24. JetBlue Airways and AirTran Airways followed with 3.19 and 3.13, respectively. American Airlines was rated as the best legacy domestic carrier for flexibility in group pricing at 3.01, over Continental Airlines, which corporate travel buyers rated at 2.97. Last year, the two airlines tied with scores of 3.37.
After Delta Air Lines eliminated its groups and meetings product early in the year, some other legacy carriers reevaluated their meetings products and weighed the potential revenue with high labor costs, in some cases scaling back corporate group sales programs. Meetings Today recently learned Delta would release a new automated group-booking tool directly on its Web site
(Meetings Today, Nov. 14).Meanwhile, the two highest-ranked major carriers in the survey both reaffirmed their commitment to employing a group sales department and exploring every available sales channel for meetings.
In 2006, American Airlines will continue to refine its meetings programs, said Frank Morogiello, vice president of global accounts. "You didn't even have to justify the group desk, it was a matter of how to grow it," he said. "We can take the order any way anyone else can, and then some." The potential of the meetings market has just begun to be tapped, Morogiello said, and much corporate group travel still is unmanaged.
AA's Group Evaluation Model pricing system continues to generate strong sales leads for the carrier, he said. The GEM system, in place for five years, helps buyers find lower fares by offering off-peak and low-inventory flights. "The flexibility of that, which gives us an advantage, is you can take the order on that, or lower the levels, or move the destination if they say they need a sun-and-fun place or a business place. Being the world's largest airline gives you breadth and scope of where you can move the meeting," Morogiello said.
Morogiello said he does not consider LCCs to be a challenger in corporate group sales, but said all carriers could be considered competitors. "They have a different business model in how they're trying to take the orders. They're not working, for the most part, with the agency community," he said.
Morogiello said competition is based on more than who has the lowest fares. "I'm always cautious when you win the award for the best price. I don't think we want to be that. It's not what we sell. Of course, price is an issue as is how you decide if you're going to be able to accommodate the offer. How are they booking it and where are they doing it?" he said. "We think we're still taking the order the right way, and we can take it electronically as well. The biggest challenge in sales is to be able to take the order from where the customer wants to buy it."
Chris Clarke, Continental's regional sales manager of specialty sales programs, said confusion about pricing and discounts may have contributed to the carrier's lower raking in this year's survey.
"The simplification of the fare structure that started earlier this year drove some changes to our discount program to more closely match the corporate structure. In some cases, the discounts may actually look lower, but since the overall fare structure has come down, customers can actually be paying the same or less," Clarke said. "Part of that for us is just managing the perception that because the discounts are lower, the yields aren't as good. The reality is that, because of the whole downward pressure on prices, the deals are as good or better."
Communicating exact savings to a customer is a challenge, he said, and the message should be what the savings are, rather than a percentage discount, he said. In some cases, Continental has worked to quantify exactly what a meetings buyer is saving.
"The other change that we made earlier in the year is that the discounts now apply to all fares. In the past, we had 10 percent off certain fare buckets. Now, it's multi-tiered by fare level. The good news is that all fares are now eligible for some kind of discount," he said.
Continental's commitment to a group sales desk continues, said Joe Pizzitola, sales development manager for meeting, incentive and group sales.
In April, Continental relaunched its MeetingWorks pricing program with an online tool, in conjunction with the new fare structure. Earned tickets and upgrades are given as part of an earned-points reward system.
"We do have a meetings and groups desk and we do get a lot of bids through the online tool. What we'd like to do is enhance that further and in the future we see things like having an online statement, for example. Each month, we send out notifications with productivity and travel, and we'd like to put that online," Clarke said. Continental attaches a code to online meeting bookings to ensure the spending is captured in the record of the corporation's total volume.
Continental also extends corporate preferred rates into meeting contracts, Clarke said. "They basically get to choose from both discount programs," he said.
Automating the booking process and moving group desks online has been a trend among airlines, said Kim Tiberia, director of corporate meetings for The Travel Team, a corporate travel management company based in Buffalo, N.Y.
"Sometimes those point-and-click products are useful as far as time is concerned and getting answers, but other times it's difficult when you need that personal service and you need to talk to an individual," she said. "It is a little disheartening to realize that is gone and will be a thing of the past."
Tiberia has worked with LCCs in the past for corporate meetings. Working with such carriers is easier, she said, and the ticketing process is more streamlined. "It basically is calling in a name list to the carrier and we process the deposits, the final payments and so forth. It's really easy," Tiberia said.
Flat discounts help clients understand upfront savings, she added, and aid in budgeting and benchmarking.
"That simple process of understanding where everybody is coming from in order to calculate zone fares takes a lot of guesswork out of it," Tiberia said. "We've actually cut down on airfare analysis that used to be really popular. Our clients would ask for that type of report to help in budgeting. Over the past year, we haven't been using that product as much as we have in the past because things are simpler."
Tiberia said she has seen "no flexibility" this year on legacy carriers' waivers and favors in meetings negotiations.
"There's really no flexibility when we are looking for exceptions. Going the extra mile for our client is what we pride ourselves on, but we can only do as much as the carriers will work with us on. We find that to be a little difficult," she said.
Candie Gerakos in March left her position as director of group sales for Continental to become director of sales and sponsorship for Denver-based Frontier Airlines. Frontier offers a flat 10 percent discount off published fares to groups of 20 or more attendees. During the past eight months, Frontier increased promotion of its meetings discount and involvement with meetings industry associations, Gerakos said. Though survey respondents ranked Frontier highest in group pricing flexibility, only 11 percent of them used the airline in 2005.
"The 10 percent discount is a big deal, because in the meetings industry, that's probably the best deal you're going to get," Gerakos said. "It's pretty simple to understand, versus a lot of other carriers' meeting programs where if you book 30 days out, you get an extra 5 percent off, but if you book on this fare then you don't get a discount at all. It becomes very complicated. The 10 percent is a simple message, and our fares are so low to begin with that the fact you get an extra 10 percent off is just gravy."
Gerakos said Frontier hopes to launch an online booking option for meetings in the first quarter of 2006. Currently, meeting buyers can request an agreement or group booking on the Web site, but the new tool would allow purchasing and include the automatic 10 percent discount, she said.
"If people prefer to go directly to our group desk or use a travel agent, it's fine. We just want to give them the additional option to come direct with us," Gerakos said.
When Gerakos joined Frontier, she asked corporate meetings customers if they would be interested in zone fares, but her customers said they preferred flat discounts.
"Zone fares are somewhat good for budgeting, but nobody ever uses them because they're so high and the published fares are much more attractive. They're very cumbersome for an airline to administer and if the customer doesn't see a need for it, there's really no reason to veer off our 10-percent-off message," she said.