In a dramatic contrast to several moves by some U.S. airlines to limit transient discounting and flexibility, three major carriers last month revised their standard, public meeting fare offerings to shorten the advance purchase requirement needed to receive an additional discount off group and meeting fares. It was the first change made to those meeting packages in years.
The move—led by United Airlines last month—reduced the advance purchase time needed to receive an additional 5 percent discount for a group or meetings fare from 60 days to 30 days. American and Northwest airlines quickly followed United, but at press time Continental, Delta and US Airways had not matched.
Every major airline offers a standard 5 percent discount off full coach fares when booked as part of a group or meeting of at least 10 attendees. This move affects the advance purchase needed to receive an additional 5 percent discount.
The change should have the greatest impact on companies that have decentralized or lightly managed meetings programs, giving them more opportunities to receive the discount even as meeting lead times industrywide generally continue to shrink.
JoAnn Bedrosian Ryan, United manager of specialty markets, painted the move as not only a reaction to shrinking meeting lead times but as a method to help the airline better track meeting and group volume. Changing the booking requirement should spur more interest in the product, she said, enabling United to book more meeting business with proper meeting codes. "We want to drive this business through the proper channels, with the bonus discount as an incentive," Ryan said. "This will help stimulate meeting traffic and increase use of the proper code." Ryan sees no relaxation of short-term booking trends for at least the next year and probably into 2004. "Even for trade shows and citywides, you're seeing bookings 22 days out, when it used to be 60 to 70," she said.
The change is the first to any airline's standard public package in at least three years, about the time when United first introduced its 60-day discount. United has no plans, however, to lower its 10-attendee definition of a meeting. Anything less, Ryan said, would make it easier for transient travelers to improperly claim meeting attendee status.
First to match was American, which did so within days of United. "We want to remain competitive and in line with advance booking trends," said American product manager George Coyle. "We're seeing some changes in the market, as many attendees book closer in."
Still, it's unclear whether pricing or qualification changes are enough to spur a slowed corporate meetings market, given that many corporations have placed wide restrictions on any non-client-facing meeting travel. "Affordability is key," Coyle said, "but you can't fault the pricing if they're not having meetings. Our pricing levels are under ongoing analysis, and our zone fares are reevaluated all the time. There's still demand, but the best we can do is make it convenient and affordable."
The move diverges from other recent major airline acts to limit negotiated corporate discounts
(BTN, July 15) and reuse of nonrefundable fares
(BTN, Sept. 9). There's no guarantee, though, that the additional percentage discount automatically will translate to savings—raising the airfare on a particular route by more than 5 percent would negate the discount. One buyer was uncertain of the potential impact of the new change. "We mandate that attendees at some of our large training meetings book at least 60 days out," said Bill Mattes, manager of meetings and travel management at Jersey City, N.J.-based Insurance Services Office Inc. "That relaxes a bit."
However, Mattes pointed to carriers' revenue management philosophies as potential stumbling blocks on the road to lower meeting fares. He said reducing the advance purchase requirement to 30 days could give carriers the ability to assess demand and load factors for each flight later and with better accuracy, possibly leading to the exemption of certain classes of fares from eligibility for meeting and group discounts earlier than the typical 21 days in advance of the flight.
"It doesn't mean prices will stay good," Mattes said. "With group business, carriers can take classes of fares away. Sixty days in advance they aren't looking at their loads as specifically as they will 30 days in advance. They will be able to see what that load is like and what revenues are like." In today's rapidly changing airline market, he added, with new rules and regulations introduced frequently, it is possible no change is permanent.
Schering-Plough Corp. of Kenilworth, N.J., tends to use standard packages only as a backup to its negotiated zone fare package, said director of travel services Mike Doran. "Dropping from 60 days to 30 days makes it a little easier to use the deal," he said, "but this is just an opportunity to fill more seats on the plane. The carriers are looking to up their load factors."
The pace of group and meetings business today likely will limit the impact of any move made by the airlines to grow traffic, said Russell Atkinson, vice president of business development of the meetings and incentives division of Wayne, Pa.-based Omega World Travel. "When airlines do whatever they do, it doesn't affect meetings and groups that much," Atkinson said. "If a client determines when they want to have a meeting, whenever the restrictions on airfares there may be, the client tends not to care. There's usually only a small window available for that meeting, and there's no schedule for them anymore. If a company has a good quarter, then they'll have a meeting."
The airlines' yield management strategies have changed recently, leading to future uncertainty, he added. "Even when I worked in the airline business, I never understood their philosophies regarding inventory control," Atkinson said. "I don't think this will have a dramatic effect. Plus, it could change tomorrow."