A Map For A Landscape In Motion

<H1>A Map For A Landscape In Motion</H1>In a dozen years of charting the landscape of the U.S. business travel industry, never before have we recorded such seismic shifts. The changes in the past year are not so much in the rankings as in the revenues. Previous reductions in overcapacity of airline seats and new hotel rooms paid off. Traffic was strong enough to support an airline turnaround and give hotel companies a seller's market. Car rental companies did not fare as well, but the seeds of a turnaround in that industry segment appear to have been sown.

The most obvious shock came in February when the airlines put a cap on agency commissions. That move not only sent $500 million to the airlines'

bottom lines, it also permanently altered the course of how business travel buyers negotiate with travel agencies and airlines. It served as a wake-up call for suppliers and buyers of business travel services to look more closely at the costs of the process.

In re-examining agency transaction costs, many travel management companies were extremely successful this year in convincing accounts to shift from straight commission-rebate deals to some sort of fee-based arrangement. In the process of making agencies into service providers rather than middlemen, the cap also created a negotiating environment more conducive to direct dealing between corporate buyers and airline and hotel vendors for consolidated pieces of business.

In addition to redefining where the agency's bread is buttered, the cap's most significant effect was that it provided an economic case for all parties to justify investing in the development of automated booking and expense reporting systems.

The commission cap earthquake was only a symptom. On a more tectonic level, the problem that needs further correcting is that travel distribution costs are just too high. The conventional wisdom today is that as airlines seek new ways to cut their costs, CRS vendors will have to scramble to reposition themselves in the travel food chain in 1996 the way that travel agencies did in 1995.

The greatest prospect for substantially lowering distribution costs is the electrification of the travel distribution process. That effort was most clearly advanced in the past year by the deployment of ticketless travel. Electronic ticketing and self-booking procedures will eliminate another layer of cost for a significant percentage of travel, and as those technologies take hold they promise to cut agencies further out of the loop.

Despite the uproar, the agencies recorded increased revenue again this year, and they didn't have to resort to leisure travel to do it. Three-fourths of the 99 biggest travel management companies, those with annual U.S. gross air sales of $25 million or more, reported increasing the percentage of agency revenue coming from business travel accounts.

Meanwhile, the dawn of electronic commerce is making payment systems vendors even more interesting to watch. As it is, these companies are the best source for consolidating business travel spending data, but they seem to have an even brighter future ahead as the currency for computerized transactions over the Internet. The looming financial rewards are drawing new banking entrants, and the big race to develop expense management software is making corporate payment another travel industry segment to attract technology companies.

Thanks to those suppliers who provided their numbers for this latest Business Travel News effort to depict the lay of the land for North American business travel buyers. These figures are offered as mileposts on a landscape still in motion so that they can size up the relative strengths and performance of business travel services suppliers to make more informed purchasing decisions.