Agencies Predict Good Year As They Prepare Tech

Executives of large and midsize travel management companies generally are cautiously optimistic about the year ahead when it comes to their prospects for profitability and for positioning themselves for future growth.

Barring any unforeseen economic curveballs, most travel agents agree with Travel One president and CEO Jeff Harrow, who expects 1997 to be "a great year." While this upbeat assessment is held by most super regionals and mega agencies, it is the "mega regionals" like Travel One, which have annual air sales of several hundred thousand dollars, that seem to be wearing the biggest grins these days. The trend toward consolidation and globalization among agencies has given the largest regional agencies the opportunity to compete for multinational accounts like never before, and the ground they have gained in this area has enabled them to score larger overrides from airlines.

Stepping up in size above $100 million in air sales can mean as much as a point to a point and a half in override revenue, said consultant Tom Wilkinson, president of the Travel Management Group in Alexandria, Va. And Travel & Transport president Frank Dinovo said that, in working on a fee basis with multinational accounts, super regionals are finding that for the largest agencies, carriers have exceeded the supposed 5 percent override ceiling.

While these agencies are bulking up through acquisitions and leveraging their growing clout, the megas are positioning themselves for true global competition.

Travis Tanner, the president and CEO of the almost-merged Carlson Wagonlit Travel company, sees the "ability to negotiate multinational deals as a critical ingredient of what we will be able to deliver in 1997-probably in late 1997."

In Carlson Wagonlit's efforts to compete on a worldwide basis, the agency is undergoing a reengineering process through which all of its agents will have a common front-end system and will use similar procedures in servicing accounts.

American Express, through its Thomas Cook acquisition, and Rosenbluth International, through the replacement of foreign franchises with wholly owned locations, have moved in a similar direction.

The biggest agency deal of 1997 is expected to be a move by London-based Hogg Robinson to acquire controlling interest of the Business Travel International alliance, including BTI Americas.

While Tanner concedes the move could create a tougher adversary for global accounts, he is skeptical that the deal will be completed this year, if at all. "It's difficult enough merging two entities," he said.

Agency leaders expect heightened international airline competition to forestall a cap on international commissions, which many previously viewed as an inevitability. They see airfares on the rise, which bodes well for the commissions they do earn. For the most part, however, they have done better at converting corporate clients to a fee basis than anticipated, and expect to raise the percentage of such deals from a clear to an overwhelming majority.

With the rising number of fee-based arrangements and increasing interest from airlines, executives expect to see, if not help orchestrate, more net fare deals this year. Another bargaining tactic many see rising to the fore is the advanced purchase of bulk airline seat and hotel room inventory.

Agency execs expect technology to improve customer relationships and make operations more efficient. Most see opportunities in the installation of automated booking, management reporting and expense processing systems and the creation of travel sites on corporate intranets.

"At this point, demand is only for intranet-based products," said Michael Steiner, executive vice president of marketing for Direct Travel, a New York-based agency that reported $145 million in air sales in 1995. "Solutions for that platform will be one of the thrusts for us for next year."

Getting those intranets up and equipped properly is going to be the name of the game for many other agencies as well. "1997 is the year in which most companies will be getting their infrastructure lined up to take advantage of the products coming to market," said Ed Gilligan, president of American Express Corporate Services.

Many eyes are on Amex and its venture with Microsoft to develop an online aproach to corporate travel management. "The key thing for 1997 and 1998," Gilligan said, "is to work out the distribution and make sure that companies have the intranet up and running in such a way that it can take on an application such as travel that would pump such volume over it."

While the groundwork may be laid this year, no one believes these systems will significantly change the way they do the majority of their business in 1997.

"Corporate intranets are not the current frontier, but I think they will be," said Tanner. "The current frontier is answering the phone and providing the lowest fare. This year the focus is still on the basic blocking and tackling. A lot of us are still living on the old frontier."

Still, that won't keep agencies like Direct Travel from trying to lead the charge. "In 1997 we will price differently for automated transactions versus the old-fashioned way. That will help drive it," Steiner said.