Auctions: Rosenbluth Airing Bids

Philadelphia - Rosenbluth International this week plans to launch Rosenbluth Exchange, a reverse auction platform for air purchasing targeted at companies with less than $5 million in annual U.S. booked air volume.

Rosenbluth Exchange is a rebranded version of MyTravelBid, developed last year by Rosenbluth technology unit Eclipse Advisors in conjunction with San Mateo, Calif.-based Internet commerce software company AtTheMoment Inc. Eclipse Advisors has made MyTravelBid available to the public, but Rosenbluth is the first agency to market with the tool, which is to be deployed by account managers for clients who want to submit requests for proposals to participating carriers, a list that at press time included United, Continental, US Airways, British Airways and Lufthansa.

Buyers and carriers will pay Rosenbluth a percentage of the total worth of air deals brokered through the service. In beta tests, Rosenbluth Exchange produced average discounts of 17 percent for midmarket travel buyers.

Although airlines historically have been standoffish when it comes to reverse auctions, the lure of the small and midsize markets combined with the carriers' current economic woes has led some of them to change their tune.

In fact, according to Rosenbluth senior vice president for North America Ron DiLeo, airlines have been "clamoring" to participate in Rosenbluth Exchange.

"This is the airlines' chance to attract market share that may not otherwise come to them," Dileo said. "It's a way to gain new business, not just an attempt to drive down fares."

"Corporations should not expect a better deal by negotiating via this portal versus the current process," said Dave Bartels, senior director of corporate programs at Continental Airlines. "There is no commitment on our part to even bid on their business, but we wanted to make sure this option was available to our corporate partners if they choose this channel."

Eclipse Advisors COO Michael Boult and managing partner Alison Galik invented the concept for MyTravelBid in late 1999. Rosenbluth bought out its development partner AtTheMoment and filed for an as-of-yet-unapproved patent on the process of reverse travel auctions almost a year later.

In January of 2001, the company began beta tests with a group of 36 companies and eight air carriers. Galik said the original model of MyTravelBid targeted travel buyers as its end users, but that the results of the three-month-long beta test indicated that account managers at agencies would be more appropriate users for the auctioning tool.

"The small and medium-size companies that participated in the beta test said they wanted the reverse auction service," Galik said, "but they do not have the time or the right skill sets to create RFPs and engage in negotiations with bidding airlines. So we reengineered the system and it became an agency tool."

The first step in using Rosenbluth Exchange is to create an RFP for specific city pairs that will be placed before the airlines along with the client's buying history, which will be gleaned from reporting information captured by Rosenbluth's Vision reporting suite.

"The client name is not included in the record or the RFP," Rosenbluth's Thomas said. "The buyer's identity is only revealed to the airline that wins the bid, at the discretion of the account manager."

Carriers bid Exchange RFPs without any knowledge of what the their competitiors are bidding. Upon receiving a satisfactory bid, the client and the airline move on to finalizing a traditional buyer-carrier contract based on the parameters created in the auction. The buyer has the option of declining any or all of the bids submitted, and also has the option of accepting bids "with exceptions," Thomas said. "The airline might respond to a bid and say that it is willing to give a 10 percent discount on 75 segments from New York to Los Angeles, and the client can counter the carrier's bid by asking for a 12 percent discount. The carrier and client can go back and forth until a satisfactory agreement is reached."

For now, MyTravelBid can handle air auctions only, although Galik said it could be altered to facilitate auctions with hotel and ground transportation suppliers: "If there is demand, we could start that this year."

Bill Hubric, vice president at Norwalk, Conn-based Management Alternatives is less optimistic about MyTravelBid's chances for proliferation in the market. "I have seen a few companies attempt reverse auctions for their contracts with the airlines, and none of them have been successful so far," he said. "I don't think airlines lend themselves to auction-type pricing. They do not have the flexibility or the profit margins to get into a bidding game."

At least one Rosenbluth client is looking forward to airline reverse auctions. "We have been doing a lot with reverse auctions with much success, primarily for commodities we use in stores, catalogs or temporary staffing," said Diane Trask, travel manager for Framingham, Mass.-based Staples.

Staples spent $5 million in U.S. booked air volume in 2001, but Trask said carriers have not been responsive to the idea of a reverse auction. Yet, she is enthusiastic about the possibilities of securing their interest through Rosenbluth Exchange.

Rosenbluth also is targeting small and midsize businesses with bundled services called e-Pac, which includes a call center reservation service, online booking and Web reporting for companies that spend between $2 million and $10 million annually in air travel. Rosenbluth offers standard transaction fees for e-Pac telephone and Internet bookings. "In exchange for accepting a non-customized solution," said senior VP DiLeo, "they'll get a better price."