Buyers Urged To Drive Standards

<I>Chicago</I> - Travel buyers have a unique opportunity to shape the emerging new travel distribution paradigm, but little time to waste.

"My advice to you is to drive that change," Greg Conley, general manager, travel and transportation industry for IBM Corp., urged buyers at the Association of Corporate Travel Managers' annual conference in Chicago last week.

At the end of the day, corporations are going to pay for the new system, Conley said. "You shouldn't let companies like us, Microsoft and Sabre build up products and get them out of the chute without your input," he said. "You should be in there driving and shaping the change."

Unlike other industries that have developed standards to easily exchange data, ensure compatibility and lower costs, the travel industry has not embraced standard approaches, Conley said. He urged attendees to "collect themselves" through organizations like ACTE to ensure that the standards being developed will meet their needs.

One way ACTE intends to drive the change is through the formation of a new technology committee, said ACTE president Earl Foster. The ACTE board has charged the committee "to influence developments that are going on today," including forging standards. Foster plans to ask a supplier to head the committee and expects a small group--of perhaps eight members, split evenly between buyers and suppliers--to be in place within 30 days.

"We have to get travel decision makers involved and ask them, 'what do you really want? When? And how much are you willing to pay for it?' " said Foster, who began a new job as global travel management director at New York-based Seagrams last week (see story, Page 3).

In his keynote address, Conley also spoke of the benefits that smart cards can offer travelers, travel decision makers and suppliers. But, once again, the industry must develop standards on security, applications and other issues for smart cards to become a viable offering. Pointing to the recent announcement by smart card vendors to coalesce around a Java-based application, Conley noted progress is being made. However, some cards in use today can't be read by certain readers, and the industry must develop a standard to eliminate such problems, he said.

Through 1997, smart card pilots will proliferate, Conley predicted. The results of those tests will either produce widespread deployment of applications or further refinements in 1998. In a pilot involving American Express, American Airlines, Hilton Hotels and IBM, smart cards are being used for payment, to generate boarding passes on electronic tickets and at hotel kiosks to speed the checkin process. However, they also could be used to access airline clubs, to streamline immigration and enhance security by storing biometrics (fingerprints, handprints, eye patterns, etc.) or even a picture that a computer could compare to the cardholder. Other uses can include speeding up car rental transactions and collecting all expense data during a trip for download on an expense form. IBM is working with Sabre's Business Travel Solutions and the Microsoft/Amex Rome booking systems to ensure that its smart card applications are integrated.

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Technology was clearly on the minds, agendas and budgets of conference delegates. In an ACTE survey of 169 travel managers, half said they expect to implement an automated booking system in the next year, with another quarter implementing in 18 months or more. Twelve percent said they are early adopters of that technology.

Although more than half of BTI Americas' clients have asked about automated booking systems, president Ralph Manaker was highly skeptical that such a large portion of corporations will move so quickly on this issue. "The economic benefits as they exist today and the installation hassles do not make it feasible," he said. "There will be gradual acceptance, like with ATMs."

In the case of automated expense management solutions, almost half expect to implement within 12 months, and 22 percent expect it to take 18 months or more. Early adopters of T&E systems made up another 22 percent of this group. In an unscientific show of hands, the majority of travel managers shopping for systems said they have the budget to do so.

Rating the importance of five issues, more than three-quarters of the travel managers said automated processes were extremely or very important. Next was distribution costs, then safety/security, airline consolidation and globalization.

The greatest challenges facing about 70 percent of travel managers and suppliers are automation, internal communication and policy compliance, the survey showed.

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As it has for a few years now, the subject of globalization remained at the top of conference participants' agendas. The sentiment was perhaps best phrased by Peter Rogers, CEO and president of Diners Club International: "Much has been said about the subject of globalization in recent years and not enough delivered. The challenge is that true globalization is just emerging."

That thought is reflected in an ACTE survey taken at the conference, which showed that while more than 70 percent of suppliers and agents think globalization is important, only 57 percent of travel managers agreed.

Mike Platt, director of commercial affairs for Hogg Robinson in Farnborough, England, voiced similar thoughts. "There's a lot of hype, but there's not much going on," he said. "Suppliers like the idea, but the last thing that they want at the moment is a global deal."

A key development in this area is the formation of strong marketing alliances between large airlines and the liberalization of international air agreements that accompany them. Focusing on Europe, some companies are signing joint deals with airline partners, Platt said, noting that United and Lufthansa have been particularly aggressive (see story, Page 22). But, he said, "I don't see the benefits for the companies. Perhaps they're containing a threat more than seeking benefits; it may be a better deal initially."

Kyle Davis, director of purchasing and airfare management for American Express in Paris, advised travel managers hoping to negotiate such joint deals to get to work on them early.

"Alliances are starting to offer package deals," he said. "They take a long time to negotiate because there is negotiating going on between airlines and between different divisions of the company. The good news is that airlines and corporate customers are being more open with each other by sharing data up front, which makes for the best deals for both."

As to whether such alliances offer reduced discount opportunities, "the jury's still out," Davis said. The ACTE survey indicated that 58 percent of travel managers think alliances will result in less competition, 36 percent believe they will offer better service and 33 percent said they will reduce choices.

Both Davis and Margit Napier, Lufthansa's manager of global corporate sales, agreed that the benefits enjoyed in the United States under deregulation have not yet been realized in Europe, as evidenced by steep increases in business fares, limited route development and a lack of new entry in Europe. "Thirty percent of the routes have two carriers, and 6 percent have three," said Napier. "And 64 percent still have monopolies."

However, some developments have paralleled those in the United States, particularly a drastic increase in promotional vacation fares, which Napier said has lowered airline yields by 20 percent. The end result in Europe, Davis predicted, will be "consolidation, with the possible emergence of two to five mega carriers."

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Consolidation in the hotel industry is definitely on the radar screen of Hyatt Hotels Corp. president Doug Geoga, and it's not a pretty picture.

"The consolidation we're seeing is more driven by Wall Street," with one company buying another and keeping both brands rather than consolidating them, he said. "I don't see this consolidation as having a positive impact on the service levels, culture or relationships with customers," Geoga said. "I look at this from the perspective that Wall Street is very shortsighted."

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Budget Group Inc. chairman and CEO Sandy Miller proved you can be in two places at once, as he appeared on a panel with other top industry executives and closed the six deals necessary for Team Rental Group Inc. to officially acquire Budget Rent A Car Corp.

Miller signed papers on loans, stock issuances and the actual acquisition in New York until 4 a.m. last Tuesday before hopping a plane to Chicago for an afternoon panel, leaving lawyers to execute the papers. The company raised $495 million in stock and notes to complete the transaction. Budget now operates 76 percent of its U.S. fleet and is focusing on improving performance at its rental counters. To that end, the company has hired former Brink's exec Jeffrey Hendrickson as senior vice president and general manager of U.S. rental operations.

Like the old Budget, the new Budget plans to let Hertz remain on the leading edge of technology, while it "wants to be near the edge of technology," Miller said. "Our customers love navigational devices, but they're not willing to pay for them." Nor are customers likely to cancel reservations they don't need, causing a huge, costly problem, Miller said. "Whether you believe it or not, we do hold the car for you," he said. "Our no-show factor is twice what you'd anticipate, and each reservation costs us $5."

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ACTE recognized three members for their service to the organization and the industry. Nancy Holtzman of System One/Amadeus received the President's Award; Piet Stokman, European travel purchasing manager for 3M, won the Business Professionalism Award; and Andre Jenkins, president of A. Jenkins & Associates won the Industry Professionalism Award.

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Consultant Marvin Gottlieb outlined tactics that travel managers can use to boost compliance when posting travel policy online. Gottlieb--president of the Communication Project Inc., a Greenwich, Conn.&shy;based management consulting firm--suggested that travel managers should add a series of quizzes on the policy that earn airline miles or points toward prizes. He also recommended linking the site to the traveler's e-mail or automated expense report.

While surfing the Net, Gottlieb found that the University of Wisconsin has the most elaborate travel management site: http://www.uwsa.edu/fadmin/travel.htm. Although such a site is, for most firms, "unrealistic unless you've got 40 graduate students to maintain it," the site offers currency exchange, maps, a forum for traveler and travel administrator feedback and even cost comparisons between flying and driving.

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Microsoft Travel Technologies Group has inked an agreement to provide the booking engine for another airline site, and will soon announce the name of the carrier, said group product manager Dhiren Fonseca. The company has rapidly built a presence for itself in the industry, with a product line that now includes Expedia, Expedia Canada and Rome, and contracts to provide the booking engines for the Amex leisure site and the Northwest Airlines site. The rollout of the Amex-Microsoft Rome system is on track for July--and the product this month takes on Bill Gates as a customer, as it begins beta testing internally at Microsoft.

<I>Jay Campbell, Linda Humphrey, Mary Ann McNulty and Cheryl Rosen contributed to this report.