Orlando - The ears of corporate travel professionals everywhere must have been ringing last month when more than 800 investors, analysts and travel techies gathered at PhoCusWright's Executive Conference to discuss, among other things, the demise of the corporate travel management company. Drowning out practiced protests from American Express and Carlson Wagonlit Travel, this latter-day Internet hype extolled a view that corporate travel is a "critical growth component" for Expedia, Orbitz and Travelocity.
"Finally, corporate travel, the old guard sector of the industry that has never quite been so sexy, is actually hot," said Philip Wolf, president and CEO of conference host PhoCusWright, a Sherman, Conn.-based strategy and research firm.
When misinterpreted, this message parallels one with which Wall Street types and top managers of late have menaced corporate travel buyers: "What do we need you for?"
One of the few corporate buyers in attendance was amazed by the way distribution vendors coddle the investment community, and said at least a few leading travel managers should attend simply to be aware of the hyperbole strewn about behind their backs.
In listing the "obvious" reasons online corporate travel "is really happening now," Orbitz chairman, president and CEO Jeff Katz said, "Every employee in American business recognizes three or four online travel brands very well, and Orbitz, Expedia and Travelocity are usually the first. Getting employees to book their business trips now on some custom, in-house software or other unrecognizable program is like asking them to stop doing their budgets on Excel and start doing them on some Brand X spreadsheet software. They'll resist it, they'll make mistakes and some won't do it at all. But if the boss says, 'Use Orbitz,' a brand name they know, the adoption rate is accelerated.
"I'm not saying every company in America is jumping on this bandwagon in 2003 or 2004, and I'm not forecasting the demise of the corporate agency as we know it today—not at all," Katz added. PhoCusWright estimated that by 2005 traditional agencies will hold just one-third of the overall U.S. travel market.
Other PhoCusWright Executive Conference participants opined that TMCs with their supported online booking engines are doomed. Comments by some of the show's financial analyst speakers showed, for example, that some believe advertising that suggests the average agency transaction fee is $50. Others compared corporate travel agencies and their online-originating rivals with major carriers and low-cost competitors—not a bad analogy, except that many TMCs have a far tighter grip on their own labor costs than do the big network carriers. Yet, even a few of those online-originating players that would appear to benefit most from the propaganda sought to slow it down.
"In corporate travel, what are we, one one-hundredth the size of the big guys?" asked Expedia president and CEO Erik Blachford, who mentioned Amex, Carlson Wagonlit and Cendant as competitors right alongside Orbitz and Travelocity. "We're just getting started."
After saying, "It's a little disheartening to see the online travel agencies' view toward the traditional travel agency," agency automation provider Revelex Corp. president and CEO David Goodis asked Barry Diller, chairman and CEO of Expedia parent InterActiveCorp, to share his view on the agency marketplace. "I have never believed that one business displaces another," Diller said. "From the entertainment side of my life, I've watched so many things where people say, 'Oh, that's over. Nobody is going to go to movies. Nobody is going to do this.' It never happens." Asked more directly about the blurring of corporate and leisure travel online, Diller said, "Our core focus is on consumers. With the exception of really good ambitions at Expedia Corporate Travel that are just starting, we have no particular interest" in providing business to business services.
Europe's online consumer travel pioneers were cautious in statements about the growth possibilities in online corporate travel. "One shouldn't look at Europe like people look at the USA," said Dinesh Dhamija, Ebookers.com chairman and CEO. "In the U.S., the largest market is corporate. Obviously, there is a corporate market in Europe, but the leisure market is huge." Expedia senior vice president of international Simon Breakwell noted that the added technology required for managed corporate travel, including compliance engines, are "a non-trivial piece of work." Other European panelists lamented complexity and slow adoption on the corporate side, although Lastminute.com founder Brent Hoberman said he could see getting into the small to midsize corporate market during 2005.
More than a decade after corporate travelers began automated, self-service reservations (BTN, Feb. 7, 1994), its largest purveyors still find themselves on the defensive in terms of buzz.
"I've heard some people here today who seem to have a limited view of the online players," said Pamela Arway, executive vice president and general manager of American Express Corporate Travel in North America. "With all due respect, they are stuck in the paradigm of thinking this space only belongs to Expedia, Orbitz and Travelocity. You have to include Amex and some of the other traditional players, otherwise you're missing the boat completely.
"The marketplace is challenging the status quo in corporate travel," she continued. "And that's a very good thing because it's creating momentum for change and prodding some of the more traditional thinkers into examining things they would not otherwise. It's fair to say that Amex is no longer a 'traditional travel agency.' We have a huge, global corporate business, quite possibly larger than the corporate business of all the online competitors put together." Arway repeated previously reported numbers on online and touchless bookings
(BTN, Oct. 20)."We believe we are one of you," said CWT worldwide president and CEO Hervé Gourio, presumably speaking to the Big Three online-originating agencies. Gourio said CWT's Symphonie platform now covers close to half of eligible corporate transactions, with 70 percent client adoption and 85 percent touchless.
"I doubt it will work," Gourio said about McDonald's decision to go with Orbitz For Business
(BTN, Nov. 10), an announcement that generated what Arway called, "recent coverage in the press creating a huge amount of buzz in the industry. I think it's also got some corporate CFOs asking travel managers if this is something they should look into."
The McDonald's account, which sources said represents about $18 million in U.S. booked air volume, is a "full service, managed program from an executive desk with dedicated agents, meeting planning services, policy tools and so on," Orbitz's Katz said. "We have a very small executive desk for support. Over time, you'll see companies willing to adapt their processes so they fit into a more low-cost model. Because of the way the product works and is easier to use, they tend to call less, so they don't have to duplicate some of their own high-cost habits, which have gotten in the way."
Asked how the Orbitz For Business cost base is different from that of a TMC, Katz said, "There really is a difference. We started out post-dot-com crash, and we recognized that our model only makes sense on a very low cost basis. That is to say, all of our overhead and back-office fulfillment processes are engineered to be very, very low cost per unit." When asked about last month's sale
(see Inside Track) to an Indian conglomerate of Orbitz's back-office call center and customer support provider, UpStream, Katz told BTN that Orbitz clients should expect "almost equivalent customer service in all centers, including India. They will not be impacted by that sale."
Yet, the company losing the McDonald's business sees its costs as at least equivalent. "I do believe some of our costs, such as overhead and marketing, are much lower, so from a cost standpoint we are extremely competitive," said CWT's Gourio. "McDonald's USA is at the upper range of medium-size corporations. The big questions are, 'How will that work,' and 'What will be the travel experience?' We don't believe the experience will be as good as Jeff believes. We don't believe this is the right solution for McDonald's, and what we gathered from some of our other clients was rather negative." He did not elaborate on that client feedback, but said Orbitz's low advertised transaction fees are "subsidized by other revenue sources for a specific attack on specific clients. McDonald's may be right, but we're used to servicing very large corporations, which do not have a big reputation for lavishness. General Electric and United Technologies are not the kind of companies known for spending too much."
GE is the all-time biggest user of the Sabre BTS corporate booking tool, which should disappear in the first half of next year, said new Sabre Holdings CEO and president Sam Gilliland.
On the migration of GetThere into Travelocity, Travelocity Business president Ellen Keszler said, "It's a natural evolution of Sabre's business and the marketplace as a whole. All the teams and employees have been integrated. There are some behind-the-scenes issues in terms of where we're going to move responsibility for running the software. We lowered our costs to run the hardware, but our partner EDS also has run online technology before."
T-Biz is shifting its focus to the mid-office for technology-applied savings opportunities, using "a combination of our own as well as with companies like TRX," Keszler said. "What's next for companies that have 80 percent adoption? We're focused on how to make GetThere run best on Sabre and best on Travelocity fulfillment, so we're analyzing every exception and creating automation so it can be touchless."
Keszler confirmed that while T-Biz has three customer service centers of its own—in Pennsylvania, Texas and Virginia—New York's SeaGate Travel Group has joined TQ3 Travel Solutions as a partner for what was known as GetThere's Fulfillment Service Option
(BTN, March 12, 2001). "It's outsourced but drives significantly lower price points," Keszler said of FSO. "We expect to continue to outsource. We also know we must have global, and we have negotiated agreements with partners in various regions to provide seamless fulfillment using our full service and telephonic processes. We're also working closely with colleagues in Europe to be sure we have a consistent approach for U.S.-based corporations globally, and we will have a Europe-based offering." T-Biz also named General Dynamics, Liberty Mutual and Computer Associates as full service clients, though it has only part of GD.
Distinguishing Cendant's corporate full service offering from its competitors' partly because it does not outsource U.S. fulfillment, Travel Distribution Division chairman and CEO Samuel Katz said the company's Travelport division
(BTN, Aug. 25) "recently signed its first end-to-end client, which will be deployed next month, and there are more in the pipeline." Partnership, however, is the way to go in Europe, where he said Travelport launched in October in concert with preferred TMCs. "Next year, we're looking at Australia, Europe, Singapore and other regions, in partnership with multinational clients," Katz added.
As Cendant explores simultaneous competition and cooperation with TMCs, which, Katz said, "are trying new models that could disintermediate us, we want to redefine the agency-GDS model, develop stronger partnerships and replace financial assistance with new revenue streams." However, Cendant likely will not set up a new kind of deal where the agency pays the GDS provider, as have Worldspan and Amex
(BTN, Oct. 6). "It's a creative approach, but we see that as being isolated to Amex," he said. "We don't perceive travel suppliers finding it all that attractive."