Direct Links Do Not Mean An End To The Intermediary

<B>Direct Links Do Not Mean An End To The Intermediary</B>

By John Ackermann

The debate is over. Now that all of the major technology providers have publicly stated their intent to build direct links into their systems, we finally can move on to the work at hand--building direct links and the travel industry's new Internet backbone. The coming battle already is heating up--what role, if any, will intermediaries play in this new Internet-based distribution network?

While it is no surprise to me that the industry finally has recognized the value of direct links, what has surprised me is the extent to which people resisted this change and the amount of time it has taken for people to recognize that market forces always win. For travel suppliers--particularly airlines--distribution costs, including commissions, overrides, segment fees and credit card fees, still eat up anywhere from 15 percent to 20 percent of revenue. Corporations subsidize this inefficiency by paying higher rates to suppliers.

The Internet offers an unprecedented opportunity to break down this inefficiency. Suppliers recognize the opportunity and have raced to the Web. With individual Web sites and now T2, travel suppliers are moving quickly to establish a presence online, with the eventual hope that they can capture a lion's share of the bookings in their own systems, thereby eliminating as much of the cost structure as possible. These same suppliers are approaching corporations and saying, "Why don't you just place a link on your intranet and book with us directly?" While on the surface this may seem an attractive option for corporations, it poses several questions: How can I enforce and monitor travel policy? Who is going to service direct reservations? What happens to my corporate reporting? These are important issues to consider, and suppliers may not be prepared to address them. Suppliers' abilities to address these issues go a long way toward understanding what role intermediaries will play with direct links.

Let's start with travel policy. Your company's ability to obtain favorable discounts from travel suppliers hinges on your ability to drive employee behavior and move market share. In turn, your ability to move market share depends on a strong travel policy that actively is monitored and enforced. With your employees going outside your firewall to external systems that do not integrate your policy, your ability to actively monitor and enforce policy is impacted significantly, if not lost altogether.

Corporations also need to consider serviceability issues for reservations made through supplier Web sites. While suppliers very well may want to drive everyone to their Web site for reservations, they fail to consider the inconvenience it may cause by making travelers go to multiple systems to book a complete trip. Additionally, suppliers may not be prepared to support the volume of phone calls they will receive to support reservations made through their Web sites.

As a tech provider, I'd like to think that all reservations, including changes, can be completely automated. This just isn't going to happen. There are times that corporate travelers need access to human agents. Are the suppliers prepared to invest in call centers to support this increase in call volume? If not, are travelers prepared to sit on hold while "representatives assist other customers?" Corporations also must insist that any agents that service their reservations be well versed in company-specific travel policy.

Corporate reporting is yet another area of consideration when using supplier Web sites for reservations. With information coming from such disparate sources as expense reporting systems, charge card companies, suppliers and agencies, obtaining comprehensive travel management data, which allows for meaningful decision support, is already quite a challenge. With corporate travelers going directly to supplier Web sites, this challenge remains. While you may capture post-trip data on the credit card, a huge hole remains with pre-trip reporting. How is the corporation to know what costs have been committed by employees and what are the details of these costs? To what extent are these trips booked within policy? These are all valid questions, and questions that may not be on the minds of travel suppliers trying to funnel corporate business to their Web sites.

It is clear that the Internet, as it is doing in all industries, is reshaping the business travel industry. Direct links are playing a significant role in this change. However, direct links between corporations and travel suppliers pose thorny issues that may or may not be addressed by travel suppliers. In the absence of any resolution to these issues, a role remains for those who can bridge the gap between corporations and travel suppliers. While there is much talk about the changing role of traditional industry intermediaries, we firmly believe that Internet technology will significantly shift their associated value in the supply chain.

<I>John Ackermann is president and CEO of e-Travel Inc., a wholly owned subsidiary of Oracle Corp.