Electronic Links To Corporate Intranets Loom Larger

<B> Electronic Links To Corporate Intranets Loom Larger</B>

By Laurie Berger



If 1997 was the year travel vendors wooed consumers to snazzy new storefronts for direct booking, 1998 finds those same suppliers courting new partners for another online tango--direct links to corporate buyers.

No one's taking responsibility for initiating these encounters. And with logistics still a muddle, the bottom line benefits are still in question. But one thing is sure--both vendors and their top corporate clients are investing this year in the "electronic relationship."

Driven by spiraling distribution costs and the World Wide Web's promise to provide a cheaper channel, travel companies in all segments confirm that they've increased resources to grow the corporate online segment in 1998. They also predict that in the next 12 months a bundle of cost-friendly pricing and technology scenarios will drop in the laps of travel managers, making them partners in removing cost from the system. The grand prize: Internet-only corporate deals that beat the net-net fares some already have negotiated.

"The way companies purchase travel will have a direct bearing on the price they pay this year," said Steve Cossette, vice president of distribution planning for Continental Airlines. He said there's a $15-20 savings per ticket to be gained just by booking online and using e-tickets, which can be split two or three ways, depending upon the number of intermediaries involved. "We're having this conversation now with every corporation," he said.

But that's not all. Vendors also are plunking down dollars to build "administrative" sites that support such pacts, and the relationship in general. These private-access pages enable electronic requests for proposals and dissemination of management reports. In some cases, suppliers also are absorbing the high costs of customizing and supporting the interfaces between companies and their reservation systems.

Then there are the soft-dollar pacts. To increase adoption rates by employees, for instance, vendors are throwing in such value-added perks as bonus miles or points, vacation discounts and private versions of the popular "weekend deals" available on consumer sites. Some even are swapping such benefits as guaranteed room blocks in frequently sold-out cities or room upgrades for banner ads or preferred placement on corporate intranet travel sites.

While it seems everything's up for grabs in these new digital relationships, there's no such thing as a free lunch. Both sides are quickly discovering the challenges disintermediation presents for travel management. Linking directly may provide one of the greatest opportunities for cost savings, but it also creates the largest headaches--disruptions in policy compliance, data integration and management reporting, not to mention those delicate agency financial arrangements.

"The vendors are all pushing us to book online, but we still have to work out all the issues, particularly the integration of back-end information," said Nader Nemati, manager of quality and technology North America for Allied Signal.

Still, despite the costs and hassles of direct vendor connections in their various forms--from simple extranet booking links to full-blown custom sites--the online travel management revolution is unstoppable, many claim.

"It's the wave of the future," said the travel manager of a Fortune 100 company, who expects a "long winter" before seeing the fruits of tech investment. "There are definite cost savings to be had--it's the only reason to go through these headaches."

Airlines

Fresh from a successful first year of consumer bookings--United Connection alone reportedly rang up $115 million--airlines are eyeing similar gains in the corporate market. And companies seeking relief from the rising labor costs associated with commission cuts are willing partners.

"A number of corporations have already negotiated deals for Internet-only fares that are cheaper than net fares," said Jeff Hoffman, Worldspan vice president of distribution planning and development, who has been informally polling companies for a National Business Travel Association study. "They're putting more pressure on airlines to share these costs savings if they book online."

Most carriers agree they're having serious discussions with top corporate clients now. But they hedge when it comes to talking about actual deals, instead speaking about such pacts in the future tense.

"We're open to Internet discounts--that's definitely where everything is headed," said Mark Koehler, director of electronic distribution for United Airlines, which launched its new Internet Travel Network booking interface last December.

Koehler claims many of these discussions are triggered by travel managers' requests for net fares. "When companies start pounding on us for net fares, the first question we ask is, what channel will you book these through?" he said. "We're looking for an automated solution."

Delta, the airline that claims it "has more net-net agreements than any other," is "changing the way we do business in 1998, by supporting all sorts of online configurations, from online travel agencies to direct connections," according to Vince Caminiti, senior vice president of sales.

But in a departure from their consumer strategies, carriers publicly are sticking with online intermediaries--the GDS or agency supported booking tools--to fulfill bookings for the corporate market. American, for example, is "throwing its full support behind BTS," said John Samuels, managing director, distribution planning. "Building a corporate booking tool is just not our core competency."

United agreed, claiming the level of investment is higher on the corporate than consumer side. "We'll spend the first half of 1998 evaluating prototype arrangements," said Koehler, of the ever cautious United Airlines, the first company to develop a disk-based product but the last to emerge with a consumer booking site. However, it will tap experience gained from the short-lived Corporate United Connection, which had eight businesses as subscribers before the airline pulled the plug.

Delta, too, is supporting deals booked through Worldspan's corporate Trip Manager. At the same time, the airline is canvassing customers regarding interest in Via World Network, the Web-based reservations system built by Anderson Consulting, even though Delta is not a participating carrier in the system.

Continental officially has chosen Via World to fulfill its corporate objectives for 1998. The airline soon will become the third Via subscriber, joining USAirways and Northwest. But Cossette said Continental simultaneously will support any client that uses agency-based systems, such as American Express's AXI.

But for all these arrangements, adoption is the big question mark. To make them cost-effective, there must be a critical mass of corporate travelers booking through the system. Until this is resolved, airlines remain guarded about the short-term financial success of such ventures.

When asked how it's going with those companies they already have brought online, Cossette reponded, "Right now, it's only about one-third of a percent, but we see 1998 as the base year for corporate desktop applications and are looking for about 1 percent of the business to be driven through them."

Advancements in electronic ticketing--which include the availability of international documents--could be the single force that rescues 1998 from the doldrums. "It's the low hanging fruit out there and the key to cost savings," said Richard Wooten, manager of travel systems for Texas Instruments.

When interline capabilities emerge in 1999, many vendors think online booking will get another boost. Combine that with the emergence of standard interfaces, which would allow airlines to plug into any online booking system, and adoption rates could zoom to 30 percent. But that could take as long as three years, Cossette said. Until then, Continental will not be customizing solutions for corporations. "That's a year 2000 initiative," he said.

In the interim, airlines are pushing various risk-free solutions to corporate buyers. Northwest is adding a capability that's less appealing to many travel managers but offers an easy way to test the waters: corporate ID numbers for booking negotiated rates at its public site.

Carriers also are eyeing ways to provide a corporate-flavored version of its runaway hit of 1997--weekend fares. "Corporations have asked us to give their travelers first crack at our NetsAAver fares," said Frank Morogiello, director of sales for American. "That's definitely possible for 1998." United, which was set to roll out its E-Fares program last week, also considers it a "safe bet for this year."

In a surprise move, airlines have begun quietly evaluating how to leverage desktop applications to snag pieces of managed travelers' leisure bookings. Some carriers--and other travel vendors--peg 1999 as the year leisure becomes a powerful negotiation tool on both sides of the online equation for one simple reason: it meets that elusive goal of reaching the end user.

Despite the focus on corporate buyers, carriers continue to ply business travelers who visit their public sites with new incentives. Most are beefing up their frequent flyer functionality to allow travelers to automatically upgrade, book mileage awards, personalize pages and more.

"We're six weeks into our Website and already we're well beyond one quarter of our total year for United Connection in revenue," said Koehler.

But the biggest news is in pricing. Bowing to pressure from competitor and online pioneer Southwest, Delta said both consumers and unmanaged business travelers will see more Internet-only fares in 1998 that are not just tied to restricted weekend deals. "If Southwest does it, we have to compete," Caminiti said.

Hotels

With 60 percent of their reservations occurring outside the GDSs, hotels haven't been shy about establishing direct links with corporations. In the past year, major chains began leaning on their top accounts to lay the foundation for these new connections, deploying everything from basic hyperlinks to co-branded extranet sites. This year, they're taking the next logical step--customized intranet sites that link directly into the reservation system and private access "administration sites" that support corporate travel managers.

"Marriott, Hilton and Sheraton have been very aggressive about online booking," said Jeff Kurn, travel manager-MIS for Hewlett Packard. "Sheraton says we can share in the cost savings, but it's still not clear whether that would be offset by higher labor costs on the back end."

Hilton has been on the leading edge. It is one of the few chains that built its own reservations system, rather than relying on higher-cost GDSs or Pegasus' TravelWeb as online distribution tools. Now it needs to drive more business through that engine.

The consumer site earned just over $15 million in revenues last year. But for the second year in a row, the chain has dedicated 10-15 percent of its overall Web budget to developing solutions for the corporate market. Hilton's main goal is to steer bookings from its top producers' sites through corporate intranets or extranets. The chain signed on Charles Schwab last year, and now is finalizing customized sites for five other corporate giants, including IBM and Hewlett Packard. But even with the incentive for travelers of 1,500 points per booking, Bruce Rosenberg, vice president, marketing distribution for Hilton Hotels, predicted just under 1 percent penetration in year one.

Meanwhile Sheraton, anticipating corporate America's reluctance to partner on funding Web tool development, made a decision to buy, not build, when it launched a consumer Website 18 months ago. It partnered with Pegasus to create a corporate version of TravelWeb, the lower cost intermediary, which Siemens elected to use as its online hotel tool. "The cost of putting together a direct booking infrastructure would have exceeded the cost of doing business online," said Dan Geller, the chain's vice president and director of corporate sales. Ten of Sheraton's "Global Preference" clients are currently in the pipeline to implement the Corporate Travel Web system during 1998.

Then there's Radisson, which got an early start on the Web, but has kept its experiment simple. The chain has encouraged corporations to book at its public site using designated ID numbers. Even this modest approach has garnered significant business travel bookings. Radisson estimates that 50 percent of its Web bookings in 1997 originated from a corporate location, said Rachel Marret, director of interactive marketing.

Based on this success, the chain recently began lining up customers for co-branded extranet sites, hard-coding corporate ID and IATA numbers to reduce keystrokes. But given the current usage levels, Radisson said it cannot afford to trade deeper discounts for online bookings. "We're investing in the production costs of customized sites so there are no deals, but it's open for discussion," Marret said.

Meanwhile, Sheraton and Hilton have been quietly developing another corporate vehicle: extranet-style "administration sites" for travel managers of their top accounts. These password-protected pages are aimed at decreasing costs of doing business with a corporate account and improving productivity of the travel manager.

Still in prototype, Hilton's site features a complete list of preferred hotels, a copy of the corporate agreement, an electronic RFP and the ability to monitor room night production, rather than waiting for paper reports. Summaries of room night totals for that day and year to date appear on the home page; travel managers can link from there to detailed reports. Sheraton claims its travel manager page has been available for a year and Radisson says it, too, is developing a prototype.

Sheraton, meanwhile, is adding important functionality to the "travel manager pages" its top clients have been using. By late September, the chain says it will be able to generate global bid responses as a result of ongoing efforts to standardize negotiated rates based on production. Travel managers will only need to input their destination requirements and anticipated room comittment at the site to receive an automated proposal. Sheraton "will have this in time for the 1999 contract season," Geller said.

In contrast, Marriott claims it is devoting most of its 1998 resources to the consumer side, where it earned $16 million in revenue last year from a TravelWeb-driven booking site. "Our corporate investment pales in comparison to the consumer side," said Mike Pusateri, vice president of interactive sales and marketing.

Rumors have it that the chain recently plunked down at least $500,000 for a button on America Online. "And that could go up to $1 million next year," said Hilton's Rosenberg. "I know because they offered it to us and we declined."

That doesn't mean Marriott has lost sight of the corporate account. "Most of the stuff we do with our strategic accounts is not for public consumption," said Pusateri. And some travel managers confirm that the chain has been pressing for online bookings.

"Electronic links are clearly an emerging trend. We just want to make sure we're making proper investments that bring value to the relationship," said David Townsend, Marriott's vice president of alliance accounts. "But I could see carving out a piece of the server for our strategic accounts to retrieve their own pricing."

Despite their divergent approaches to the corporate market, the hotel titans agree on how they plan to drive more unmanaged traveler bookings in 1998: with speed and content. In 1998, Hilton said, it will guarantee a level of service at its corporate and consumer Websites that "exceeds the phone." Release 2.0 of its reservation system aims to reduce reservation time from two minutes to one minute and 15 seconds. Marriott claims it has reduced the number of clicks it takes to make a reservations from nine to five. And Radisson clocks in at seven clicks, said Marret.

Hilton and Marriott are racing to create content-rich, Yellow Pages-style Websites for their individual properties by this time next year. A licensing deal with Worldview will provide robust content for each of 240 Hilton hotels in database format. "These sites could be as large as 100 pages and integrate local business information with property-centric maps and driving directions," said Rosenberg.

Marriott is rolling out home pages for 1,500 properties. The property-specific sites automate the RFP process, under which chains begin gathering negotiated rate data from their properties in June to meet the October deadlines for corporations' hotel rate directories for the coming year.

"It's a ridiculous process that asks our properties to commit to next year's corporate rates when they don't even know what their new operating budgets will be," said Townsend. By linking these sites by intranet as well, Marriott hopes to shave the year 2000 bid cycle by four months.

Besides trying to craft new electronic deals with corporations, hotel chains are jockeying for mindshare on their corporate intranets. Many, such as Marriott, are buying ad banners and "premium positions" on corporate travel home pages, as well as in their electronic hotel directories.

Hilton said it's getting around the chronic data integration problem by sending e-mail to the travel agency every time a booking is made via the engine. But this is only a stop-gap. The chain is speaking with third parties such as Lanyon.

Car Rental

With their long tradition of corporate-direct purchasing, car rental firms are making speedy inroads into the online landscape. Last year, the car rental industry devoted much of its time infiltrating corporate intranets and extranets with information-only pages and links. Avis, for one, claims to have implemented at least 12 "descriptive pages" for corporations, which link to online enrollment forms for preferred renter programs, as well as selected pages on their consumer Websites.

Now that the ice has been broken, the rental firms are diving head first into direct links, primarily through their own booking engines. Echoing the 1998 corporate strategies of others in the segment, industry leader Hertz issued a statement from Brian Kennedy, vice president of marketing and sales, stating the following:

"The development of direct links is focused on decreasing distribution costs. Hertz has participated in many discussion with corporate accounts and third-party developers. We already have a number of direct link capabilities with several travel-related companies in place. However, the details remain proprietary."

Late last year, Avis announced it will forge direct links with companies in the first quarter of 1998 through its Wizcom engine. This would allow the rental firm to "provide an unlimited number of corporations with intranet booking sites," said Debbie Schneiderman, manager of online marketing. "Getting corporations on the Internet is our main goal for 1998."

Budget Rent A Car, a latecomer to the online party, recently scrapped its co-branding deal with Travelocity and has retained the interactive division of its ad agency, Hill Holiday, to build a proprietary booking engine to debut later this year. "We're making more investment in the Web in 1998 than ever before," said Mike Blakely, director of channel marketing.

Although few car rental firms would admit they were offering preferred pricing in exchange for online bookings, corporations said they've been increasingly approached with these types of arrangements. "Vendors like Hertz are definitely looking at providing reduced rates," said Chip Mahan, chief of the travel project management office at the National Security Agency and chair of the NBTA technology committee.

Yet despite their best efforts to sell snappy technology to corporate buyers, rental car firms are not immune to the industry's data integration and customer adoption woes. For that reason, they aggressively are scouting out third-party partners who can knit together directly booked reservations with airline PNRs.

At presstime, Hertz was reported to be in serious discussion with Lanyon and National Car Rental was set to announce a new program, thought to be a product that integrates with travel booking packages.

Customizing the solutions of corporations is also a big issue for car rental firms. Avis claims that its Wizcom service is free. But companies must shoulder their own customization fees, unless the amount of business they generate warrants Avis absorbing the costs, said Schneiderman.

Budget, on the other hand, plans to stay out of the customization business. "Our goal is to push as much corporate business through the consumer Website, using extranet links and corporate ID numbers, rather than customized solutions," said Blakely. "But we'll review it case by case."

More than any other segment, car rental firms are hoping their new spot on the corporate desktop becomes a gateway to incremental leisure business. Both Avis and Budget indicated an interest in creating leisure deals for managed travelers. "We're looking at special vacation packages or even last-minute deals for our most loyal customers," said Blakely. "It's like a no-cost employee benefit.