Bellevue, Wash. - Relishing the task of convincing corporate travel professionals it can offer them proper service, consumer online travel powerhouse Expedia last month launched its small-business travel management program and revealed plans for a large-company offering to become available in mid-2003.
Expedia's current service costs $5 for unassisted flight bookings. Agent assistance pushes the price to $20 for domestic and $30 for international bookings. Hotel and car bookings without air are $10 with telephonic support, free if made online. Expedia through year-end is waiving a $149 account setup fee, but a separate fee to load clients' negotiated air rates is about $500, depending on complexity. Pricing is similar to charges by Orbitz For Business
(BTN, July 29) and a handful of lightly managed programs offered by such larger agencies as American Express and Rosenbluth International.
Though the price points appear attractive—considering the average online booking fee is $18.50, according to a recent Institute of Business Travel Management survey of 157 National Business Travel Association members—Expedia and its competitors said the real test lies in service.
"We'll measure success by customer satisfaction," said Expedia senior vice president of corporate travel Byron Bishop.
The current Expedia Corporate Travel product offers a travel arranger view that complements the travel manager interface with downloadable reports, user profile management, messaging and other features.
Travel managers can control the display of suppliers in the traveler interface, where preferred airlines are flagged with a handshake icon and itineraries can be downloaded into Microsoft Outlook. The product also tracks for companies their usage of several airline soft-dollar business incentive programs.
Expedia is backing its offering with a team of agents who average 10 years experience in corporate travel, as well as an industry standard pledge to answer 80 percent of all calls within 20 seconds. In addition to its acquisition earlier this year of Seattle's Metropolitan Travel
(BTN, July 29), Expedia is taking advantage of its experience with the defunct American Express Interactive product
(BTN, June 12, 2000), some of whose engineers are still with the company.
"We'll have a team of account managers who will help companies drive online adoption, create strategies for lowering the cost of their travel and provide consulting in their negotiations with suppliers," Bishop said. "As we continue to develop, we'll be offering additional services, including travel policy management and dedicated call center agents."
The current Expedia product lacks most policy enforcement tools and such other features as negotiated hotel rates, but Bishop said these and other functions for heavily managed programs will be available in next year's release.
"Companies that expect a salesperson to call on them tend to be bigger companies with longer sales cycles," Bishop added. "For the midyear release, that sales cycle is already going on now, so we're actively building out our salesforce."
Bishop said Expedia is taking a measured approach, partly to prevent smaller clients from bearing the costs of deeper management tools. Expedia officials were surprised to find that many large companies are interested in the lightly managed product, which launched with 20 small clients.
The company expects its client base to grow rapidly, with its conservative estimate giving Expedia about $7 billion in online corporate travel within five to 10 years—bigger than all of Expedia today. "We earn higher revenue, but also have higher costs per trip as business travelers are expected to book more components per trip," Bishop said. "In 2003, we will be in investment mode and will spend more on research, development and marketing than we will make in gross profit. We expect corporate travel will begin making a material contribution to revenues in 2004. We will pace our investments to reach profitability in this business before the end of 2004."
Expedia CEO Richard Barton last month told a PhoCusWright conference in Hollywood, "We're stupid if we can't go actually sell the service to a corporation—sorry, it's not that simple certainly—but the market is prime and teed up and ready for us."
Pressed further on how successful Expedia can be—its brand notwithstanding—in the more complicated corporate space, Barton said, "Someone will be successful. All of the drivers moving interactions from offline to online present in the leisure market are there in corporate as well. Exactly how we make money, I really don't know, but I'm very confident there's value to be added. Will we succeed? It's up to us. It comes down to execution."
Bishop cited "inefficiencies and redundancies" in the typical corporate booking model partly driven by corporations often having relationships with multiple providers for agency and booking services. Such a model results in, he said, "redundant tech support, a disconnect between service providers and extra cost."
"Hidden costs" are added for all clients, he noted, as travel management companies invest in supporting customized offerings for some.
Though many corporations like the flexibility of component buying, some competitors agreed with Expedia that it has flaws and noted that they already offer all-in-one approaches. Sabre's GetThere, for example, has bundled pricing with fulfillment and support through TQ3 Maritz Travel Solutions. Amex's Sabre-based RezPort suite offers several options for small companies, starting with free fully automated bookings and up to a $5 fee for bookings if negotiated rates are loaded. Amex's large-market Corporate Travel Online product is bought under a single contract, officials said.
A spokesperson for GetThere said the company's midmarket product bookings quadrupled year over year, and cited a marked increase in the aggressiveness of its distributors' pricing—also a potential buyer benefit from the new players' emphasis on low transaction costs.
American Express vice president of strategic marketing and business development John Berkley anticipated that the entry of Expedia and Orbitz would increase awareness for managing travel, possibly "reminding small businesses of the reason you would buy a business travel product over a leisure one." Amex last month sweetened its Sabre-based RezPort offering with triple loyalty points, an online enrollment option and a temporarily waived maintenance fee.
According to Rosenbluth International strategic travel solutions COO Ron DiLeo, "I don't think Expedia and Orbitz have caused downward pressure on fees as much as they bring to light travel management for smaller clients. It has heightened awareness of that segment, and we're delighted by it, but they will affect the smaller agency community. It probably also helps accelerate e-booking adoption in managed travel and affects the look-and-feel expectations for providers like GetThere and Highwire." DiLeo added that nearly 30 percent of Rosenbluth's reservations now are made online. Rosenbluth's Upstream unit supports Orbitz.
Bishop responded to concerns that such situations as the recently resolved Northwest Airlines dispute—in which Northwest and Expedia temporarily agreed to stop working together because, according to Northwest, "Expedia was unwilling to commit to display Northwest's products in an unbiased manner"—would impact the corporate offering. Bishop said Expedia is creating agreements with suppliers that relate to the corporate offering, which are separate from Expedia's retail operation.
The first example of that, he said, is an arrangement that will have Expedia agents making telephone-based reservations with Southwest, a carrier that remains unavailable to consumer users since it is not in the Worldspan GDS, which backs Expedia. "JetBlue will come soon," Bishop said.
Two executives who have "a love affair with JetBlue" currently are the only travelers at New York-based Entertainment Events—a $50,000 T&E account referred by Expedia—who don't book on Expedia, said production manager Ally Haynes. Like Haynes, another early Expedia corporate client is a travel arranger with myriad other duties at a company that barely manages travel. Both companies took their business away from traditional travel agencies that policy had dictated travelers use.
That would certainly not be so easy for larger accounts, which "you can't service without a global presence," Bishop said. "That doesn't mean you have to be the wholly owned entity in each of 130 countries, but you do need to have a facility and service to offer outside of the United States, which we'll be looking at developing."
Both of the small clients already were using Expedia before it launched a corporate product; that so many others have as well may be Expedia's greatest advantage. For despite all of its potential challenges in corporate travel management, Expedia certainly has usability on its side—something most traditional corporate booking tool providers for years have tried to mimic.
Orbitz and Travelocity also carry serious weight in consumer awareness and experience, but their approaches are different. Travelocity CEO Sam Gilliland said Sabre has made "no specific conclusions" about how Travelocity might work its way toward the managed travel end of the market that sibling company GetThere addresses. Though his company aggressively is courting the lightly managed end of the market, Orbitz CEO Jeff Katz distanced Orbitz For Business from serving the needs of large companies.