<B>Fulfillment Is Elusive</B>
By Megan Hjermstad
Fulfillment of online booking is proving to be a harder business for travel agencies to enter than many originally thought.
While most mega travel agencies are increasing their support of centralized fulfillment models, others are unable or unwilling to support a business model that relies on economies of scale to make a return at a lower price point. As a result, corporate clients seeking optimum cost savings and customer support must turn to secondary agencies that are better equipped to handle these tasks.
Meanwhile, even those companies that have led the way to online corporate fulfillment are finding that transactions will remain more expensive than they initially projected for the foreseeable future.
American Express last week opened its new centralized center in Miami with increased capacity and enhanced back-office technology to automate fulfillment of online bookings. Meanwhile, Kansas City-based online fulfillment provider ITravel last month abruptly closed its doors when it failed to receive the venture capital necessary to keep it afloat.
After focusing on online business for the past two years, ITravel had a growing fulfillment division and a retail division with 1,400 small and midsize clients. It was targeting an aggressive adoption rate of above 50 percent on a modified Sabre BTS platform.
ITravel was predicting profitability in late 2Q or 3Q this year based on scale. "With scale, we could get from where it would cost $19 to $6 to process a transaction," said Jay Jackson, former vice president of fulfillment for ITravel.
The company, which relied on up-front capital to build proprietary online systems, was successful in acquiring venture capital funding in its first two rounds, but in the third round, "The timing was terrible," said Jackson. "We had a really compelling offering with a lot of innovation, but we just did not have enough money to offset our costs."
To ensure that their customers did not experience a cessation of services, ITravel contacted World Wide Travel Service Inc., which transitioned former ITravel accounts to its proprietary online booking tool Quality Agent in less than 72 hours. "There was a danger people would fall out of the loop, and we tried to make sure noone did," said World Wide Travel vice president of marketing Steve Davison.
WWT worked with ITravel and Sabre to transfer passwords, archived data and 11,000 profiles into its own information systems at its Little Rock, Ark., headquarters. Its Austin, Texas, call center is absorbing the call volume and it's Little Rock office is handling back-end quality control and ticketing.
WWT is committed to incentivizing clients to book through its proprietary online tool by not charging a fee for online reservations. "We consider our system end-to-end," said Davison. "What we're selling is total integration."
While a seamless low-cost travel process is the goal for most corporations, even agencies that have taken on online fufillment are having trouble keeping costs down. "There is a slowing of costs per transaction," said WorldTravel BTI CEO and TRX chairman Jack Alexander, "but calls are still stubbornly high. There is an explosion of hybrid transactions."
Online booking vendors have taken a proactive role by partnering with agencies that have focused on driving online bookings at a lower cost.
Indeed, GetThere recently partnered with ITravel, although Tom Wilkinson, GetThere senior director of fulfillment services, said the demise of ITravel didn't hurt GetThere because the relationship was in its infancy (BTN, March 12). While a number of BTS accounts independently had selected ITravel as their agency of record, GetThere has had to migrate only two legacy BTS accounts from ITravel to its other fulfillment partner, TQ3 Maritz Travel Solutions.
"We plan to continue to work with additional partners to optimize online booking for the traveler and for the corporation," said Wilkinson. "Our strategy is simply to match up with world-class fulfillment agencies for companies that want to make online their primary channel." However, Wilkinson said there are inherent advantages to having an agency of record, which has knowledge and familiarity of a corporation, provide service. "Corporations have to balance their options and weigh price and service," said Wilkinson. "We always recommend a customer first try to come to an agreement with the current agency."
"If you have an agency partner willing to support and offer cost incentives, it should be a fairly happy story," said Mike Premo, vice president of strategic relationships at SatoTravel. "But corporations are coming back to booking vendors and telling them they need help finding a place for fulfillment because they're not happy with their agency."
Premo said those agencies are forcing the self-booking companies to go out and find a fulfillment partner to satisfy unhappy customers. Sato, which fulfills for E-Travel when a corporation needs it, is providing fulfillment for multiple companies that are serviced simultaneously through their traditional agencies. However, Premo said the situation is not common. "It can't be called a best practice to have to resort to having two agencies. In those cases, there was a conscious decision on the part of the full-service agency that they didn't want to price break," said Premo. "Not in all cases are agencies telling clients they can get savings on online transactions."
TQ3 Maritz, in addition to supporting its own clients, now is providing fulfillment for five GetThere customers through its centralized fulfillment center that is designed to support any booking tool. Mike Tenholder, vice president of alternative distribution for TQ3 Maritz, said, "That situation is driven by the traditional agency that has decided it doesn't want to get into fulfillment or doesn't want to give a better price. Five years ago, we made a decision to segregate it and put in a separate location for one-third of what it would cost in a traditional environment."
Rich Miller, vice president and general manager of the interactive travel group at American Express, said Amex is focused on providing fulfillment for its existing customers, although it is talking about interactive with several non-agency clients. "There are some companies willing to split traditional from interactive," said Miller, "but from an MIS standpoint it's not ideal."
"It is conceivable that we're billing the agency and they're combining MIS data with their consolidated reporting," said WorldTravel BTI's Mary Ellen Humphrey, general manager for corporate fulfillment services. "We envision there will be accounts that contract with both us and the traditional agency." In such a situation, she said, the agency would need to give its ARC number to CFS, so when a ticket is issued for a reservation booked online it is done through the traditional agency.
Using coexisting agencies creates complications, such as who is responsible for consolidating and reporting information. "It has to be about mutual understanding and respect, but that's easier said than done," said Premo. "You need to declare who the master travel agency is, who the data aggregator is, who reports to ARC and who is in charge of the PNR."
Added Tenholder, "You have to establish whose 24-hour service you are going to call; either us or the other agency. If it is the other agency, we have to be sure to export the PNR to them.