The blurring of lines between corporate travel distributors is well underway, with all three U.S. global distribution system providers in varying stages of offering what traditionally would be a travel agency service, and the largest agencies continuing to develop technology independent of the GDSs.
Talk of this channel clash has been sparse given the delicacies of these vendors' relationships with one another, characterized by a large degree of mutual dependence amid a recognition that as supplier revenue dries up, both need to serve buyers. The silence, however, is coming to an end as GDS companies begin elaborating on their fulfillment options and agencies further market the benefits of their independent technology platforms.
A new corporate travel fulfillment offering, including the mid-office tools to enable it, is a significant component of a realignment at Galileo International, to be announced today, which positions its Highwire self-booking subsidiary within a broader company known as Travelport. "The complexity of travel has grown so much that buyers are asking us to keep it simple," said Highwire Corporate Services president Marka Jenkins. "So, delivering all the needs with one source is key."
Jenkins acknowledged the influence of Expedia and Orbitz in driving the convergence of varying distribution services at a lower overall price from a single vendor. Despite "channel conflict," Jenkins said Travelport continues to support the hybrid model in which it partners with an agency to serve a client.
"A strong agency partnered with a tech company will provide the best service, and anything we offer to corporate customers, we will offer to preferred Galileo agency partners," she said. "Yet, we're seeing customers wanting it a few different ways, and we have to look to the future and make sure there's a low-cost Galileo solution."
She said some clients are ready to take on a packaged solution from Travelport through the historically leisure-oriented Cendant Travel, which officials said handles $1.5 billion in annual travel sales and half a million tickets per month. Jenkins said tests with midsize accounts are expected to begin in the fourth quarter.
Sabre's GetThere subsidiary is further along in its comparable offering. Sabre chairman and CEO Bill Hannigan talked a bit about GetThere's Fulfillment Service Option
(BTN, March 12, 2001) during a conference call last month with Wall Street analysts. The program allows corporate buyers to set up a single contract with GetThere for both online booking and fulfillment, almost a mirror image of how such programs as American Express' Corporate Travel Online or Carlson Wagonlit Travel's Symphonie also offer both to customers through one contract.
While Amex's CTO, for example, uses the GetThere booking engine behind the scenes, GetThere's FSO outsources fulfillment to a short list of partner agencies, including TQ3 Travel Solutions, with which GetThere has negotiated favorable pricing. Just as online bookings sever the relationships between travelers and agents, GDS fulfillment services insert the GDS companies contractually between the corporate buyer and the agency. "The battle for who owns the corporate relationship is underway," said one GDS source.
For Computer Associates, the largest FSO client, one key advantage is that there's no need to get the travel agency to get the booking tool provider to address technical issues. "If you have to talk to a middle person, it's the same thing as when you call a store and the person you're talking to has to go get the manager to respond," said CA divisional assistant vice president of corporate travel Ellen Hanzl. "GetThere understands because it's their product."
One of the nation's 100 largest business travel buyers at nearly $40 million in U.S. booked air travel, Computer Associates cut its transaction fees in half after ending its relationship with American Express in favor of GetThere's FSO in January 2002.
Another source familiar with FSO described it this way: In contracting with an agency for both booking and fulfillment, "you're working directly with the company you're trying to eliminate costs on. The agency is the source, but it's them you're looking to cut." This is the kind of language Sabre and GetThere have been reluctant to use, partly to the detriment of FSO's success. "Sales are not going as well as we would have liked," Hannigan said. "The sales cycle is longer than we would like. We have a few, but not dozens of customers."
"We approached GetThere seeking more information about FSO, but no one followed up with me," one buyer said. "They said I need to come to them if we want any information."
The hesitation is related to GetThere's agency arrangements. Every mega agency is a GetThere distributor, making it difficult in certain instances for GetThere to actively market and sell FSO. "Some companies are ready for online providers to be their primary supplier, but we're still as committed to agency distributors as we've always been," said a spokesperson. "We need to address the market in all ways."
Amex and GetThere recently extended their relationship, and an Amex executive said the company has no interest in providing fulfillment for "online agencies," instead preferring to retain a direct relationship with the corporate client.
The FSO program has fewer than 10 clients, all of which have taken quite a leap in no longer contracting directly with a travel agency. Also posing a sales challenge, FSO is a solution best utilized by companies for which picking up the phone is the exception.
According to GetThere's description, "GetThere works with all leading travel management companies to provide full service ticketing or fulfillment for online bookings. For clients who require alternate fulfillment services, an experienced GetThere consultant can be assigned to manage the fulfillment planning, implementation and operation process. This service is best suited for clients with aggressive online adoption goals and those who want an alternative to traditional fulfillment services."
Though it is positioned as an alternative, FSO is a key revenue source for Sabre going forward. "The Fulfillment Service Offering at GetThere is all about taking revenue up from the sixes to more like $20 on a per-transaction basis," Hannigan said. Sabre is considering using revenue per transaction—from GetThere and its FSO, Travelocity and Sabre's airline solutions division—as a quarterly measure of financial performance beginning next year, he added.
"GetThere is a real gem in the company," said Merrill Lynch analyst Jenny Dugan. "Along with Travelocity, that's what Sabre will be in the future. People will forget about them being a GDS, as they're focusing on these electronic storefronts."
Legg Mason analyst Tom Underwood, who follows Expedia as well as Sabre, was less enthusiastic. "In the evolving landscape, I'm not sure a corporate booking tool owned by a GDS is ultimately the way things will settle out," he said. "I do think it makes sense for corporate travel bookings to be managed by a single entity, and it could be a lot of different kinds of entities. You won't have online through one entity and offline through another, and along those lines I don't know what Sabre's intentions are. I do know that Expedia is very intent on becoming a full-service agency."
Worldspan also is offering a service it calls Worldspan Ticket Manager to users of its Trip Manager booking tool. According to Worldspan's Web site, the service offers "all typical agency functions," including "global ticketing, delivery, reporting and customer support. Customers taking advantage of this service receive a one-vendor solution for Internet booking engine, global distribution system transactions and travel fulfillment operations."
Recently sold Worldspan is being uncharacteristically mum about this service. Unlike the outsourced relationship between GetThere and TQ3 for FSO, sources said Worldspan's WTM is operated by its own Kansas City fulfillment center that serves its employees.
Agencies AnswerOn the other side of the coin, travel management companies were driven partly by Web fare hysteria to develop their own platforms that treat the GDSs as but one source of information among many
(BTN, July 29, 2002).For example, Carlson Wagonlit Travel on Aug. 1 made the long-awaited announcement that it and partner Navitaire—a division of CWT client Accenture—developed direct bookings with airlines, including American, Continental, Delta and United
(see Sabre story). Like Amex in its CTO offering, CWT was one of the first travel management companies to offer a bundled solution through its Horizon booking tool that allows clients to forgo an extra contract with a self-booking provider.
Navigant International's recent purchase of the Powertrip booking tool
(BTN, June 9), sets up that agency to offer what it's calling an end-to-end solution. "In the past, we have presented ourselves as an integrator," said chairman and CEO Ed Adams. "We're supporting 12 or 13 Internet booking engines. The purchase of Powertrip started out as a defensive move to address the $5 solution we're seeing from Expedia, Orbitz and now Travelocity. As we move forward and add full functionality to our online booking tool, however, we will see some channel conflict with the GetTheres and ResAssists and other online booking tools. We're certainly not going to abandon support of any of those tools, but many of our customers want a choice, and we want to work with them."
"Unlike some of our competitors, who offer one solution and one service structure, we believe that choice is still important," said Navigant CFO Bob Griffith. "We think the ultimate winners will provide both." The bundled solution, he said, "allowed us to price more competitively with our customers and provide a product to them. It's $5 if they never talk to us, and goes up on a scale from there to full service."
At TQ3 Travel Solutions Americas, said CEO Jack O'Neill, the general thinking is to continue to work "customer by customer" to integrate the clients' preferred tools.
Presented through its new BTI Intellect brand, WorldTravel BTI offers integration or can sell booking and fulfillment together, though its most blatant offering along these lines—the travelagent.com portal for smaller accounts—is being reworked. "We're seeing both the integrator or the general contractor and bundled or one-stop shop kinds of roles," said WorldTravel BTI president Danny Hood. "There's no trend one way or the other, and we're certainly in the 'coopetition' mode with some partners. We know some clients may not want all their eggs in one basket."
Indeed, there are cons as well as pros in singularly sourcing travel distribution.
According to a GetThere client who does not use FSO, "We looked at it a while back, but haven't talked about it in months. It seemed like an interesting opportunity. I kind of like the idea of the people who know the program inside and out being the supplier, but on the flip side, our agency knows our program inside and out. It comes down to company culture. We have always found we wanted those agreements to be independent, so if we have GetThere problems, they answer to us. To have to change products every time you change agencies is inconsistent and vice-versa."