Sabre Travel Network last month notified its travel management company customers that in November it will begin charging a monthly fee to agencies using ARC's card settlement application to process travel agent service fees. Sabre is making the move to lure more customers to its own platform, a settlement tool called Card Services launched in April that undercuts the transaction fees ARC charges travel management companies
(BTN, April 26).Card Services is a component of Sabre's Magnify Revenue Advantage tool and makes Sabre the first GDS to bypass ARC's card settlement process while presenting travel managers with more robust charge card billing data, Sabre said.
"We communicated directly with our agency customers that effective Nov. 1, they could choose to continue this process through ARC or use the Sabre Card Services tool," Sabre said in a press statement. "If they choose to use the ARC product we will charge a small monthly service fee that varies, depending on the agency size and volume."
Sabre's announcement quickly drew the ire of ARC. "Sabre has elected to impose a fee on access to the ARC product that we have provided to travel professionals over the past decade," Kathi Argiropoulos, ARC vice president of travel agency services, said in a statement. "The travel community should know that ARC is in no way involved in this action by Sabre, nor will it benefit from this action."
While ARC in April conceded Sabre charges less on a transactional basis, the company noted Sabre charges a monthly service fee that ARC does not impose. Sabre said it charges a monthly fee between $15 and $35 per pseudo-city code based on agency size and volume when they use the ARC tool.
"Obviously mega agencies have many pseudo-city codes or ARC locations," said WorldTravel BTI president Danny Hood. "Our different call centers and onsites would have different pseudo-city codes, for instance, or multiple pseudo-city codes." The fees will vary depending on how many locations or onsites a travel management company has, yet will be capped at $500 per month and waived completely when an agency signs up for Card Services.
"Travel agencies are billed 3.5 percent and a minimum of 70 cents per transaction by ARC if they're using ARC's solution," Tim Maher, Sabre Travel Management Solutions marketing manager told BTN in April when the company launched the new service. "In our world, it's going to be 2.9 percent plus 12 cents. There's clearly a benefit to the agency as the merchant in that it will be a lower-cost solution. They'll also get their expedited cash flow. ARC, typically with agencies, is two weeks cash-flow negative and, with us, we'll settle them on a rolling eight days."
Hood said that since Sabre will cap the monthly fee at $500 for large agencies, the likelihood of passing the fee to corporate customers is minimal. "It's not a big expense; it's $500 a month, $6,000 a year," he said. "We probably will not pass this on to our clients if Sabre is charging us $6,000 a year for this new technology."
Although ARC criticized Sabre's decision to charge the fees in the statement, saying "the costs to travel agents using ARC's product have been significantly increased—by Sabre," some agencies that signed onto the Sabre tool lauded it as a cost saver. John Henry, Robustelli World Travel CFO and CTO, in a statement said the feature offered "significant cost benefits and additional controls of the fees being charged for the services rendered."
Hood said WorldTravel BTI will evaluate which option between Sabre and ARC will make the most sense for his agency. "They may have an offsetting value with a lower merchant rate," he said of Sabre's tool. "If one GDS only makes up 55 percent of our volume, however, there is some value in keeping a single process with ARC, which we have with all the GDSs today."
ARC said it does not publish statistical information on the program at the behest of its customers, but said its proprietary card settlement service is "widely used" by its customers since it was launched in 1995.
"We've had no indication that anybody will be dropping their ARC service program. Admittedly it may be early days for such if that were to transpire," an ARC spokesperson said. "The feedback that we got was 100 percent supportive. Again, we stand by our product; we feel it's a good product and that seems to be echoed by our customers."
Sabre has signed 148 Card Services customers and is "adding customers at a rate of between 12 and 20 per week," a spokesperson said.
Before activating the fee in November, Sabre will broaden its access to all major T&E payment providers to include Universal Air Travel Plan, which already is processed by ARC's tool.
Sabre this year launched the card settlement functionality as a component of its Sabre Magnify Revenue Advantage service, which costs agencies between $75 and $300 per month, a charge Sabre waives when an agency uses Card Services.
Sabre partnered with payment system provider Merchant E-solutions to develop the enhancement to the Sabre Magnify Revenue Advantage tool, which Sabre said saves travel management companies 0.6 percent and at least 58 cents per transaction—a savings that could be passed along to business travel buyers.