As Expedia and Orbitz this month elaborated on their upcoming business travel offerings, corporate travel buyers welcomed the competition and saw room for the pair in at least the small-business portion of the marketplace.
Established corporate travel agencies and self-booking providers, meanwhile, either shrugged off the two newcomers or said one size does not fit all for the complexity of managed corporate travel. One major competitor, Sabre, said it would respond with a tool for lightly managed programs.
Orbitz as of last week said it had been contacted by 300 companies, including 200 at the National Business Travel Association convention, where it conducted demos. About 75 buyers, an Orbitz rep said, had "requested contracts and were ready to get started."
Both companies said business travel buyers should consider them for ease of use, lower transaction pricing and the opportunity to single-source both agency and self-booking services.
While Expedia's pricing structure is "evolving," said one exec, Orbitz revealed its TravelBuilder product—due out late next month—would charge $5 for unassisted bookings and around $15 for assisted ones. Officials said that assuming a 50 percent rate of call center usage, companies would pay an average of $10 per transaction, as well as an implementation fee to integrate traveler profiles, security measures and negotiated fares. A minimum monthly service fee would be charged if a company fails to meet its "designated travel volume." Now testing with midsize companies, TravelBuilder includes online reservations in a browser window that indicates preferred carriers, paper or e-tickets, customer service and a monthly booking report. A travel arranger function and preferred hotel rates are in the works.
Expedia said it will deliver new Web-based technology for business travel management by year-end, but, for now, the newly acquired Metropolitan Travel
(BTN, July 15) is supporting and endorsing both Expedia and the Galileo-owned Highwire booking tool.
Unlike Expedia, Orbitz also is offering reports for a monthly minimum fee based on transaction volume—under the TripTracker brand—on bookings made by companies that do not want to designate Orbitz as their agency, a product Orbitz sees even large companies using. TripTracker, which Orbitz said is available now and takes 48 hours to activate, uses e-mail domain names provided by business clients to track Web-only and published fare bookings made for business travel by their employees. Orbitz also is talking to the Airlines Reporting Corp. about data management and lower-cost settlement.
Both Expedia and Orbitz derided corporate agency transaction fees they said can reach $40 to $60. BTN research indicated that very large companies pay about $44, but small to midsize firms pay $20 to $30 on average. BTN defines average agency transaction fees as the total paid to the agency, including all expenses and indirect costs, divided by the total number of tickets and refunds issued.
Also questionable is the two companies' claims that buyers are better off with an agency that also is the e-booking provider. "Travel managers we're talking to want one price," said Patricia Elliot, CEO of Metropolitan, noting lessons Expedia learned from the AXI partnership between Microsoft and American Express. High adoption and reduced costs, indeed, have come slowly to agencies and self-booking providers partnering to service corporate clients. Further, they have not always seen eye to eye on such issues as support pricing.
However, the "single source" of Expedia or Orbitz seems hardly different from bundled fulfillment-booking pricing available from such existing providers as GetThere and Worldspan. Those companies said it is an option in which many clients have not been interested.
Similar to GetThere and Worldspan, neither Expedia nor Orbitz handles all of its own customer service and fulfillment. Dedicated personnel at Rosenbluth's Upstream call center division, which also supports United's and US Airways' Web sites, will use Orbitz's customer care platform to support Orbitz users under a multi-year contract.
Expedia was less open on its plans for fulfillment and customer service. Among the players it is known to be working with are Peoplesupport in San Mateo, Calif., and TRX Inc. of Atlanta. Expedia has some support facilities of its own, and the acquisition of Metropolitan "accelerates our entry," said CEO Rich Barton.
"There is an inherent challenge in combining online booking and fulfillment," said Tom Wilkinson, GetThere senior director of fulfillment services. "In a corporate environment, it's difficult sometimes to tell where the functionality on the booking tool ends and where fulfillment begins. Savings are largely driven by automating the latter. A corporate online agency makes sense, but it will be a challenge to meld their operations and make things seamless."
"There's no question this is heating up," acknowledged Henry Blinder, American Express Interactive Travel Group vice president of product development and communications, "but it would be difficult to replicate."
"We take them seriously, and there is a lot of uncertainty about how they will impact us," said Amadeus E-Travel senior marketing director Rob Wald. "Their model where the online agency becomes the offering is still untested, though, and we think a bricks-and-mortar travel agency still delivers a lot of value."
Others are taking the pair less seriously. "Expedia and Orbitz are just casting lines to see the interest level," said Richard Spradling, corporate vice president of information technology with TQ3 Maritz Travel Solutions. "Although Expedia's acquisition of an agency makes a lot of sense."
Expedia and Orbitz know they face some hurdles. "We know we cannot fumble the ball on customer service," said Rick Weber, Orbitz vice president of business services. "It's complicated to customize for everyone. We may not have the functionality that large-company travel managers are looking for, like policy enforcement, but some may be willing to give that up for lower transaction costs." Expedia senior vice president and CFO Greg Stanger said, "It's correct to say there are different service levels required." However, the players could offer companies that want to move reservations online a less painful option—particularly since many of their travelers already may use the sites.
As stated at the NBTA conference by Amex Interactive Travel Group vice president of acquisition and usage Douglas Wright, "If you haven't rolled out online booking, this will probably be the biggest challenge of your career—death by a thousand nicks." Further, it may be to Expedia's and Orbitz's advantage that, according to Wright, at least 70 percent of cost-adding traveler questions that require human intervention have to do with the technology rather than the travel.
"Those online agencies have gotten their fulfillment costs down so low," said Steve Reynolds, TRX Technology Services executive vice president and general manager. "Corporate is more complex and the killer there is exceptions, but the fees: One is up here and the other is down here—dollars, not pennies."
"With Expedia and Orbitz, a whole new genre is coming in," said Dorian Stonie, manager of Internet travel technologies at Hewlett-Packard. "It might not be applicable to all companies, but I can definitely see a niche among those companies seeking a low-cost, low-maintenance tool for employees. It almost becomes a Mercedes versus a Ford Escort. The best thing for them is that a lot of companies don't need the full-blown version."