The revelation last month that McDonald's Corp. is a customer of Orbitz surprised few insiders as both the airline-owned site and Expedia build out solutions that more comprehensively address managed travel. Meanwhile, their main corporate travel competitors, most of which offer booking technologies from Sabre's GetThere, have stepped up efforts to emphasize value they say the online players cannot or will not offer.
A McDonald's travel manager declined to elaborate on the company's small pilot test of Orbitz For Business, which was verified last month by an Orbitz executive at The Masters Program in Washington, D.C., as the two companies had agreed to keep the arrangement quiet. Rumors of the relationship, however, were passed around the industry for weeks as sources speculated on the size of the McDonald's program, how heavily it manages travel and whether Orbitz would replace or supplement the designated agency, Carlson Wagonlit Travel.
Although these and other questions certainly are relevant, no one needs the answers to understand that Expedia and Orbitz have the traditional travel management companies and their technology partners on the run.
"The concept of a $5 self-service portal solution is very attractive to many corporate accounts," said Navigant International chairman, president and CEO Ed Adams at a CIBC World Markets conference in New York last month. Adams, who in February acknowledged "some impact" from the online players among customers that lightly manage travel, said Navigant is targeting for next quarter what it is calling a "$5 solution," which would respond to the new entrants by packaging services with a single booking engine managed centrally from the company's Denver-area headquarters.
At American Express, the low-end offering—absent negotiated rate loading—includes free online touchless transactions and triple miles for accounts under $1 million that use its RezPort offering backed by GetThere on the Sabre GDS. "There's a lot of publicity around some new entrants getting into corporate," said Pam Arway, executive vice president and general manager of North America corporate travel at Amex. "We're prepared to compete with anyone in any segment."
Expedia's and Orbitz's small-client air booking fees are $5 online and $15 to $30 offline. Downward pressure on service fees, exacerbated by the entry of Expedia and Orbitz, is as prevalent in the larger-client segment as it is with smaller corporate accounts—but some corporates may be mixing the two. One travel management company executive said his firm lost out at the last minute on a $30 million account whose CFO sent two of his divisions to Orbitz for perceived lower fees and retained the incumbent agency for the rest.
While cost is obviously important, it's not the whole story: "If you don't have a solution that has really good offline servicing, it's going to die on the vine," Arway said.
While Expedia and Orbitz said they were surprised by the interest from larger accounts, that hardly proves that what they now offer can handle centrally managed, policy-driven corporate travel. Still, the latest information on these new entrants' offerings indicates their drive to heavily managed travel is quite real.
Documents obtained by Business Travel News indicate Expedia is taking a more consultative approach than previously acknowledged, offering buyers an array of tools to, among other things, facilitate communications with travelers on general travel tips and the Expedia program, increase online adoption, arrange meetings through its Metropolitan Travel unit and build policies from both detailed and condensed travel policy templates. Expedia's next corporate version will offer reporting that is more robust than what is in the current product, which includes air bookings in summary or sorted by carrier, ticket class, top city pairs or advance purchase; car bookings in summary or by vendor; hotel bookings in summary or by property; and total spend.
Executives also have hinted about bringing Expedia's negotiating clout and travel packaging to the business community. While highly restricted, its special-rate merchant-model hotels appear to be a precursor. "We're in discussions and have signed deals with larger customers, which has caused us to accelerate a lot of direct sales," said Matt Hulett, who last month replaced the retiring Byron Bishop at the helm of Expedia Corporate Travel. Asked whether the companies have air volumes of more than $15 million, he responded, "Bigger."
General manager for corporate travel David Cerino last week said Orbitz For Business "always" has offered templates and documents in a consultative fashion. "We have implemented account management into a lot of our corporate clients now," he added. "We're not as concerned about online adoption, as we think you should be able to book on- or offline." One of the drawbacks some large-company buyers see in the online Orbitz For Business is the inability to sort preferred vendors, although the product does denote them. Cerino said Orbitz this year will "turn on filters" that can leave out nonpreferred air, car and hotel vendors—though not sort them.
"People are looking to online tools and beginning to understand that we can offer the same, if not better, service capabilities, we just have a different infrastructure," Cerino said. "It's becoming noticeable that the whole idea we're an online agency will go away and people will realize we're a full-service agency." According to another Orbitz employee, "There are several Fortune 500 companies saying, 'This is a great opportunity if I'm willing to give up some gadgets.' "
"I really believe that travel managers are looking under every rock to save money for their companies, without, of course, sacrificing service, safety and security," said National Business Travel Association president Kevin Iwamoto after hearing of McDonald's-Orbitz. "All things being equal, if they can find a lower-cost distribution option, they are going to have to look at it. Whether you agree with it or are afraid of it, you have to consider what an Expedia or an Orbitz can provide, either in conjunction with or separate from your traditional travel management company."
Expedia's and Orbitz's biggest strengths vis-à-vis travel management companies lie in front-end technological capabilities they continue to enhance. Orbitz, for example, last week announced several new fare-searching options to its lauded faring capabilities. The pair also continue to hammer on the "single-source" or "bundled" concept, which competitors said they offer too.
"We support either model," said Amex vice president and general manager of global interactive travel Rich Miller, noting the agency handles fulfillment for most booking tools and also offers RezPort and Corporate Travel Online as bundled offerings for the small and large ends, respectively. "There's so much technology now that it's difficult and time-consuming for a travel manager to go out and become knowledgeable in all areas." He said that while some expert travel managers like to buy in components, the recent trend has been for companies to buy "our end-to-end solution. They're looking to us because we have more clout with technology vendors. If we identify a problem, we take it to GetThere and get it high on the priority list."
Though Miller said Amex sometimes finds "bugs" GetThere had not already seen, surely GetThere's responsiveness to direct clients is at least as good as it is through Amex. It's partly for that reason that GetThere essentially is competing with Amex and the other agencies that distribute its product through what it calls the Fulfillment Service Option, in which the client contracts with GetThere and GetThere employs a fulfillment agency in support. At the moment, that agency is TQ3 Maritz Travel Solutions. Neither GetThere nor TQ3 is willing to be very public on the two-year-old service, largely because of a negative perception on it held by Amex and other TMCs that have "clout" with Sabre. Working with GetThere in this fashion, as nearly a dozen companies are, a controversial question arises: What is the need for a travel agency?
During a visit with TQ3 just before Thanksgiving, BTN was told that non-TQ3 clients are driving significant usage of the GetThere fulfillment option. Two vendor sources said Islandia, N.Y.-based Computer Associates' estimated $50 million in air travel is handled by just eight TQ3 agents. The company enjoys more than 70 percent online booking adoption, and its travel agency of record is GetThere.
Despite the constraints on its publicity, the FSO is a major initiative within GetThere and its best competitor to the single-source corporate models of Expedia and Orbitz. The Sabre subsidiary this week is devoting an hour of its Las Vegas customer summit to "fulfillment options," including the FSO.
"The short answer is that, with all due respect to online agencies, TMCs provide quite a bit of value," said consultant John Caldwell, president of Caldwell Associates in Washington, D.C. "So, it remains to be seen. Clearly, the online agencies can establish themselves as the low-cost provider, and whether any major companies will manage global travel spend through them is a ways down the road, but it's not inconceivable." Asked if his clients are considering those options, Caldwell said simply, "We look at everything."