Growth in Web-based hotel bookings has not come at the expense of traditional travel management companies, according to Pegasus Solutions president, CEO and chairman John Davis. Citing booking counts among 10 major hotel chains, including Marriott International and Starwood Hotels & Resorts Worldwide, Davis this week said hotel bookings made through the global distribution systems in April 2004 returned to April 2001 levels, but with a far higher percentage coming from corporate travel.
"In 2001, Internet bookings were not substantial at all," Davis said, noting that the Web growth "came at the expense of the telephone, and it was all leisure." Numbers represented by GDS bookings, he said, now more than ever are an indicator of corporate travel purchasing trends. "What happened from 2001 to 2003 is that corporate travel stopped. That's not surprising to us, but I didn't know the extent of it until we saw this cross over again. If we're back at 2001 levels, then the Internet didn't cannibalize agencies. So all the forecasts that, 'If you have agent in your name, you're on the wrong end of the food chain' are a bunch of bunk. Obviously, there were changes in commissions, and consolidation has put on enormous pressure in the past three years, but even through all that the agencies didn't die. They're alive and doing well in the corporate market."
Further elaborating on the role of corporate TMCs, Davis said their new-breed competitors face an uphill battle. Citing the recent admission by Expedia's CEO that corporate travel is "harder than it looks,"
(BTN, March 15), Davis said, "I think the Expedias and Orbitzes and Travelocities have a real challenge in the corporate market. I'm just not sure that that's a business that logically fits with what they do. It certainly won't be the same margin level they're used to, and it will take a different organization than what they've got right now. With policies, compliance and reports, there's a lot of hands-on in corporate travel, and that's what agencies sell and that's what they get paid for. A Web site sitting there doesn't give you the same hands-on. You can do it, but it's expensive and the margins aren't nearly the same, and how much do you want to throw at a lower-margin business?"