Predictions For An Industry Buffeted By Changes

<B>Predictions For An Industry Buffeted By Changes</B>

I hate to admit it--but Warren Buffet was right all along. He never invested in the burgeoning "dot-com" companies, because few of the business models made any business sense. They were selling ideas, rather than products, and few were prepared when it came time to deliver. But the dot-com boom of the mid to late 1990s cannot be written off as wasted time and baseless dreams. The brash young startups shocked us all into thinking about, and getting comfortable with, the idea that technology was going to change everything.

The word "change" has taken on a new meaning, earning a different perception in the business world. Rather than fear or reject, we now must embrace and adapt. As our economy changes, we must take a look at how it affects business as a whole, not just corporate travel. Consider how corporate culture has shifted in the past 10 years. We are communicating through e-mail, voicemail and remote devices. We still have focus groups, but our data capture is equally important. Whether the economy fluctuates, a new technology is introduced or an industry norm is compromised, the winners will anticipate and be prepared for the change.

The travel industry is in a unique position to meet the challenges of the new business model. Travel will be necessary for most businesses that require consultants, salespeople and operations personnel to visit remote sites. Corporations, however, have seen travel costs rise in the wake of commission changes--turning travel departments into cost centers rather than profit centers. Managed travel has been repositioned to offer new value propositions, including cost-containment strategies, fulfillment, data-based advocacy and policy adoption consulting. We continue to grow and prosper in the new economy, but the challenges mount every day as the industries we serve struggle to survive.

Business travel has fallen 20 percent to 30 percent for most corporations and suppliers in the past year. Mergers and acquisitions are creating mega vendors and the perception of anticompetitive behavior. Global airlines will be widespread, and we will soon see more fortress hubs. But this doesn't necessarily mean that costs will rise. In our free-market economy, there will always be a competitor. It's already working well for the rental car companies. In the late '80s and early '90s, they went through many changes of ownership to create a big-four global market. These car rental agencies effectively compete with each other to persuade corporations to sign them as their primary or secondary supplier. Buyers and suppliers have seen great success: The car rental agencies gain more clients and guaranteed usage, and the corporations keep travel budgets low. There is no reason to think that the airline alliances couldn't see the same success.

This is an exciting time. A slump in the economy will always raise the stakes and the challenges, especially in a global marketplace. The travel industry is no exception. We have done well in the face of many changes and challenges, but continued success depends on being prepared to meet the needs of our customers and clients.

The following are a few predictions I have for our industry as we move toward a stronger economy:

<li> The economy will change in the first quarter of 2002. After a tumultuous year, the economy will finally bottom out and begin moderate growth. The jaded market will be slow to invest in the future.

<li> In the next three years, three to five global airline alliances will divest from the GDS market, which will be reduced to two to three systems, instead of five.

<li> In the same timeframe, three traditional agencies, two online brands and one new entrant will dominate global managed travel and evolve as the Big Six.

<li> The B2B e-procurement hype will come to fruition, bringing preferred travel suppliers to traveler's fingertips through a corporate intranet.

<li> Demand for better service will force suppliers to focus on two or three distribution channels (traditional/online agencies, airline Web sites, airline call centers, etc.), rather than spreading themselves too thin on seven or eight.

<li> Enterprising companies will begin offering employees new alternatives to business travel. Aviation gridlock, T&E expenses and traveler frustration will open up new modes of communications.

<li> Travel will remain the primary business in e-commerce for at least three more years, until procurement technologies are widely adopted and used.

<li> Warren Buffet will still be right most of the time.

Every time there is a turn in the economy, I wonder how long it's going to last. No matter how we perceive and endure the economic changes, though, in the 22 years I've been in this industry, I've never met a tougher bunch of people than those in the travel industry--and as pastor Robert Schuller once said, "Tough times never last, tough people do."

<I>Danny Hood is president of WorldTravel-BTI, the Atlanta-based mega travel management company.