Special Report: Travel Management Technology-Amex: E-Booking Sweeps U.S., Europe Expected To Follow

After seven years of unfulfilled promises, the online booking revolution finally has swept Corporate America, according to American Express. Latest figures from the world's largest travel management company show the proportion of reservations it handled online in the United States rose from 5.8 percent in January of this year to 13.5 percent in September. Amex predicts a further rise, to 16 percent, by year-end. Among large customers (annual air volume in excess of $10 million), the agency expects the December 2002 figures to be closer to 25 percent.

Amex said it now has 1,400 clients using the online channel in the United States, with an average adoption rate of 45 percent and an almost incredible adoption rate of 80 percent among large corporate buyers. Average air ticket prices are 15 percent to 20 percent cheaper than those bought by phone, and hotel rates are 8 percent to 10 percent lower. Amex charges a transaction fee that is 50 percent to 70 percent lower for fulfilling reservations online than through offline channels.

Amex also is betting that Europe will develop an appetite for corporate booking tools in the near future. It has opened a six-person online fulfillment center in Stockholm to service customers in the Nordic countries and the Netherlands, and will open a larger one by year-end near Nice to serve France, Germany, Belgium, Spain and Italy. Amex's flagship e-fulfillment center in Miami has been expanded to support clients in the United Kingdom, Ireland, Canada and Latin America. The company will open a similar center in Asia/Pacific next year.

Amex revealed the news of the European centers and the hike in U.S. self-booked reservations during a tour of the Miami location, where two buyers supported the assertion that online booking is here to stay. Pamela Borgeson, travel manager for Motorola, said her company now books 87 percent of its U.S. domestic flights online through the soon-to-be-mothballed Sabre BTS, generating savings of $4.7 million in the first six months of 2002 alone. Bret Gelber, senior purchasing manager for Spherion, said his company went online this May and hit an adoption rate of 60 percent by July. Spherion uses Amex's Corporate Travel Online.

American Express global interactive travel group general manager Rich Miller cited several reasons for the surge in online adoption, including company mandates, economic pressure creating demand for lower-cost alternatives and zero commission forcing the introduction of transaction fees, which are lower for online reservations. This is because processing costs are lower for Amex, which takes an average of 0.5 calls to make an online booking and 3.5 calls offline.

One of the most likely checks on the surge in online transactions is the inability to book travel that is unavailable through the GDSs, which remain the backbone of today's corporate res tools. Miller said Amex is beta testing tools with the ability to grab non-GDS inventory.

Meanwhile, Amex has crystallized a checklist of the key indicators of a company's readiness for online booking. These include: transaction costs averaging $40 to $60; a travel budget stagnating or declining by 5 percent to 10 percent; simple, domestic point-to-point trips accounting for at least 70 percent of total travel transactions; policy compliance below 40 percent; and at least three traveler inquiries per booking.

Motorola, with an annual air volume of $102 million, two years ago had no policy mandate and online usage at time of launch in January 2001 stood below 10 percent. This figure rose to 46 percent by December 2001, the month before it was mandated for domestic trips. Although adoption now stands at 87 percent, Motorola Asia/Pacific books an astonishing 98 percent of trips online. The tool now is being rolled out in Europe.

Borgeson attributed Motorola's success to three factors: senior management support, including an "all employee" communication announcing the mandate that was signed by the CFO, teamwork between Motorola and Amex account handlers, and training. Motorola has delivered another incentive to move online by introducing internal transaction fees for budgetholders. The fee charged for offline reservations is 45 percent higher.

Borgeson learned several lessons during the BTS implementation. Among these is establishing a business plan with suppliers building in written goals and regularly scheduled meetings, involving the IT department immediately, ensuring all accounting and travel policy issues were resolved "before flipping the switch" and assembling a dedicated team for the project. Motorola soon will decide as to which system will replace BTS, with transition slated for 1Q 2003.

With $5 million in air spend, Fort Lauderdale-based Spherion is much smaller than Motorola, and only five months into its online program, but it already is reaping substantial rewards. With average ticket price savings of 15 percent to 20 percent, Gelber said the company made a return on its investment within three months. "The savings were greater than we thought," he said.

Gelber said the key to success was communications, including weekly bulletins, posters publicizing successes and contacting non-users directly. He plans to introduce a monthly prize draw of $1,000 for all online bookers, underlining just how substantial the savings are from introducing a corporate res tool.