Leisure Sites Scope Out The Corporate Playing Field

It won't be long before Expedia, Orbitz and/or Travelocity makes a move in the managed travel market, according to travel technology vendors speaking in Washington, D.C., at last month's Masters Program.

"I think at least one attempt will be made by one of the two or three online travel agencies to move from the small end up to General Motors," said Dhiren Fonseca, vice president of the transportation division at Bellevue, Wash.-based Expedia. "Maybe it's a progression of bottom up, rather than top down, which we tried," he said, referring to former Expedia-owner Microsoft's partnership with American Express to develop AXI. "It didn't work."

Sabre also acknowledged the possible convergence of the leisure and business travel online marketplaces—shortly after announcing plans last month to repurchase the 30 percent of Travelocity it did not already own—stating it "determined that the long-term strategies of Sabre and Travelocity are converging."

The Sabre news lent additional credence to a trend addressed in a Masters Program seminar, called Traveler Convergence: Fact or Fiction?, in which experts said the blurring of lines between business and leisure travel is accelerating as more business travelers loosen up their resistance to restrictions and seek lower fares.

Still unclear is the timing and extent to which such blurring could happen. According to sources speaking separately with BTN, Expedia and Orbitz already are working on how to get a foot in the door of managed travel—the former through possible partnerships with business travel management companies—though both maintain publicly that their strategies leave out the heavily managed end of business travel.

"We've made no secrets about our desire to expand into personally managed business travel," said Expedia senior vice president of transportation and core development Byron Bishop in a late January interview. "But the service that a WorldTravel or a Rosenbluth provides is a valuable service. It's not that another company could not replicate that, but it's not just an incremental step. It's either a fundamental change in what the corporation expects from their agency or a significant level of investment by the Internet players. I think it will be somewhere in between.

"There is a discontinuity when you get above a certain size of company," continued Bishop. "Where is the crossover? I don't know. It depends on such factors as the level of discounting, Web fares, service expectations, etc. I think that cutoff has moved up. The large corporate market is something we continue to look at, but there are no definite decisions."

The forces driving such convergence are apparent—mainly, according to Southlake, Texas-based Sabre senior vice president of corporate strategy and research Colleen Dahlen, that all travelers are seeking the best fares, even risking inconvenience. Yet, the forces working against it are formidable, including the unequal distribution by suppliers of inventory and rates, the mistrust engendered in the complex airline pricing structure and, probably most daunting, the difference in needs of the managed and unmanaged business traveler.

"We're asking whether the managed to leisure traveler could find a superstore that meets all their needs," Dahlen said. "But right now, I don't think we can see our way through the forces to know the end game." Nevertheless, she said, "So far, managed travel is not a target for consumer online agencies, but it's a natural progression of where things go."

Asked by a corporate travel manager whether Expedia could mediate access to discount inventory for corporations, Fonseca said, "That's not happening yet because we haven't figured out with the suppliers the right way to do it. Suppliers want more market share and yield, but buyers want to pay lower rates. We're not talking with corporations today, but leisure online travel agencies will start to look like large corporate buyers."

"The need for convergence is high," said Flo Lugli, senior vice president of global supplier services at Parsippany, N.J.-based Galileo International. "But we may still be saying that in three years." In a certain way, Lugli added, convergence already exists. "It's important to realize that the trending toward convergence has been going on for years through combined leisure and business trips," she said. "Now we're missing the technical capability to deliver on that. Supplier sales and marketing departments are delineated based on corporate and leisure, and they never talk to each other."

In the corporate arena, both travel agencies and buyers are split on whether and how to handle the leisure demand of corporate travelers. While two-thirds of leisure travel is booked during work hours—according to statistics cited by Atlanta-based TRX Inc. CEO Trip Davis, who will chair next year's Masters Program—not all companies help their employees do so.

Asked whether her company handles leisure travel for employees, global travel commodity manager for Berkley Heights, N.J.-based Invensys Inc. Cyndi Perper said, "We don't do it unless we're not really busy, but some companies do."

At Hartford, Conn.-based Aetna Inc., "We want nothing to do with leisure travel," said Jeanne Young, director of strategic sourcing, travel and employee reimbursements. "We're no longer allowing add-on leisure days to business trips." According to one buyer attending the Masters Program, her mega travel management company even told her it does not want her travelers' leisure business.

But some mega agencies, as well as corporate online booking providers, are not missing the trend. "Some level of convergence will take place," said Masters panelist Peter Moen, vice president of business development for Carlson Wagonlit Travel in Minneapolis.

"We're looking at what from the leisure market can be brought to corporate, and we think it's the 'feel' of a leisure site," said E-travel managing director Ian Wheeler speaking separately with Business Travel News. "Those sites have thought very carefully about upping the look-to-book ratio by reducing the steps required to process a transaction."

According to Expedia's Fonseca, "True convergence with fares all in one place would surely change the economic structure for suppliers, because today they have segmented their business."

A different view holds that the industry first will see a major change in that segmentation, perhaps via a restructuring of the fare system (see story, page 1), and that could prompt convergence. "I'd like to think that in three years, we'll have a better understanding of who the customer is and how to segment them," said Sabre's Dahlen. "Full convergence would take some bold action, and whether or not that means a new pricing structure I don't know."

Sabre expects to commence its tender offer for Travelocity this week.