What Chatbots Mean for the Midmarket

The development of new technologies always has posed something of a challenge to midmarket and smaller travel programs. New technology often offers the promise of lower costs and greater control of or visibility into traveler behavior. These are real benefits especially for lightly managed programs that could justify the price easily, considering the lack of other controls. But if that technology is immature, poorly deployed or implemented, or a bad fit for a program, the buyer risks significant investment without realizing any advantages. As such, evaluating new tech opportunities carries real stakes for the midmarket, as the potential risks and advantages are arguably greatest there.

So it is with 2017's shooting stars of travel technology: the chatbot travel assistants fueled by artificial intelligence and predictive technology. Several startups have entered the market promising personalized alerts and booking capabilities with machine-learned preferences. Travel management companies, too, are deploying chatbot assistants, offering clients natural-language messaging with intelligent bots.

How effective or vital a technology this proves to be is a story only time can tell, but one thing is certain: Chatbots from suppliers like TripActions, HelloGbye, 30SecondsToFly, Mezi and now Lola (see sidebar, below) are targeting midmarket companies in particular as these service providers seek footholds in the market. For example, TripActions focuses primarily on corporate clients that spend $500,000 and $5 million on travel annually, while Mezi concentrates on companies with spend $10 million or less.

These firms now are converting midmarket prospects into actual paying customers. 30SecondsToFly CEO Felicia Schneiderhan told The BTN group's The Beat that a few clients are set to launch beta programs, and TripActions has named a couple smaller corporations as clients, including business intelligence software provider ThoughtSpot and Jive Communications, which began using the platform in late 2016.

Jive HR director Paul Thatcher said TripActions, which enables bookings and allows travelers to collect reward points for cost-conscious decision-making, has helped reduce Jive's domestic hotel cost per night from $115 to $103. "We try to stay very conservative with travel spend," said Thatcher, crediting TripActions' traveler incentives and its ability to find and rebook lower rates. There have been a "few times where a traveler schedules a trip, and the fares for that trip went down or a better option was made available. There were several instances where we've saved money because TripActions was actively looking out for our interests."

Any supplier must consider the midmarket's consistent hankering for solutions that lower the cost of travel, 30SecondsToFly's Schneiderhan said, but she also hopes to push travel managers to think beyond the bottom line. "Especially small and midsize companies are more price sensitive than larger corporations. However, we want to move away from the static type of policy and look at the context of the data, so we can propose that this trip is a high value for the company and I don't want my salesperson who is about to close a deal for $1 million to have a layover for four hours."

She continued, "We are not there yet," but noted 30SecondsToFly is developing such an algorithm.

Potential Versus Current Capability

Before committing to chatbots, midmarket buyers must balance the technology's existing functionality and ability to reduce travel cost against their potential and the cost to implement, said GoldSpring Consulting partner Will Tate.

He acknowledged "tons of interest" among his clients in learning more about this kind of capability but cautioned that the technological maturation necessary for many corporations to actually invest in a solution is "further down the road." "I think it has to be a cheaper channel," Tate said. "Or it has to add some sort of service component. You're either going to take the cost down or you're going to raise or enhance the service level. If you do either of those two things, then you've got a really interested audience."

Some travel buyers are comfortable with the maturity of their programs' cost-effective practices, considering the midmarket's perennial focus on these issues. Those buyers, Tate said, are ready to bolster their programs in other ways. "In the midmarket, [there] is the concept that procurement has done a pretty good job of getting things in the right cost space. For more mature programs, that's handled, basically," Tate said. "The next phase is: 'How do we take that to another level?' And [it's] the customer experience that people seem to be happy to pay for as long as they can see a tangible improvement. If the chatbot enables a more efficient process, either the booking process or the research process or just the experience then the market's ready for it and the market would support it."

Partnership Travel Consulting CEO Andy Menkes is more skeptical of chatbots' utility, at least until their technology matures: "I don't see it having an application until it's faster and more economical than using an online booking tool or talking to an experienced agent. That's my bottom line. They all look very cool, but no one has said they got it nailed." He continued, "The tools have to be better," noting that calls and traditional online bookings "are not ready to be replaced by AI yet."

What About TMCs?

Nevertheless, Jive pushed its chips all in on TripActions, replacing its travel management company with the startup. Thatcher said Jive has more than $1 million in annual travel spending and about 70 percent of its travel is U.S. domestic.

A company with a larger travel spend or a more international footprint, though, would have many factors to weigh if considering replacing an agency with a startup. FCM Travel Solutions chief strategy officer John Morhous said technology hasn't matured to that level: "Travel in our opinion is still at a point where today—I'm not saying it will always be that way—there's not enough of it that you can completely automate without human interaction, and that's just based off our experience of dealing with customers of all sizes and shapes: the travel patterns of road warriors, what they do, the different types of changes, the different types of advanced things that they're looking to get—preferred rates, different types of airfares or different carriers they're looking to purchase, for example. Not everything in today's world is at a point where you can have a complex experience completely automated through a mobile app."

FCM parent company Flight Centre—which, Morhous noted, invested in 30SecondsToFly last year via its Little Argas incubation fund—is one of several large agencies rolling out chatbot functionality. Flight Centre's Sam technology is intuitive and will learn traveler preferences as it offers assistance throughout the trip. Sam joins chatbot technology from agencies like Carlson Wagonlit Travel and Travel Leaders Corporate.

"We certainly do believe that there is a future with some of the AI and app-based type of components that are in there," Morhous said. "We do believe that we are building some of the best-in-class technology, and we are investing in the marketplace in areas that we don't have full solutions with just yet. But we have people and we have expertise and we have the human element that we still think is there and necessary."

Whether this type of technology will become entrenched in midmarket travel management practices can't yet be known. GoldSpring's Tate, though, noted that the midmarket tends not to invest heavily in most travel management initiatives. Thus opportunities will exist for suppliers who can automate inexpensively. "Putting in some sort of a system that accomplishes some of the bigger parts of travel management and doing that robotically in a way that is a low-cost channel and offers a customized travel experience is, to me, a real win for that market space," Tate said of midmarket or lightly managed organizations. "To automate that process and cover a large part of the value proposition, which would be managing to compliance, could be a real win. The market would respond very well to something like that."

—Additional reporting by Elizabeth West