Internet-originating travel management companies Expedia Corporate Travel, Travelocity Business and Orbitz for Business—despite rocking the managed travel market with their base transaction price of $5 about five years ago—have landed few large clients even after competing for that business by developing tools that support complex corporate travel programs and establishing a physical presence in some key markets.
Some observers speculate that customer care concerns, whether valid or not, have impeded acceptance of such tools by larger- volume buyers. Others suggest that those organizations, because they are larger, take longer to be able to embrace new technology and that the handful of CT100 companies now using such companies on a partial basis are just the beginning.
While Internet-originating travel management companies certainly prompted legacy TMCs to lower transaction costs and upgrade their use of technology, some traditional travel management companies claimed they still are not seeing ITMCs competing for corporate tender offers. Meanwhile, online travel management companies improved on early technological tools that at first lacked such capabilities as policy enforcement, reporting and profile synchronization.
"It's taken several years and several versions for them to catch up, but as growth in the leisure market has flattened, online TMCs have added the functionality needed to compete in the corporate travel market and in some cases, even more than the solutions provided by the traditional agencies," said Steve Reynolds, vice president of technical solutions at Norwalk, Conn.-based consultancy Management Alternatives. "The traditional TMCs are somewhat late in their proprietary solutions and some of the original corporate-only engines seem to be falling behind in the race to add features."
When ITMCs debuted, they presented a stark contrast to traditional TMCs with their pure call-center-centric service, but that is changing. "Over the past several years, these two perspectives have migrated towards a common middle," Reynolds noted. "The only remaining hurdles for the ITMCs are establishing enough scale to make money in the corporate market and a global presence to support the needs of a large corporate market."
While the companies each claim to move significant numbers of transactions, most seem to be for small and previously unmanaged corporate business, with only one of the largest companies committing completely to consolidating travel management company services multinationally to date
(BTN, Sept. 25).ITMCs have been playing a catch-up game in establishing a multinational presence to rival their legacy counterparts. Expedia Corporate Travel has the largest multinational presence, with fulfillment centers in Canada, France, the United Kingdom and, most recently, Germany
(BTN, Aug. 14). Travelocity Business has ticketing capabilities in the United Kingdom and is in the process of implementing its technology processes and integrated data consolidations for the Asia/Pacific region. Support in Canada is provided by mega travel agency HRG. Travelport significantly lacks international market presence when matched against its online competitors, but it seems that will change in a year. Orbitz for Business and Travelport COO Dean Sivley said that in late 2007, the company would establish a multinational presence and a booking tool with international capabilities.
According to Sivley, Travelport is making "tremendous progress" on having an internationalized core product base.
"When it is completed, it doesn't mean we've solved the needs for corporate travel," he said, adding that clients could expect to see such a product in the second half of 2007, though it won't immediately be available in every market. "It will have solved a majority of things in terms of global distribution system connectivity and language, and then there are the various nuances we'll have to apply on top of that for corporate."
Travelport also is focused on international ticket fulfillment capabilities for next year. "We're continuing to look at what makes sense for us in terms of having a presence in the country itself," Sivley said. "I'm not prepared to make any announcements today, but what I am prepared to say is that in the first half of '07, we'll be announcing a strategy of how we'll address that. That's a significant move for us. In the past, we really haven't come forward."
Sivley acknowledged that Travelport is a long way from full market penetration. "The answer is clearly no," he said. "We continue to have high growth rates, so if we had full penetration, we wouldn't continue to grow at the rate we are. If you look at the size of the corporate marketplace, which people have estimated at about $100 billion or so, and you look at what the total ITMC share is, which would include Expedia Corporate Travel and Travelocity Business, we haven't even scratched the surface in terms of what we could do."
Travelport is focused on all markets, Sivley said, as the company has two products that cater to each segment: Orbitz for Business for smaller companies and Travelport for Business for the large and midmarket. Though he declined to get into specifics, Sivley said in looking at dollar amounts, 80 percent of the company's business stems from the large and midmarket and that, for the most part, Travelport manages 100 percent of those corporations' domestic travel. According to BTN's Corporate Travel 100, which ranked companies with a minimum expenditure of $39 million in U.S. booked air volume in 2005
(BTN, Aug. 28), Orbitz for Business in 2005 managed about 15 percent of travel at financial services firm Fidelity.
Expedia Corporate Travel claims at least one client on par with BTN's Corporate Travel 100 and has clients across all markets in the thousands, said Stan Sorensen, vice president of marketing for the company. ECT also is honing its focus on the large and midmarket.
"Our approach is a little different from our competitors, as some of them decide to pursue a customer based on a dollar number," Sorensen said. "The foremost thing for us is that a corporation be predominately self-service. Certainly we look at things like travel spend, but that's so we can direct a customer into a travel program that's best for them."
Travelocity Business scored the biggest coup of the three online travel management companies earlier this year when it won the business of government defense contractor Lockheed Martin, which ranked fourth on BTN's Corporate Travel 100 list with just more than $213 million in U.S. booked air volume in 2005. Multinational implementation began late last month.
Ellen Keszler, president of Travelocity Business, said the company about one year ago shifted focus from smaller businesses to those in the large and midmarket. "When we looked at the assets we had within the portfolio, with GetThere as our booking tool and the value proposition that we could deliver, we really thought it resonated better with companies with true managed travel programs," she said. "That's where our market focus has been and will continue to be."
Both Travelport's Sivley and ECT's Sorensen cited a PhoCusWright study that said the U.S. business travel market is a $126 million business opportunity, with online transactions, including those by so-called legacy agencies, accounting for $30 million. Said Sorensen, "Nobody in the industry has saturated the travel market."
Sivley argued that in many cases, a clear distinction between legacy and online travel management companies no longer exists. "Maybe we're not as global, but that's changing and vice versa," he said. "Whereas we used to kill traditional TMCs on just the technology product alone, that doesn't happen anymore. They have options either internally or that they've licensed. The distinction is not as valid anymore."