Editorial: Taking Travel Management Online

<B> Editorial: Taking Travel Management Online</B>

By David Meyer, Editor-In-Chief

In an innovative use of off-the-shelf applications, business travel buyers are heading for a position of greater strength in the negotiating dynamic by going electronic. Tapping into a tremendous number of opportunities from travel and automation vendors, they are expediting processes, cutting costs and creating a more powerful corporate travel department. The Internet, other advances in information technology systems, changing business practices and a new accreditation from the Airlines Reporting Corp. are helping make these improvements significant. And the trends in these directions appear to be accelerating as they go. We should be reaching critical mass in the next couple of years, by which time about half of business travel buyers will have made the transistion to online travel management.

Certainly we have seen companies increasingly getting wired for enterprise resource systems and implementing corporate intranet communications.

For travel management companies, which in many cases perform the corporate travel buyer function on an outsourced basis, the handwriting has been on the wall for many years now that if they did not become enablers of online travel management they would be bypassed by it. Agencies have been trying to gain the operating efficiencies that the Web can provide and at the same time they have been looking for ways in which they can have a presence on the corporate intranet travel site.

The groundwork that has been done over the past couple of years by third-party software developers, pioneering travel agents and business travel buyers in laying the foundation for many travel management functions to be done online is yielding results. It seems likely that the acceleration of the adoption curve will go through the roof during the next few years.

What will really account for the jump in the online direction is the increasingly convincing case made by solid returns on investments. The story that these cases are beginning to tell is that there is more to save from online booking systems than simply the processing efficiencies and the agency manpower that might be reduced. There appear to be savings related to the price of the ticket beyond a reduction in phone calls and the traveler taking on the order-taking tasks.

While adoption rates have not yet soared, there has been many a pioneer migrating significant volume and realizing improved savings and control.

Dorian Stonie, manager of corporate travel for VeriFone Inc., a Hewlett-Packard subsidiary, recently told BTN that his Internet Travel Network online booking system is yielding average ticket prices at least 15 percent lower than traditional bookings. Even with more than 60 percent of travelers using the system, Stonie said it will be several years before the adoption rate is high enough to cut agent headcount.

Our publication also has reported handfuls of other companies achieving online booking adoption rates above 40 percent. One such company, Thomson Consumer Electronics, where worldwide corporate travel manager Cindy Heston is mandating that all point-to-point travel be made through Worldspan's TripManager, reports that online booking tools are driving up agent productivity.

Maritz Travel Co. president and CEO Mike Boland also recently confirmed what these pioneering travel managers have found that "fares are coming in roughly 30 percent lower on electronic transactions."

Those who perform the function of travel management have been faced with the challenge of getting the attention and support of their companies' information technology departments. Generally those IT resources have been preoccupied with Year 2000 issues. As part of the Y2K spending, many are making other infrastructure improvements. Many also have been looking closely at enterprise resource providers, such as Oracle, Peoplesoft and SAP, which are now at various stages of adding travel components.

As the Year 2000 efforts wrap up, the market decides to what extent it will embrace the ERPs, and the percentage of corporations with intranets and travel pages rises, pent up demand will surge and it won't be long before a majority of business travel buyers will be using end-to-end online travel management technology.

Of the components so far, expense reporting has been the one tagged as the low-hanging fruit, because the return on investment is so compelling. Increasingly, however, companies recognize that decision support information systems contain data that is essential for best travel management practices, and that online booking capabilities help streamline the process and reduce costs.

Research that BTN published last fall showed that 20 percent of 201 travel managers surveyed had deployed automated booking systems, 28 percent had deployed automated expense reporting systems and 15 percent more expected to deploy booking and expense reporting systems by 2000. Only one-third used an intranet site to disseminate policy, while 75 percent used e-mail and 55 percent still published a handbook.

Of the Corporate Travel 100, the largest spenders in terms of U.S. booked air volume, 60 percent are using their corporate intranet to book hotels, though only 3 percent have more than one-fourth of their travelers using the corporate intranet for that purpose.

In benchmarking research conducted with the CT 100 in March, all of the attendees said their companies will at least be testing online booking systems by the end of next year. One-third said they currently are using an electronic booking system, 43 percent are testing systems, 18 percent plan to test one this year and 7 percent expect to do so next year.

The same forces that helped drive the advance of technology have prompted a substantial change in the way that business travel buyers and sellers relate to one another.

The cuts in commissions that began changing the airline-agency-client relationship four years ago culminated in December with the institution by the airlines of the cap on international commissions. That reduction in the revenue stream has turned the industry to doing business primarily on a fee basis, with buyers considering negotiating fares net of commissions and overrides. As they move in that direction, they are finding data gathering and processing capabilities--like the ones presented by online decision support tools--essential to striking good deals.

Net fares are not the only outgrowth of the new dynamics. Changing roles and improved information systems are tempting buyers and travel management companies to explore the bulk buying of airline and hotel inventory. The Airlines Reporting Corp.'s decision to accredit Corporate Travel Departments also recognizes changes in the industry landscape.

These changes have culminated in the past year in an interest in direct connections. By linking the corporate intranet platform, via extranets, business travel buyers have begun connecting directly to preferred airlines, hotel and car rental suppliers.

Such scenarios, however, do not necessarily exclude travel agencies. There are still plenty of functions that corporate buyers will want to outsource. In fact, agents may well end up playing a key role as facilitators in building extranet connections. Agency support and reporting also may be instrumental in allowing corporate buyers to bypass or enhance the CRSs. The agencies also will continue to play a critical role in providing business travelers with enhanced anti-yield management systems.

Indeed, though we are seeing a rise in insourcing, for the foreseeable future the trend toward outsourcing travel management functions will be a much more substantial one, even for the largest business travel buyers. The attractiveness of travel management companies as partners for smaller companies will continue to be pronounced, particularly as they aspire to have the kinds of control and services that the bigger buyers increasingly will be able to leverage.

Meanwhile, other technological advances will continue to drive travel e-commerce forward. The global proliferation of electronic ticketing will get another boost this summer as American and United prepare to test interlining. Buyers and suppliers will continue to advance the use of electronic hotel RFPs for transient travel and meetings, and figure out how to break out hotel folio data to facilitate the prepopulation of expense reports.

The industry has come a long way in a relatively short period of time. While online travel management tools promise to streamline processes and cut costs, their primary appeal to the travel buyer is the control over the data that they can provide. As always for buyers of corporate travel services, having control of travel volume spending patterns and statistics provides leverage in negotiating with suppliers. That's why we are expecting substantial growth of online travel management in the next couple of years to tremendously strengthen the buyer's hands in their dealings with their vendors.