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A look at 2011 and several industry trends that are likely to impact a corporate travel manager.
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A LOOK AT 2011
Steve ReynoldsPresident and CEOThe R Group
TOPICS• MIS and Reporting • Usage of Preferred Suppliers• Merchant Model• Airline Direct Connects
MIS AND REPORTING• Limited R&D over the past several years• New features coming in 2011– Analytics applied to travel data
• Don’t just tell me what I’ve done in the past• How am I doing relative to my peers• Let me select benchmarks for comparison• Better forecast spend • Tell me what to change and the savings that could
result
– Greater ability to combine global, card, and vendor data
– Capture of ancillary fee information
MIS AND REPORTING• Third party providers:
• Agency and GDS solutions
PREFERRED SUPPLIER USAGE• Vendors are requiring a proven ability to
shift share in order to keep significant discounts.
• Agencies have a growing need to improve incentive revenues.
‐ Becoming a larger percentage of their profits.
‐ Fees are quickly being commoditized.‐ Could create a conflict with customers if
not done properly.• Solutions are becoming much more
sophisticated.• If done right, a > than 20% shift is
achievable.
PREFERRED SUPPLIER USAGEComponents of a complete solution:
1. Analytical Engine – review agreements (both corporate and agency), determine vendor mix to maximize incentive or lowest costs, analyze markets for “true” share shift opportunities.
2. Biasing – apply messaging to online booking tools and agent desktop.
3. Agent/Traveler Incentives – they have to be motivated to sell towards or against a vendor. Tracking agent and traveler usage of preferred suppliers is critical to success.
MERCHANT MODEL• Definition – a seller’s profit based upon their
ability to markup a rate. Similar to most retail models. They buy at a reduced rate and markup within guidelines.
• Corporate agencies are looking very seriously at this model to offset lost revenue due to reduction in transaction fees costs.
• Merchant model is already in use by online agencies for hotel net rates. Working very well (i.e. Priceline).
• Corporate travelers will migrate to this model in search of better deals. Happening today (leakage).
MERCHANT MODEL• Opportunities for markup:
– Airline net fares – international, business class fares
– Hotel net rates – every hotel has rooms at these rates
– Ancillary fees – baggage, seats– Packages
• Advantages over current model:– No more transaction fees, negotiated rates with
corporations, etc. What does it cost you to negotiate deals every year?
– Larger retailers (Amex, BCD, CWT) are rewarded with lower costs and negotiate on behalf of all their customers.
– Consortiums can provide real value through bulk purchasing and negotiation.
MERCHANT MODEL• When will this happen:
‐ It already has in the online leisure market – Expedia, Priceline, Travelocity.
‐ Corporate agencies need the ability to markup dynamically at both the agent point of sale (GDS) and in the online booking systems.
‐ Analytics need to improve to determine the right amount of markup.
‐ Flat fee or %‐ Dynamic based upon available rates and fares‐ Both
‐ Corporations need to be convinced that this model results in greater savings than the current fee based model.
‐ Agencies need to be convinced that they will make more money.
‐ Several pilots underway testing the approach.
AIRLINE DIRECT CONNECTS
• What’s happened over past few weeks:‐ AA stopped Orbitz from selling their product.‐ DL stopped selling through several smaller online agencies.‐ Expedia dropped AA.‐ Sabre moved AA down in the GDS display.‐ AA filed an injunction to stop Sabre from modifying the display.
• AA’s position:‐ They want greater control over what and how they sell their
products.‐ They consider the corporate buyer significantly different than the online leisure
buyer.‐ They need leverage in negotiations and content is what they have.
‐ SWA does not fully participate in any GDS or in any online system. AA wants the same model.
‐ GDS incentives need to go away.
• GDS and Online agency position:‐ Not allowing Orbitz to sell AA could create a domino effect
where more airlines stop selling thru online agencies.‐ Reduces a consumers ability to compare price.
AIRLINE DIRECT CONNECTS
• Likely outcome:‐ AA will obtain the ability to pull inventory from online
distributors.‐ They will continue to participate fully in the GDSs to not
damage their corporate and traditional agency relationships and sales.
‐ They will promote a direct connect solution thru Farelogix.‐ GDS costs for AA will be reduced resulting in lower GDS
incentives to agencies.‐ The other large airlines will follow AA’s lead.
• Worse case scenario:‐ AA is no longer in either Travelport or Sabre for a period of time.
• Similar to SWA situation back in 90’s.
AIRLINE DIRECT CONNECTS
• What a corporation flying AA needs to do now:‐ Make sure your online booking tool provider is talking to
Farelogix• Don’t expect GetThere to connect. They’ll have to go to
AA.com.• They’ve already done the work for SWA and AC.
‐ Make sure your agency is looking at point of sale solutions (i.e. SWDirect).• Integrated at agent workstation• Passive segments created
‐ When a booking is made, make sure down stream applications work properly.• Itinerary delivery via email• Ticketing, Refunds/Exchanges• Backoffice data for reporting is complete and accurate.
