Monthly Archives: May 2015

Pre-Trip Approval And The Value Of Red Tape

Pre-trip approval for many organizations is a necessary evil. It’s bureaucratic by nature. It may be the antithesis of the traveler-centric approach that’s all the rage on the conference circuit. But the practice is effective for travel pros and senior managers looking to put the kibosh on journeys deemed too expensive, unworthy or unsafe.

The ultimate demand-management control, pre-trip approval appears to be no more or less prevalent than it has been for at least a decade. Over that timeframe, though, risk management and closer scrutiny of travel expenses have raised the practice’s profile. Better technology can make it more accessible and productive as manual processes give way to automated workflow management systems.

pre-trip-approvalAt Stonegate Mortgage, policy compliance and dialogue with travelers are the reasons for pre-trip approvals. The Indianapolis-based company has about 400 travelers and spends around $3.5 million each year on corporate travel. Using Egencia technology, travel manager Monica Whitehead sees all reservations, 90 percent of which adhere to policy and need no action. When bookings are identified as out of policy, she’ll check them out.

That creates an important line of communication. Maybe the policy capping a nightly hotel room rate isn’t fair when the traveler is going to New York City. Or maybe travelers don’t realize that taking connections won’t cost them too much extra time.

“I pride myself on talking to them. We have been fairly successful in getting them to reconsider,” Whitehead said. “I’ve given the travelers fairly good boundaries but if it’s something completely off the charts, then yes, I have to escalate it and send it to their managers so they know what is going on.”

Other travel agencies, corporate booking tools and third-party providers also offer configurable solutions. Several include rules engines to determine when reservations need approval. In some companies, it may be all bookings. In others, only out-of-policy reservations or intended purchases above a certain amount will trigger a review.

For any organization interested in pre-trip approval, there’s much to consider. What’s the ROI? Who approves? What if they’re unavailable? Might that delay jeopardize availability of a favorable airfare the traveler intends to buy?

Then there are types of approval. Silent or passive approval means reservations go through unless stopped by the authorized reviewer.

A 2014 World Travel Inc. presentation explained that this approach allows companies to customize parameters that set off an inquiry. Among the drawbacks, passive approvals may allow travel to high-risk destinations slip through unnoticed.

A different approach, “hard-stop approval” means all reservations need approval before ticketing. That, according to World Travel, identifies risky travel and “supports full control of travel expenditures prior to purchase.” But the agency pointed out that hard stops need reviewing managers to constantly pay attention and warrant “a back-up process.” Bookings on carriers that use instant ticketing also can be problematic.

Culture is a key factor, as is the fear of rubber-stamping or extra red tape. A 2014 Carlson Wagonlit Travel survey found that half of 10,000 travelers from “global” companies with pre-trip approvals “have never had a trip request rejected.” The overall approval rate was 90 percent.

Speaking during a January Global Business Travel Association webcast, Trondent’s Jan Lofgren mentioned “permission-to-book” functionality available in some tools. The latest from her company is among them. She explained how travelers or arrangers can “complete a trip request summary prior to even making reservations.”

Lofgren also noted “rule chaining,” which prompts examination when more than one condition applies. International and over a certain cost threshold, for example. She said certain systems “also help manage the hierarchy of users.” They do so by incorporating human resources feeds, passenger name record data and other information, perhaps supplied via Web Services.

Establishing the value of the trip and reviewing the price are key reasons for pre-trip processes, but risk management may be the more compelling one.

Pre-trip procedures can identify reservations for trips to destinations considered particularly dangerous. “It’s important that it is done early in the approvals process to trigger things down the line,” like traveler training, briefings and inoculations, said FCm Travel Solutions senior director global travel risk management Charles Brossman.

Brossman said the industry soon would see pre-trip automation account for risk ratings before bookings are reviewed. He noted there already are ways to apply risk information to online booking tools and travel agency quality-control systems.

According to GBTA Foundation research issued this month, pre-travel approval is a practice that appeals to organizations of all sizes. The group reported that 49 percent of 257 travel, HR and risk management professionals said their firms include pre-travel approvals for domestic trips. The number jumps to 72 percent for international protocols.

A 2010 Egencia/GBTA Foundation poll of 689 North American travel managers found 58 percent of companies use the method for some or all trips. Thirty percent indicated they “do not require any kind of pre-trip approval before trips are finalized, and only 30 percent subject all trips to a pre-trip approval process.” Researchers found that 14 percent limit PTA for travel to specific destinations. Thirteen percent apiece do so when costs exceed a predetermined threshold or for trips booked by “non-executives.”

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Custom Travel App Makers Gain Interest

Corporate travel departments can acquire risk apps, TMC apps, expense apps — and of course also booking and itinerary apps. Some want supplier-agnostic, custom apps but don’t have the resources to build their own. In the market for a little branding, or more? There’s an app maker (or two) for that.

Originally a language translation app, four-year-old TripLingo also is a risk app. It now has features to manage mobile data and roaming expenses, including a Wi-Fi dialer.

“We knew companies wouldn’t pay us for just a mobile phrasebook,” said TripLingo founder and CEO Jesse Maddox. He’s still trying to nail down what exactly they will pay for. The firm has 15 enterprise clients and anticipates that doubling in a few months. Maddox claimed 30 travel management companies are users.

corporate-appsFor the app’s co-branded enterprise version, TripLingo charges a flat rate based on either the total number of trips or total number of travelers in a year. Clients can install their branding as well as contact, policy and insurance information.

Four TripLingo clients spoke with The Company Dime, three on the condition of anonymity. A media company travel manager said the firm recouped its investment in the app within two months. The Wi-Fi dialer alone will save 10 times the app’s cost in the first year, the travel manager said.

A major retailer for six months has been using TripLingo mainly as a risk management application. Its travel buyer said there are some communications savings. Measuring the ROI on travel risk management, of course, is “difficult.”

“We wanted our international travelers to be able to reach our travel agency or medical assistance 24/7 regardless of where they are, over Internet or cellular, with one touch,” said the retail company travel buyer. He said the app’s assisted dialing feature “understands where you are and where you’re trying to call.” It plugs in the correct country code, for example. Of TripLingo’s traditional features, the language translator remains most popular, the buyer said.

Tokyo Electron manager of travel and fleet services Dianne Bradley said savings from the Wi-Fi dialer paid for the app within just a few months of use. “We manage data plans when people travel, but this was an additional savings over that,” said Bradley. “That was one of the more compelling pieces of it.” She said TripLingo’s language translator and cultural/country information also are handy for travelers. Tokyo Electron integrated contact information for its risk management provider, International SOS. The firm also uses the Dash app from its TMC, Travel and Transport.

Dutch firm Roadmap provides custom travel apps for BP and others. This year it’s been talking with big companies in the United States, and has signed a global fashion firm based there.

Roadmap started out within a company called Sound of Data, offering white-label apps to travel distribution companies. Clients include Amadeus and U.K. travel agency group Advantage Business Travel. Like many apps, Roadmap is based on the traveler’s itinerary and incorporates gate and flight alerts, check-in and mapping functions.

TripCase, TripIt and WorldMate are among the notable examples of existing apps that offer those services. Roadmap considers its user experience distinctive — an “interactive travel companion” that “displays any live data on your trip.” Enterprise clients can install their branding as well as their “own tools, offers and suppliers.” Roadmap suggests travel managers can build communities around the app, and use it to gather feedback on supplier services.

The service is priced based on the number of passenger name records imported from the TMC. Custom development for a module that is not already built is based on hourly work, unless it turns into one that can be sold to other clients.

“Nine months ago, one of our TMC customers had a client who was asking for deep customization,” said CEO and co-founder Jeroen van Velzen. “So deep that it didn’t make sense to integrate that into the TMC’s app. That’s how we got started on enterprise apps, and we’re just scratching the surface. We have industrialized the customization. There’s a huge appetite.”

Some travel management companies build custom apps. TSI International’s app offers single sign-on in a wrapper for other apps like Concur, Expensify or TripCase. It also eases texting and calling to agents.

One client is inflight Wi-Fi provider GoGo, for which design is paramount, said TSI vice president of sales DeAnne Dale.

“We work directly with, for example, GoGo’s marketing department so it has all the right visuals, pictures, look and feel, logo,” Dale said. “We build it and do the connectivity but from a visual perspective, it’s all the client’s.”

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Fewer Airlines, Bigger Contracting Challenges

[UPDATE, April 8, 2016: We published new information related to this article here.]

Despite significant consolidation among major U.S. airlines during the past decade, contracting with corporations is no less complex. Why?

For one thing, published pricing is getting ever-more intricate. Some would say convoluted. That’s because airlines continue to apply more sophisticated revenue management techniques. They use more booking classes and constantly play around with inventories and fare rules, oftentimes market by market. In turn, many contracts — especially for bigger companies — get revenue-managed. Airlines understandably want to maximize revenue, but the process can frustrate buyers. Who are these revenue managers? What influence do they have on corporate deals?

Another challenge relates to the disparate ways airlines set contract performance targets.

Image: Thinkstock

Image: Thinkstock

Among the legacy carriers, it used to be mostly about market share. Now carriers to varying degrees target “revenue quality,” or higher yields. Each airline has its own way to gauge the value of a corporate deal.

“What’s new in some cases is the ways of measuring targets have expanded,” said GoldSpring Consulting’s Neil Hammond. “It used to be a volume or marketshare or segment goal for a specific geography. Now we are seeing revenue share goals and share gap goals.” By that, Hammond refers to a premium on quality of service index or fair market share calculations. QSI and FMS essentially mean the same thing: the market share an airline would expect in a given citypair, based on its seats, schedules and a variety of other factors.

According to sources, Delta is after share premium based on QSI or FMS. As those calculations fluctuate over time, so would contract targets. That makes it harder for a client to track performance.

Other airlines also at least consider QSI or FMS. Some see that approach as the most fair. As carrier and market capacities change, contract goals “should adjust accordingly,” said Turner Broadcasting System senior director of corporate travel services Jim Wilkins.

Southwest Airlines doesn’t dabble in Prism, the corporate contracting system used by American, Delta and United. It’s not in the marketshare game. Sources said it wants volume, and generally uses a simple discount structure to get it.

Neither Delta nor Southwest commented for this article.

As with its travel agency deals, American Airlines is interested in grabbing the highest proportion of dollars that a client can commit.

At United, “market share still drives contracts and it is segment-based,” said managing director of sales operations and resources Karen Catlin. “That is not to say we don’t also take into account revenue.”

Egencia director of client services Nathan Brooks said balancing divergent contract structures is challenging. “How do I give a revenue share premium to one and a flight share premium to another?” he asked.

Wilkins said his company uses a third party to model all of that. “Companies have to do their due diligence to break that down to the lowest common denominator on what all that means,” he said.

AA’s Merged Contracts ‘Nearly There’

The airlines still standing after the last merger wave brush up against each other in key business markets. In those spots, buyers must make choices. In other markets industry consolidation has reduced competition. In those cases, airlines need not discount as aggressively as they once did.

“In a consolidated world, companies are not meeting their goals,” Brooks said. “Airlines are walking away from deals. The days of having contracts with everybody, particularly if you can’t mandate, are over.”

The latest big merger was American-US Airways. The new company has achieved key milestones, but there’s still work to do. “We have been particularly focused lately on deals that US Airways had but that American did not,” according to AA vice president of sales Derek DeCross. “We need to get pricing in place on the American code prior to starting our reservations system migration. We are nearly there and expect to be through these by mid-summer.”

Like Delta’s and United’s, AA’s multinational contracts include foreign joint-venture partners. That’s a must for any company that wants a deal on international routes. One-off contracts with individual JV carriers are a thing of the past. Trying to satisfy multiple JV partners can be complicated.

But the international market is where buyers usually can make the biggest difference.

“I’ve assumed that we are taking leisure airfares so if they give us a 1 percent or 2 percent discount, I am not going to focus on it,” said Yasuo Sonoda, senior global manager for travel and card services and procurement analytics at VeriSign. “I focus on what the airlines focus on, the high-yield stuff. How much more can I get out of the airlines for international first or business class? If you have a high volume of those things it more than offsets those 1 percent or 2 percent discounts.”

But companies without high-yielding international traffic have less to offer. Are domestic-only deals still available? That depends on the circumstances.

CWT Solutions Group director for air in the Americas Katie Raddatz said there’s “still some appetite” among carriers provided clients direct share and maintain support.

When most of a company’s domestic tickets are lower yield — perhaps due to lowest-logical airfare policies — negotiated deals are hard to come by. Where they exist, discounts generally aren’t much more than a few percentage points. (The alternative is an airline small-business program.)

“We have a lot of customers who give us a lot of business in the domestic market and its not all low yield,” United’s Catlin pointed out. “Lowest logical airfare doesn’t mean low yield if you are booking for tomorrow.” Asked if lower-bucket bookings count when measuring contract performance, she said that depends on the client. “For some customers, it’s a big factor.”

Accessing Analysts

A major carrier’s assessment of whether, where and how to discount comes back to revenue management. For example, “depending on demand, they are eliminating corporate discounts in the lower fare classes and pushing corporate buyers into the higher fares,” said GoldSpring’s Hammond.

Egencia’s Brooks said big airlines have revenue management departments of hundreds of people. They’re using them to create “quasi-discounting programs.”

“When I need help, I’ll open up the lower fare classes and when I don’t I’ll close them out,” he said, sharing the airlines’ view. “I’ll let the revenue management folks drive that discounting discussion versus putting in a static discount that’s giving you a percentage off whether I need your help or not.”

Brooks said such “drastic changes,” along with current strength of the airline market, means clients have little choice. “There’s not a lot of need from the airline perspective so they are effectively going to discount through the revenue management systems.”

That can bother buyers who’d like to hear directly from revenue managers about proposed discount levels but aren’t given the opportunity. It’s all the more bothersome when they sense that commercial sales teams are not empowered or fully informed.

Not so at United, according to Catlin. There, “corporate contracting is clearly a sales function,” she said. “I’ve got analysts who make the determination within guidelines discussed with revenue management.”

Turner’s Wilkins said that in his experience, revenue managers and pricing analysts do not liaise with customers, though some number crunchers may upon request.

Getting Real

Especially for large spenders, technology can help sort out today’s air sourcing complexities. But how small is too small to draw interest from airlines?

Christian Cole is director of business development for Sabre Corporate Solutions and Prism Avion. Speaking last month during a Global Business Travel Association webcast, he said, “I’d like to think that the threshold could be as low as $5 million. But it’s safe to say if your air volume is $10 million or more,” custom discount deals are within reach. But Cole added that if corporate policy is “lowest logical no matter what,” it’ll be a harder road to hoe.

Even on the larger end, “organizations have to be getting realistic as well as creative in how they are going about doing their sourcing,” said CWT’s Raddatz.

In some cases, that may mean erring on the side of caution and not bidding out the program as often. She said some customers are taking a more targeted approach, perhaps looking to tweak deals in a certain region or only with their top airline or primary alliance. Otherwise they may be “risking something by going out to RFP and don’t want to open up everything for renegotiation and have a potential reduction in value,” Raddatz said.

That’s what VeriSign’s Sonoda has done. “Can we not look at it for another two years and just extend it to maintain our rich agreement?” he asked. “That’s been my strategy.”

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Commission Recovery Players Evolve, And ECS Pivots

Hotels pay tremendous amounts of money to travel agencies and some corporate travel departments on commissionable room rates. The standard is 10 percent. Depending on contractual arrangements, travel management companies may pass all or part of those commissions to corporate clients. Or, they may keep them and charge customers lower transaction fees. Some even waive fees if their hotel revenues are robust enough.

That all makes the process sound simple, but getting hotels to pay commissions can be a huge pain. Helping TMCs and ARC-accredited Corporate Travel Departments with it is a cottage industry in itself. During the past several months, lawsuits, consolidation, partnerships and new competitive dynamics have remade this previously sleepy niche.

In the latest development, commission recovery firm eCommission Solutions announced it’s now entering the crowded travel data services business after losing vital partners for its commission recovery solution in a complicated dispute now in the courts. Commission recovery remains a “viable part of our business,” said ECS CEO Paul Hoffmann. “As we evolve, it’s about the data.” The commission service has gone from “a large part” of the business to “only a facet,” he said another way.

Paul Hoffmann

Paul Hoffmann, CEO of eCommissionSolutions

Hoffmann was unable to comment on matters related to lawsuits against CTS Systems and Dell Marketing. According to court documentation filed by his attorneys, ECS’ service to clients was inadequate after 2011 and untenable after 2013 due to issues with its partners. The problems led client Carlson Wagonlit Travel to serve ECS a breach of contract notice in the first quarter of this year after CTS, according to ECS attorneys, failed to comply with a CWT audit of the services.

According to an ECS court filing, CTS president and owner Carl Roberts told an ECS client that without CTS and Dell, ECS “would be unable to provide services to its clients.” ECS called these statements misleading and false. ECS indicated it has lost clients to CTS, including Maritime Travel, Travel Leaders and Tzell.

American Express Global Business Travel declined to comment and CWT was unable to before press time. It’s not clear whether ECS has retained commission recovery business with these firms. A Texas state court in March denied an ECS request to stop Dell from terminating its relationship with ECS despite the fact that it would result in ECS losing American Express as a client. According to Hoffmann’s testimony, American Express had represented 40 percent of ECS revenues.

BCD Travel “transitioned our hotel commission collection to CTS as of May 1, resulting in no impact to our clients,” according to executive vice president of global supplier relations and strategic sourcing Rose Stratford.

CTS and Net Trans Services are the main players in commission collection. “They’re the guys who do it soup to nuts,” said Eric Altschul, CEO of ABC Global Services, which offers travel agency members a global hotel rate program.

Dallas-based Onyx Payments last year acquired Norway’s Net Trans, which travel agency group Hickory Global Partners last week named as a new partner for commission recovery. A hotel rate program provider like ABC, Hickory also supports clients using CTS and ECS, according to president Chris Dane. ABC uses CTS for its Global CommissionPro service announced last year, which has attracted nearly two dozen agency users. CTS also partners with Concur and the Virtuoso agency network.

In addition to these partnerships, CTS clients include Executive Travel, Omega World Travel, The Travel Authority and Tzell. CTS’ Roberts told The Company Dime that about half of his firm’s business comes directly and half through resellers.

CTS and Net Trans approach the market a bit differently. Net Trans attempts to collect from each hotel the commissions due to all its clients at one time by taking the payments itself and distributing them appropriately. But CTS gets the hotels to send individual checks to individual clients. CTS says the Net Trans way is slower. Net Trans says doing it individually runs up bank and currency conversion charges. Client preference drives the choice.

Net Trans had entered the U.S. market before its acquisition by Onyx, and has adapted its model to preferences there. “It’s a lot about habit,” said Net Trans chief sales officer Trond Sorensen. “Travel agencies are very locked into what they’re used to — they’re used to having those checks in the door. It feels safe.” Asked about the ECS-CTS dispute, Sorensen said, “Before, if you chose ECS, you chose CTS. We used to have one competitor and now I see we have two.”

Another variation is how the service is priced. The standard Net Trans model includes a transaction fee per collected commissionable room night. CTS emphasizes a contingency fee — no more than 40 percent of the total recovered, depending on agency sales volume. CTS also can charge transaction fees, or use a blended approach.

Among other services, these companies make requests to hotels for commissions they should have paid based on comparing consumed agency bookings with commissions received.

“Regardless of who it’s with, it surprises me that more agencies don’t use commission collection, especially if it’s on contingency,” said ABC’s Altschul. “If you look at the data, most agency hotel commissions — 65 percent — are coming in within 90 days. The remaining 30 to 35 percent is taking a long long time, and if you can get someone to help you should. The real shame is that many agencies don’t know what they’re not collecting.”

It’s a large enough amount of money that many corporations have established their own status with ARC and the International Air Transport Association Billing Settlement Plans for direct relationships with suppliers for commission payments. Some of these corporations don’t trust their TMC partners to get the money in the first place, or to pass it back in accordance with contracts.

Short of that, corporations may want to audit their agencies.

Corporate Solutions Group consultant Robert Langsfeld helps corporate clients go after commissions on bookings with non-preferred hotels. (Preferred negotiated rates typically are not commissionable.) “We find all kinds of games out there which mostly are not legit,” he said. “The primary flow is 10 percent but a lot of the big chains are moving more to back-end payments. So there’s no accountability.”

The ECS Pivot

CTS, Net Trans and ECS also provide their clients with data reporting. CTS contracted with travel data veteran Kevin Austin’s Big Data Experts to build a new reporting platform. Unlike at ECS, though, this CTS data reporting is strictly addressing the hotel commission niche “at this time,” said Roberts.

Evolving from its origins as a commission recovery service, ECS built its ECSIQ Portal data solution in-house during the past two years. It enables “plug and play” collection, consolidation, cleansing, management and reconciliation of data with “unmatched speed, accuracy, transparency and convenience,” the company announced. ECS introduced an “initial phase” of the service a year ago in partnership with Domo. Domo is a data aggregator and dashboard maker that counts Christopherson Business Travel among its clients.

Add-on products for ECSIQ include predictive analytics, consulting and “newly enhanced commission revenue recovery.” Hoffmann described that as including customizable invoices and more targeted dunning.

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ECommission Solutions Sues Partners CTS, Dell

[UPDATE, May 31, 2016: Plaintiff eCommission Solutions and defendant Dell Marketing agreed to dismiss claims and counterclaims. The presiding judge in Dallas County Court on May 27 signed the order for dismissal with prejudice prohibiting ECS from bringing the same claims in the future. The case is now closed. The related ECS suit against CTS continues in a U.S. District Court in New York. Defendant CTS is ordered to file its motion to dismiss by June 6.]

Hotel commissions reconciliation specialist eCommission Solutions in February and March filed separate lawsuits against key partners CTS Systems and Dell Marketing. Accused of breaching contracts and using proprietary information to “steal” ECS’ customers, CTS and Dell denied the allegations. Dell filed counterclaims, which ECS denied.

The situation preceded a change in direction for ECS, which today is announcing a new data consolidation service. Dedicated hotel commission collection providers include CTS and Net Trans. Such companies review data and chase down commissions owed to travel agencies and corporate clients by hotels.

In a complaint filed in the U.S. District Court’s Southern District of New York in March, ECS alleged that services provided by CTS under a partnership agreement began to deteriorate in 2011. By 2014, ECS client Carson Wagonlit Travel was demanding an audit due to these service problems, according to court documents. ECS accused CTS of failing to support that February 2015 audit, leading CWT to send a contract breach notice to ECS.

To secure business in recent years with CWT, American Express and BCD Travel, ECS had to provide assurances related to data security and storage. In the case of CWT, that included storing all servers containing its data “in a secure location protected against catastrophes.” ECS claimed to receive assurances from CTS that these conditions applied.

But a fire in February 2014 destroyed CTS headquarters near Atlanta. As a result, ECS said it “learned that CTS did not have a disaster recovery plan in place.” It also claimed to learn that CTS stored some client data — including that of Amex, BCD and CWT — there rather than at a secure location. ECS alleged that CTS CEO Mark Lewington on a phone call to ECS president and CEO Paul Hoffmann admitted to lying about the CTS data storage and security procedures.

ECS claimed that after the fire it attempted to address the service issues through a potential acquisition of CTS — and that Dell and CTS supported the idea. By late January 2015, though, CTS informed ECS it wasn’t interested. ECS alleged that CTS entered into negotiations for a possible sale “in furtherance of a scheme with Dell to steal ECS’ clients” and force ECS out of business. The “sole purpose” of the acquisition discussions, ECS claimed, was to end them “in the final hour in an attempt to put ECS at a commercial disadvantage.”

ECS claimed CTS has had access to proprietary ECS information on clients and pricing. It used that information to “directly compete against ECS for clients.” ECS claimed that CTS successfully did so to pilfer clients Maritime Travel, Travel Leaders, Tzell and others.

ECS is seeking millions in compensatory damages and additional punitive damages. It also wants a “permanent injunction” to prevent CTS from using its proprietary information.

In a statement provided to The Company Dime, the defendant’s attorneys wrote: “CTS believes the complaint is without merit and it will be pursuing all appropriate relief before the court, where it has full confidence that justice will be served.” 

The presiding judge scheduled a pre-trial conference for July 22.

Meanwhile, In Texas

The whole saga started in March 2005 when ECS and Dell Marketing (then known as Perot Systems) entered a reseller agreement. The deal called for Dell to provide services to assist ECS in commission services for clients, primarily travel agencies. Dell then brought in CTS as subcontractor to also provide services to ECS and its clients.

ECS and Dell in August 2014 agreed to a task order requiring Dell to provide lockbox collection services through July 2017 for American Express Global Business Travel. (In commercial banking, a bank lockbox is used to receive, process and deposit an organization’s receivables.) Another task order, in place since 2009 and scheduled to run through July 2019, covered lockbox services provided to ECS for the benefit of Amex Platinum. In its March 2015 complaint against Dell filed in a Texas state court in Dallas, ECS claimed these lockbox services enabled it to secure Amex GBT as a client.

ECS and Dell then worked toward an amended reseller deal. The idea, according to ECS, was to address “horrific service issues caused by CTS.” But ECS claimed Dell in February 2015 said it had been considering ending the reseller relationship and would stop lockbox services on March 10, 2015 (the original end date of the reseller agreement). That, ECS claimed, “amounts to a clear breach of the task orders.”

ECS said Amex GBT and Amex Platinum today represent “a considerable share” of client revenue. ECS also claimed that service termination by Dell would “disrupt the payment of commissions to Amex GBT.” In turn, Amex customers would suffer as the agency no longer provides timely commission revenue-share payments to them, according to ECS.

An American Express Global Business Travel press official declined to comment.

ECS wants the court to order Dell to provide the Amex lockbox services through 2017 and 2019. It’s also seeking damages.

In one of its court filings, defendant Dell denied all allegations. It said the decision not to extend the reseller agreement came after determining ECS’ intent to “relegate Dell to a subsidiary role in the provision of Dell’s own services.” Dell claimed that it was ECS that broke off further negotiations and threw away “its last chance to elicit Dell’s voluntary extension of task order services beyond March 10.”

Dell filed various counterclaims, alleging that ECS breached the reseller deal by not paying hundreds of thousands of dollars it owes. ECS denied those counterclaims.

The court set a scheduling conference for May 27.

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BCD Travel Acquires World Travel Service, Plans More

BCD Travel on Friday acquired Knoxville, Tenn.,-based World Travel Service Inc., which the companies said is the 13th-largest U.S. corporate travel agency. BCD Travel CEO John Snyder said the market can expect the company to make “many” more corporate travel and meetings deals this year and next.

Addressing rumors of consolidation discussions between the largest travel management companies, Snyder also said that if anything happens BCD Group will be a buyer not a seller.

Snyder-BCD

BCD Travel CEO John Snyder

With World Travel Service, BCD is targeting the small and medium market, which WTS president Lamar Shuler said is “strong right now.”

“A big part of our SME strategy is and will continue to be the affiliate network,” said Snyder. “We have the strongest affiliate network in the country and if one of them wants to sell we want to be a part of that discussion.”

A BCD Travel affiliate since 2002, World Travel has more than 100 people and processes annual travel sales of more than $330 million. Shuler will remain president of World Travel Service; the entity would operate with its own brand as a business unit of BCD Travel.

On the largest end of the market, Snyder said “if there is consolidation, we will be the acquirer and not the acquired.” An investment firm related to BCD Group owns about 24 percent of Hogg Robinson Group. Last year, a consortium of investors bought half of American Express Global Business Travel and Carlson Companies acquired full ownership in Carlson Wagonlit Travel. Investors behind Direct Travel have been active of late. Expedia is aiming to acquire Orbitz, which would bring along with it Orbitz for Business.

“There’s reasonably high activity,” said Snyder when asked about travel management mergers and acquisitions in general. “There are a lot of people wanting to deploy investment dollars and it’s a positive that they see our industry as a good opportunity.”

CWT CEO Doug Anderson told Skift he “wouldn’t be shocked to see more consolidation at the mega TMC level … in the near to medium term.”

The goal of M&A among TMCs in some cases is to increase clout with suppliers or footprint for clients. But while Snyder said scale is important, he explained that “we would never do a deal just to drive it. Our driver is to grow with solid businesses that add to our top and bottom line and our overall offering. We look for a solid cultural fit and customer-first approach that values employees.”

The principles expect no leadership changes as a result of the BCD-WTS deal, and they said cost savings are not a major component.

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DHL Cites Tech, Speed And Service For Picking Short’s In Agency Consolidation

Overwhelmed by trying to manage the use of 30 travel agencies in the Americas, logistics company Deutsche Post DHL Group a year ago started a consolidation project. The HRG affiliates network and Latin America’s L’alianXa Travel Network were the two winning bidders. In the United States, where DHL fields more than 20,000 travelers, Short’s Travel Management beat out other HRG affiliates. Implementation began April 1.

Quick turnaround by Short’s on tech development impressed DHL. “We want to continue to change and we were getting lost” when serviced by larger travel management companies, said DHL regional travel services category manager Michelle Hunt.

Of particular interest, the Short’s FindIt tool enables travelers to search the open market for airfares and email choices to the agency.

DHL regional category manager for travel services Michelle Hunt

Hunt said DHL policy has allowed travelers to book wherever, within certain parameters. “The fact is, they are looking,” she said. FindIt therefore “met an important need for our U.S. travelers.”

Using FindIt requires a browser extension (available for Internet Explorer, Chrome and Firefox), which works with dozens of direct airline sites and online travel agencies. Once travelers select a flight, a pop-up window allows them to send that selection to Short’s.

The agency’s automation then searches for better fares and applies any relevant corporate policies. The traveler receives an email from Short’s often showing the exact flight option originally selected as well as others (which may be priced lower, have shorter elapsed time or be on a preferred airline). It will also show other classes of services. Buttons next to all options indicate whether they are in policy.

Once a traveler makes a final choice, they’re brought to a check-out page which already shows profile and credit card information to complete the transaction. Short’s makes the booking through its regular global distribution system process and charges a basic online booking transaction fee.

Short’s CEO David LeCompte said instances of the traveler’s preferred option being available only on the airline’s direct website, for example, are “very rare. All their content is in the GDS.”

DHL is piloting FindIt and expects a rollout later this year. LeCompte said Short’s will next look to bring hotel bookings into FindIt.

DHL travelers also can continue using the company’s pre-existing booking tool, Concur Travel. Now, though, company managers can make use of Concur’s pre-trip approval capabilities, which Hunt said were not supported by DHL’s previous U.S. travel agency.

LeCompte said DHL implementation required some extra work related to Concur. He explained that DHL’s Concur setup is more complex than most — multiple business units with different parameters and settings, some on Concur Expense and others not. Also, because Short’s uses the Travelport global distribution system, it had to migrate DHL to that from Sabre.

DHL uses Sabre in Latin America. Agency bidders had to be comfortable with DHL controlling its own GDS contracts, which provide financial incentives for transactions.

Late in the solicitation process, Short’s quickly built a response to a DHL executive admin’s request: TSA PreCheck indicators on airports in online booking tool displays. That way, when PreCheck-enrolled travelers or their admins are booking, they are better informed about when to get to the airport. Hunt liked how Short’s built the PreCheck function and planned to make it available to all customers before DHL even signed with the agency.

“It made sense and was pretty easy to do,” LeCompte said. Short’s built the PreCheck feature for its STO online booking tool, which will be available to DHL employees later this year. STO serves as the back-end for FindIt.

DHL selected local HRG network affiliates elsewhere in the Americas. “We have the network behind us for consolidation and reporting, yet we have the autonomy of the individual agency within country,” Hunt explained.

“It’s the same thing as going to a Radius or a GlobalStar,” said Travel Consulted president Grant Caplan. “You get that same backbone that they are all attached to. There are some super strong agencies in these networks that give you individual service and will make you feel more important but still get the features of a bigger agency standing behind that. I have seen a lot more movement in that direction at the lower end and among midsize clients than ever before. It says to me that service is more important than name recognition.”

The second winning bidder was South America’s L’alianXa, which happens to be a GlobalStar network member that claims a presence in 18 Latin American countries.

In addition to supporting Concur Travel and DHL’s choice of GDSs, winning agency bidders had to commit to provide data to the company’s risk management firm, International SOS, and to airline contracting system Prism. Whether HRG affiliates or part of L’alianXa, they also load monthly data into the HRG Insights reporting tool to consolidate DHL’s data.

New agency programs are in place in Argentina, Brazil, Canada, Chile and Mexico. DHL declined to say which specific agencies other than Short’s are servicing particular countries. DHL also owns and will continue using an agency in Colombia.

The overall consolidation project will continue throughout this year.

Hunt referenced the importance of including business units throughout the process. DHL has more than a thousand legal entities, each responsible for its own profit and loss. In that autonomous corporate culture, travel programs vary. Not all units use pre-approval or notification processes, for example. Units also are allowed to modify the global travel policy, but only to make it more restrictive, she said.

“We are not forcing them into a box,” Hunt said. “One solution is not going to fit everybody.”

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AA Targets October For US Airways Reservation System Migration, Works To Minimize Risks

Switching reservation systems is a crucial part of an airline merger, and a scary proposition. If it doesn’t go as planned, it can be traumatic for the carriers and their customers. Delta Air Lines in 201o had some glitches when absorbing Northwest’s reservations, but overall the migration wasn’t too disruptive. It was a very different story at United two years later.

American Airlines now is targeting as early as October to switch US Airways from the HP Shares system to its Sabre-hosted system. One way AA aims to minimize potential problems is by winding down the US Airways system before migration. During a 90-day period starting as early as July, no new bookings will be made through Shares.

“Any existing US Airways reservations with travel departing after this period will be migrated to Sabre,” according to a Tuesday AA letter to corporate customers. “The majority of corporate bookings are made and flown within 90 days, which decreases the number of reservations needing migration to Sabre.”

By October, less than 10 percent of the normal US Airways booking load would remain in Shares. These will be the reservations made more than 90 days ahead of time. Such bookings tend not to include business travelers, whose booking records are at particular risk during a cutover since they tend to change or be cancelled.

Res systems, also known as passenger service systems, are at the center of airline customer service. They back sales by providing fares, schedule and inventory information; process reservations and create passenger name records; link up with check-in functions; and convey flight status. They incorporate or interface with various other systems, including those used by airline call center and airport staff, and those related to baggage, business programs, loyalty programs, departure control and many more.

Given these interdependencies, when things go wrong they tend to go really wrong.

Lesson Learned

As part of its merger with Northwest Airlines, Delta Air Lines in February 2010 brought information from Northwest Pars into Deltamatic (which Delta now owns). Though the systems at that time were on separate platforms, both were operated by Travelport’s Worldspan.

To prep for the huge task, Delta and Travelport several months in advance began recreating Northwest flights in Deltamatic and migrating passenger name records.

In the end, the carrier reported little more than a few “hiccups.”

There were different conditions for United Airlines’ move in March 2012 to migrate to the HP Shares system that Continental had been running. Unlike the Delta/Northwest integration, this one required cooperation between two tech suppliers. It also meant combining on the smaller carrier’s pre-existing platform rather than the Travelport (Apollo) system United had been using.

Looking ahead to the planned merger with AA, when he was US Airways CEO, Doug Parker in February 2013 said “it’s much easier” to go the other way and stick with the larger airline’s system.

Ahead of its switch, United preached preparedness. It trained employees in phases, conducted “dress rehearsals” and transferred PNR data. It also stopped selling Economy Plus seats through global distribution systems.

Those steps didn’t prevent United’s res system migration nightmare. PNRs were out of sync or lost. Wait times at call centers spiked. Disruptions hit sales of several ancillary products, elite upgrades, automated check-in, MileagePlus accounts and several other services. Operational performance plummeted. It took about two years to get Economy Plus sales back into GDS channels.

In hindsight, the airline tried to do too much too quickly. In summer 2010, CEO Jeff Smisek said the airline stressed its operations “by simultaneously converting to a single passenger system, implementing hundreds of new processes and procedures, rerouting aircraft across our network and harmonizing our maintenance programs.”

System switches don’t happen only in mergers. WestJet and JetBlue about five years ago each replaced Navitaire systems in favor of Sabre. WestJet had a rougher go of it. JetBlue took several steps to mitigate potential disruption. It shut down sales and many functions on its website for a 24-hour period ahead of the cutover, temporarily limited its flight load and maintained a part of the old system as a back-up.

Virgin America in 2011 also switched to a Sabre res system (from a Travelport one). Like WestJet and United, it wasn’t exactly a smooth ride.

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Corporate Booking Tools Expect Progress On Economy Seat Upgrades

[UPDATE, Oct. 1: In late September, Sabre GetThere made available bookings for United’s Economy Plus seating. Users without elite status on the airline have the option to split payment for the product upgrade by charging the added cost to a personal credit card if corporate policies disallow such purchases. Travel managers can decide whether the capability should be activated for their programs.]

Corporate travel programs for several years have struggled with access to American’s, Delta’s and United’s extra legroom coach products. In some cases now, agents can reserve those seats through the global distribution systems. But no client wants to advise travelers to incur a self-booking transaction fee of a few dollars only to spend multiples of that on agent assistance for a seat upgrade.

Some of the booking tools make these economy seat choices available to elite loyalty program members who get them at no added cost. Non-elite travelers generally resort to using the airline’s website to make such purchases. Maybe not be a big deal, but definitely not ideal.

Part of the challenge for online booking tools is that not all clients reimburse for the perk. So software needs to allow for the user to insert personal credit card details for this extra purchase. That takes some programming.

Breakthroughs appear to be coming, surely if slowly.

GetThere displays the extra-legroom options for airlines distributing seats through Sabre, and travelers with the right frequent flyer status can book them. GetThere in the next few weeks will release new functionality allowing users with lesser status to purchase premium seats using either a corporate or personal card, according to a company official.

Sabre CEO Tom Klein in April said it was only a matter of time before booking tools caught up with the agent channel on access to the airlines’ optional services.

“For the same reason an online travel agency wants to have those offers visible to customers, I think the same expectation should exist for the online booking tools,” Klein said. “In fact, it needs to be consumer grade and needs to have all the services included. It has lagged and it shouldn’t lag.”

economy-seat

What’s required is better segmentation and profiling “so you’re not doing dumb things like offering me a paid-for seat even though I’m a frequent flyer and I get it for free,” Klein added.

Concur Travel offers such content with “a select number” of airlines and is “actively working” to expand to more, according to a spokesperson. He declined to say which airlines participate.

Concur in some cases has shown the seats as unavailable rather than enabling status-poor travelers to book them (in which cases carriers indiscriminately assign new seats). United managing director for distribution strategy Amos Khim said Concur thought that subjecting travelers to being reassigned in that way was a disservice.

But showing all the seats as occupied isn’t a good solution, either. “After we discussed it with Concur, I believe they undid that one,” Khim said. “It speaks to the greater challenge of how we have to try to solve things.”

Facilitating the carrier’s Economy Plus seating “without Concur having to invest in their booking tool” is part of the reason United is planning to hook into Concur’s TripLink, Khim added. United advises corporate clients who want such content in corporate booking tools to put pressure on them. “We hear that some customers want to be able to do it,” Khim said. “Others say, ‘I don’t let my travelers expense an Economy Plus seat so I don’t care what functionality my booking tool has for that.’ ”

Corporate booking tool providers including Deem, Egencia, nuTravel and Orbitz for Business had no answer yet on the problem for non-elite travelers who cannot book preferred seats unless they pay more. A KDS official indicated “these arrangements are generally made directly via the airline websites and not through booking tools as the payment for these items is done outside of agency settlement/ARC.”

In some instances, nuTravel will show such seats as unavailable, which chief strategy officer Rich Miller called unsatisfactory. “It’s a challenge but we’re determined to solve for it,” he said. “We’re making progress but we also have a ways to go before we can display it in a user-friendly way.”

As a first step, airlines need to offer their seating products to the GDSs. Many now do. Then the booking tools need to use the GDS companies’ XML feeds and make the appropriate programming changes to the traveler interface, for example to record personal card details.

A Travelport official said the company now is “working closely with several corporate booking tools and agencies that have their own websites” to hook up Travelport’s application programming interface. By doing so, they can offer merchandizing and, where available, upgraded seats.

One Travelport API user, AmTrav Corporate Travel, claims to be the only corporate travel distributor already addressing the problem — at least on Delta and United. AmTrav is waiting for Travelport and AA to work out the provision of the airline’s Main Cabin Extra in the API.

Asked if the function is getting a lot of usage, AmTrav president Craig Fichtelberg said, “Absolutely.”

“At the same time,” he added, “it lowers our operating cost. Companies that are not offering this online either are directing customers to the airline website or they’re doing it for them offline. But travelers appreciate a place to go where they can accomplish everything they need.”

Fichtelberg suspected that making the personal card option available is a big part of the holdup for other players.

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Vendors Target Small And Medium Enterprises With Integrated Travel And Expense

One of the more intriguing ways Concur impacted corporate travel was how it created a market of its own based on combining two otherwise discrete products. Now, just about everybody is offering integrated travel booking and expense software, at least through partnerships. With Concur’s established leadership in the large market, rivals are targeting small and medium enterprises or those with unmanaged travel programs. Yet, many remain unconvinced of the benefits of integration.

The “integrated” proposition is reinforced when a single company provides both services. It can offer a common user experience or make one of the components free, as Concur has done with travel for its expense clients. In theory, one company’s systems integrate better than those of two partners.

Hogg Robinson Group in the United Kingdom lashed expense tool Spendvision to its booking tool in a configuration the company calls Fraedom. It expects to launch this year in the United States. KDS also offers integrated travel and expense; it’s in testing with Carlson Wagonlit Travel. After selling ExpenseWire to Paychex in 2012, Deem has been building a new expense system that integrates with its travel tool.

Meanwhile, firms like Egencia, Orbitz for Business, Sabre GetThere and nuTravel apparently have succeeded with two-party integrations.

What are the benefits of integrating?

1) When you book travel, the expense system pulls in transaction details and saves keystrokes after the trip. Don’t card data and receipts do that? Yes, but proponents of travel integration say such data misses certain elements like city pairs and class of service. Skeptics say the utility of that data is marginal, even provisional.

2) Managers can compare data on booked versus expensed transactions for policy enforcement. For example, they might identify travelers who booked the right hotel or car rental rate, but upgraded at check-in. This data comparison can also help track off-channel bookings, or the end result of changes at the airport. Concur offers such data as part of its premium Insight reporting service.

Commercial Metals Company, a $7 billion steel company based in Texas, is a Concur customer for integrated travel and expense. Sourcing manager Melissa Skinner cited the aforementioned benefits in support of policy enforcement and the ease of use gained by having “one tool for both functions.” When available, electronic receipts also are a benefit, she said.

Some say comparing booked to expensed data gives program managers little useful information. What they paid is what matters, right?

“Our customers look at the individual transactions, and if the guy is paying $150 for a hotel room and that’s within policy, they’re not concerned whether they booked it earlier for $135,” said Databasics CEO Alan Tyson. “To chase these things down is expensive, and in most instances, there’s an adequate excuse or reason.”

KDS CEO Dean Forbes in a February interview said demand for the integrated solution has grown quickly, with more than 90 percent of clients now choosing it versus about 20 percent two years earlier.

Buying integrated systems is one thing, but Acquis Consulting’s David Kaufman said failure to make full use of them is not unusual. “We call it ‘implementation fatigue,’ where organizations get through the hard work of implementing a system, but don’t exert the extra 10 percent of effort to realize all of the benefits that made up their business case,” he said.

Corporate booking tool provider nuTravel offers varying levels of integration with eight expense management partners.

“We’re also talking to those providers about giving us back the expense info so the next time travelers book, we can offer information about past trips that they didn’t book using our solution,” said nuTravel chief strategy officer Rich Miller. “Then you’re beginning to close the loop on the process.” He said nuTravel and its partners are working to streamline the process of contracting with two vendors.

Although its preferred partner is Concur, Egencia also has a platform approach. This allows customers to “integrate with their vendor of choice,” said senior director for products and services Ian Knox. Orbitz for Business partners with Concur, Coupa, ExpenseWire and Expense Anywhere, according to vice president for strategy and account management Mark Walton. A GetThere official indicated the company integrates with 11 expense providers including Apptricity, Chrome River, Oracle and SAP.

Chrome River co-founder and COO David Terry said the benefits are merely “nice-to-haves.”

“When you fill out an expense report of 20 items, maybe two of them come from these booked travel records,” said Terry. “The other 18 are actual spending and that’s what has the real meaning.”

Expensify has a handful of travel integration partnerships. CEO David Barrett suggested the greatest value is in consolidating data on purchases made outside the travel system with info on those booked within it.

Opinions differ on whether SMEs appreciate integration. Many of them have yet to automate at all.

A Concur survey of 200 small and medium businesses released in March found seven of 10 do not use automated expense management. A Databasics-sponsored PayStream Advisors survey of more than 200 organizations released this year found that 63 percent of SME respondents still use “entirely manual” processes, versus 9 percent of large companies.

“Most of the expense solutions we’re integrated with are targeting the small and midsized companies,” said nuTravel’s Miller. “We get several leads a week from them for clients that want integrated travel and expense, so it’s top of mind out there.”

“We’re taking enterprise-scale solutions and moving them into this market,” said HRG group distribution and technology director Bill Brindle, tapped to also serve as CEO of Fraedom. During a March interview, he said a Fraedom mobile expense app is in the works.

Deem senior director for product marketing Thomas Marks said his firm is going in the opposite direction — building upon an SME solution to make it viable for large clients.

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Sourcing Tools Help Big Buyers Tackle Air Market’s Twists And Turns

There are fewer big U.S. airlines, they negotiate with fewer companies, and their generosity on discounts has diminished. But airline contracting is still complicated. The market offers several tools to help buyers at large travel programs optimize airline combinations.

Sabre last month revealed plans to refresh the Prism Avion corporate data platform in use by a handful of very large accounts. The company is adding sales and marketing resources and considering user interface and workflow improvements. Sourcing tools are expensive; Sabre is looking at pricing tiers to widen the appeal.

American Express Global Business Travel, BCD Travel, Carlson Wagonlit Travel, Egencia, GoldSpring Consulting and TCG Consulting are among those offering sourcing systems. Grasp Technologies is building anew, with a product expected to debut this fall.

These systems can be “a tremendous help,” said Princeton University travel program manager Cynthia Shumate. In a prior job, Shumate used a TMC tool for a multinational air RFP. “This made it possible to see which carriers would be the best fit for our volume and where we had potential opportunities to negotiate further,” she said.

There are several elements of the sourcing process, and not all tools handle all pieces.

Aggregating Data

Generally, a first step is to convert a client’s agency transactional data to an origin and destination (O&D) format.

Image: Thinkstock

Image: Thinkstock

At Sabre, Avion produces for buyers O&D data “the way airlines think about it,” said Yannis Karmis, head of the company’s Global Corporate Solutions. “It helps to normalize the analysis that a buyer has to do when evaluating suppliers’ proposals.” The Avion system mirrors the Prism Sales Information System data tool used by several big airlines.

General Electric global commodity leader for travel and fleet Steve Sitto said it’s helpful to use the same datasets as airlines during contract negotiations. GE is a longtime Avion user and its airline contract validation capabilities have impressed Sitto, who joined GE last year. “We can see if we are getting discounts in all our O&Ds, and if the coverage is there or if we are missing something,” he said. Sitto also uses Avion for reporting but said GE uses a third-party consultant to handle scenario modeling.

Modeling Scenarios

Consultant Scott Gillespie said he “invented the scenario modeling technique” in 1999 at Travel Analytics. He said most comparable tools these days can run scenarios, to varying degrees. The Travel Analytics Tango tool would model hundreds of scenarios, Gillespie said. TRX bought Travel Analytics in 2006; Concur bought TRX in 2013. Concur declined to comment on whether the product is still active.

“What-if” scenarios can analyze by city pair the impact of shifting share among carriers (or alliances) and using different classes of service.

GoldSpring Consulting may run up to 20. A programmer and former travel manager at Schlumberger, Neil Hammond developed GoldSpring’s air sourcing tool. He said scenarios must be realistic, and the model should be “coherent with the demonstrated ability of a customer to move share.”

GoldSpring models average savings against a customer’s spend profile based on class of service mix, international and domestic travel ratios and other factors. “We will feed these parameters into our model and get a good picture of the kind of savings that the program should be achieving,” Hammond explained.

Like others, Avion users can apply historical data to newly proposed terms and model the contract’s impact. Then during the life of the contract, the system can analyze changes like new markets served or new alliance partners. Meanwhile, Sabre’s Contract Optimization Services can help TMCs apply contract modeling on behalf of clients.

Grasp Technologies vice president of consulting strategy Brian Tripplehorn said scenario modeling is “the key part” of what his firm’s forthcoming tool will do. Dubbed Grasp Apex and now in beta testing, the system would also run scenarios on a client’s expected M&A and divestitures, and travel policy adjustments. “If you are looking at possibly changing your supplier mix anyway, why not look at policy decisions that may save you more or cost you more than changing the carrier mix?” Tripplehorn asked.

He added that the new system also would handle direct data feeds when certain carriers’ client information isn’t available from typical sources. Grasp is considering both direct sales to corporate clients and product licensing to TMCs.

“The market is ripe for a new online tool,” Tripplehorn said. “Customers want you to show them on the fly what these changes could mean, and we really don’t have the tools in front of them because it takes too much work in the background. My goal is to have that online tool.”

Loading Contracts

When airline proposals come in, loading all the terms can be tedious. TCG Consulting uses the Global Business Travel Association’s air RFP template that it was hired to help develop. TCG’s Barry Rogers said that automated much of the previously manual work. BCD Travel’s Advito said its template is similar.

CWT Solutions Group is replacing Excel pricing grids with automated feeds between its system and those of airlines. As a result, “we can focus attention on the more highly complex components,” said director for air in the Americas Katie Raddatz.

Scottish firm Volaro focuses only on contract loading. It’s now working with TMCs to enable them to import airline responses into relational databases.

Benchmarking Proposals

Crunching the numbers may mean comparing offers to historical data and pre-existing deals, market prices and peer benchmarks. “We apply our own methodology to normalize the offers and make sure we compare apples to apples,” according to Advito senior director and area practice leader Olivier Benoit.

According to Gillespie, “The degree of precision varies across these tools. There could be differences in a calculated savings amount or effective discount amount by plus or minus 10 percent.”

Differences arise in the crucial metric of airline quality of service index (QSI) or fair market share (FMS). Used interchangeably, the terms represent the market share an airline would expect in a given citypair, based on its seats and schedules. Other weighted factors include departure and arrival times, nonstop versus a connection, network strength, aircraft type and so on. Airlines have their own ways of calculating QSI/FMS. So do some consultants. Egencia claims an advantage by leveraging the vast Expedia benchmarking database. Others, like CWT, buy FMS data from Sabre.

To help with benchmarking, ARC is working on a new data product for corporate buyers called the City Pair Analysis Report. During sourcing projects, users would request information on a specific city pair and ARC would return a report. Details include capacity and fare trends by class of service and carrier, reflecting factors like advance purchase period and nonstops versus connections. Big companies can ask for custom reports covering many city pairs.

Confronting Complexity

Airlines have sophisticated yield management systems and use different approaches to craft corporate deals. They have disparate airline booking classes and nuanced pricing terms. Despite domestic industry consolidation to fewer competitors, contracting isn’t simpler. When including international routes, deals with several joint-venture airlines basically are the only choice. Those are more involved than the single-carrier agreements of old.

“Making sense of booking class reconfigurations and realignments” is particularly challenging now, said Raddatz. The AA-US Airways merger and other fare restructuring around the industry are to blame. She said the most critical element of CWT’s new proposal analysis model is “fare mapping” to properly compare competing offers.

Sometimes flat fares play a role. And sometimes airlines can get very granular, making offers for various fare basis codes or ranges of specific flight numbers. They constantly shift around aircraft, adjust alignment with alliance partners and mess with fare classes and buckets.

“In larger, multinational programs, the details of all this are so complex that nobody can just do it in their own,” said TCG’s Rogers. “That’s why everybody uses some sort of technology.”

The technology can be expensive. Its application usually is wrapped into the overall sourcing engagement. Purveyors declined to disclose pricing.

Princeton’s Shumate said such sourcing tools are “overkill” at the midmarket level. Because of the cost, smaller programs often make do with basic tools like Microsoft Excel and Access, despite limitations.

Even sophisticated sourcing tools can’t address all of the current market’s complications. “There is never going to be a tool that is 1oo percent accurate” in interpreting contracts, Raddatz said.

Advito’s Benoit cited challenges related to taxes, surcharges, ancillary fees and changing traveler behavior. “Today there is no air sourcing tool provider in the market that can offer all capabilities required for an optimal output for a corporate client,” he said.

Yet, “it is not all about technology,” Benoit said. Human expertise still makes the difference.

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American Express Must Tell Merchants They Can Openly Favor Competing Cards, And Soon

[UPDATE, Dec. 22, 2016: The U.S. Department of Justice last month filed a petition for a rehearing. It said the appeals court’s reversal relied on “the mistaken belief that [antitrust] principles cannot properly account for the interdependence” of the two sides of Amex’s platform, merchants and cardholders. Several parties have since filed amicus briefs.]

[UPDATE, Sept. 26, 2016: A U.S. appeals court reversed a district court’s ruling that had found American Express’ anti-steering clauses illegal. “This means consumers will be able to choose how they pay and our cardmembers will not be discriminated against at the point of sale,” according to an Amex statement. “Our non-discrimination provisions in our merchant contracts remain in effect, just as they did before the trial court issued its injunction in February 2015.”]

[UPDATE, Jan. 8, 2016: Amex appealed the district court’s April 2015 decision. The United States Court of Appeals for the Second Circuit on Dec. 18, 2015 ordered a temporary stay of the district court’s injunction while it considers the appeal. That means Amex for now can again can enforce “anti-steering” provisions in merchant contracts. The appellate court also temporarily stayed “any and all matters related to this litigation.” In addition to the United States as the plaintiff, other involved companies include movants American Airlines, Starwood and US Airways; interested parties Alaska Airlines, Frontier Airlines, Hilton, Southwest Airlines and United Airlines; material witness JetBlue; and objector Citibank.]

Airlines and other travel suppliers are one big step closer to putting financial incentives on lower-cost forms of payment now that a federal judge has made a final ruling against American Express. Following Thursday’s order in the antitrust case brought by the U.S. government, Amex in relatively short order must inform the merchants that accept its cards that they can steer consumers to competing cards. Amex plans to appeal.

The court in February sided with the government, finding that so-called “non-discrimination provisions” maintained by Amex violate antitrust law. But U.S. District Judge Nicholaus Garafuis told the two sides to jointly propose a remedy. “Unfortunately, as demonstrated by the competing proposed [remedial] orders, the parties have reached only limited common ground,” according to court documents. The court decided to adopt “many of the proposals made by the government with respect to the proper scope of injunctive relief, with some exceptions, and with certain modifications.”

Amex had proposed that steering be permitted only when a merchant encourages a less expensive competing card. It also proposed that merchants should not have freedom to steer customers to debit cards. The court rejected both of those proposals. “Excluding brands of debit cards from the scope of the permitted steering would chill merchant steering and could render illusory the rights provided by the permanent injunction,” it wrote. However the court rejected the government’s proposal to allow steering to cash, checks and other forms of payment.

Amex has 10 business days (from April 30) to provide the U.S. Department of Justice and several states party to the suit its proposed notification to merchants. That notification will read in part: “A federal court has ruled that American Express violated the law by prohibiting merchants from influencing the payment form that their customers use. As a result of that ruling, you may now favor any credit card brand that you wish, by, for example, communicating to customers which credit card brand you would prefer that they use, telling customers which credit card brands are the most or least expensive for you, or offering discounts or incentives to customers to use the credit card brand you prefer.”

After obtaining approval from DOJ, Amex within five business days must provide the written notification to all Amex-accepting merchants.

The permanent injunction issued by the court also “contains thorough compliance provisions to guarantee that American Express meets its obligations and changes its perception of and response to steering by merchants.”

Starting three months from now, Amex on a quarterly basis must provide to DOJ a list of merchants that it no longer authorizes to accept to its cards — and reasons for those terminations. Amex also must provide DOJ and the representative plaintiff states 30 days advance notice of “any new or amended rule that restricts, limits or restrains how any merchant accepts, processes, promotes or encourages use” of other credit and debit cards.

Amex, however, can include in agreements language about how merchants that choose to practice steering must convey at points of sale (including mobile and online) that they also accept American Express. Amex may enforce rules prohibiting merchants from imposing surcharges and “disparaging” or “mischaracterizing” its brand. It also still can enter into and enforce agreements through which a merchant picks Amex as the only card it will accept.

Unless an extension is granted by the court, the permanent injunction expires in 10 years.

“As we have previously stated, we plan to appeal the court’s ruling because we believe it will not provide any benefit to consumers and will in fact harm competition by further entrenching the two dominant networks,” according to an Amex official.

Visa and MasterCard faced the same antitrust accusation leveled by DOJ but reached a settlement.

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