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It’s another tough negotiating cycle for corporate hotel buyers. Healthy demand and tight availability mean some hotels are even declining to bid. But it’s not the same story in all markets and there are several ways clients can attempt to mitigate rate hikes.
Buyers should have more leverage in markets that are adding lots of new rooms. New York still is the most expensive big U.S. city, but prices there have been dropping. Although it rose 1.9 percent in September, average daily rate fell 1.4 percent in the first nine months of 2015 versus last year’s comparable period, according to STR. That’s partly a result of new supply and the strong U.S. dollar that dampens demand from overseas. More than 13,000 rooms are now under construction in New York, accounting for about 10 percent of the total U.S. development pipeline, STR reported. Airbnb also is a factor.
“New hotel sales managers should be eager to get people into their properties and try to make a deal for the next year or so,” said STR senior vice president Jan Frietag.
When asked by analysts during a Wednesday conference call about rate pressure in New York, Hilton CEO Christopher Nassetta cited new supply and undisciplined pricing. “It doesn’t take many to not have discipline before everybody is forced to follow,” he said.
HRG director of global hotel relations Margaret Bowler noted differences across New York neighborhoods. “There have been so many new rooms in the Times Square area, so you are not going to expect rate increases there to the level of some other areas,” she said.
Miami and Chicago have the seventh- and eighth-largest pipelines of new rooms, respectively, according to STR. Nassetta put those markets on a list of “just a few select places that we’d have a little more concern.” Chicago next year “is probably adding more supply than we see in demand growth because of the convention cycle next year,” he said. In Miami, there “may be a touch” of downward rate pressure because of new supply “but demand growth coming out of Latin America has been quite strong.”
Similarly, “Seattle has supply growth in excess of the national average but demand growth has been phenomenal,” Nassetta added.
He also mentioned Dallas and Houston, given new supply and demand erosion in the energy sector. Per STR, there are nearly 7,000 rooms in Houston’s pipeline and, up 100 percent from this time last year, 3,500 rooms in the Dallas pipeline.
“You can overlay the decline in the futures oil price with hotel room demand and it’s basically a one-to-one match,” Frietag said.
He said to watch Nashville and Austin, Texas, where there is a lot of new room construction. STR also reported 4,000 rooms in the Los Angeles pipeline, up about 180 percent from this time last year.
For 2016, Carlson Wagonlit Travel expects the smallest corporate rate increases among major markets in Chicago, Houston, New York and Washington.
On the flip side, buyers again are in for a rougher go in and around San Francisco. STR said the San Francisco/San Mateo market has a mere 430 rooms now under construction. Corporate rates in the city and throughout Silicon Valley for 2016 could rise as much as 15 percent, according to CWT and Advito.
Overall, hotel executives this week said corporate negotiations are pointing to 2016 rate increases in the mid-single digits. Hilton’s Nassetta said they may come in a bit higher. “We are pushing our core customers generally across the country pretty hard whether in New York or wherever they might be,” he said. “If the broader economy continues to go, it gives us pricing power.”
Given hotels’ current market power, it’s no surprise that some are declining to bid on corporate business.
According to Advito’s 2016 forecast, “customers not receiving negotiated corporate rates are being moved to best-available-rate discounts. Marriott has taken the lead on this push.”
With record occupancy, Marriott CEO Arne Sorenson isn’t shy about trying to improve mix in North America by favoring “full retail-rate” business. “We continue to cull some of the lower-rated special corporate business,” he said. Marriott probably has been “as aggressive as any in the industry” with that tactic, Sorenson added. “To some extent we are taking some more risk in saying to those lower special corporate accounts that ‘we’re simply not going to take you and we hope you will come back to our hotels at rack rate.’ I suspect we’ll do some more of that next year.”
Egencia director of client services Nathan Brooks said, “This year, for the first time, we have seen hotels saying, ‘I don’t need to give you a negotiated rate if it’s fewer than 100 room nights in a year. I have 20 customers who are 10 times bigger than you. They will fill my hotel and pay a higher rate.’ ”
Bowler said HRG last year saw the beginnings of that trend, “and it has increased this year.” Even bigger accounts face the challenge. “Hotels only want so much business at that price point,” she said.
“Mathematically,” hotels may wonder why they should bother discounting, Frietag said, but that view is “short-sighted. Obviously the industry is cyclical.”
NYU professor Bjorn Hanson said it’s “overstating it” to suggest hotels aren’t as interested in discounted corporate business. “Most hotel executives really still like that business. It’s a good steady base year to year,” he said. “There is a little bit less emphasis but not enough that there’s been a change in the market dynamics.”
Declining to bid could mean declining to offer rates that wrap in amenities or have no black-out dates. Or it may mean declining to offer traditional fixed rates.
Egencia’s Brooks has seen that trend, “particularly among the bigger chains — you are going to get 10 percent off the best available rate or you are not going to have negotiated rate at all.”
Letting It Float
Buyers generally still are not fans of dynamic pricing, despite the expectation that it would streamline the loathed hotel RFP process. Dynamic pricing makes it harder to forecast spending. It’s anathema for procurement personnel whose compensation is based on savings. “How can a procurement person or travel manager demonstrate the savings?” Bowler asked. “With a dynamic model, BAR one day could be $400 and next day its $800.”
Some find value in dynamic pricing for smaller-volume markets where they can’t get favorable flat rates, if at all.
Though Loews Hotels and Resorts doesn’t insist on the model, vice president of transient sales John Hackett recommends it. “The market has so many players, it kind of keeps us in check,” he said.
Industry consultant Scott Gillespie also is preaching the virtues. “What should matter most is whether or not your travelers have access to a room at a price that is below market, and that the supplier will actually honor that price,” he wrote in a recent blog post that also promoted re-shopping tool TripBam.
TripBam and the like have gained interest for a few reasons. They can help buyers analyze purchased hotel rates to inform negotiations with hotels. Such tools also support spot buying, similar in some ways to lowest logical airfare policies. For hotel rates, corporate programs often communicate price caps to travelers. Pick whichever hotel you want as long as it’s below that cap. Maybe it’s a generic per diem. Or maybe there are market-by-market rate benchmarks.
“Fixed corporate rates may be less relevant, but they’re still important,” said Rick Wakida, global travel and card manager at DocuSign. The company’s hotel program isn’t very big, but a few preferreds in its key markets of San Francisco and Seattle make a big difference. “Rates in the market could be $400 or $500 and we are still under $300. And when you get the citywide events like Dreamforce [Oracle’s big San Francisco conference], we can still get lower rates.
“Certainly this year and in the past few years they have been less beneficial because of availability,” Wakida added, “but part of it is on the company to take advantage of rates negotiated.” That means stressing advance bookings whenever possible.
During a webcast last month, Advito said an “integrated” hotel program should include preferred properties, spot buying, rate assurance and chain discounts for secondary markets.
Hackett said Loews this year in some cases is offering brandwide discounts, something it hasn’t done before. He hasn’t been a proponent because it dilutes business at preferred properties picked for reasons beyond price. “The whole idea of a limited number of preferreds in a city goes out the window,” he said. But in the current environment, he sees potential value. “That is in part because maybe other hotel companies are walking away.”
“It is a cool and yet weird time for corporate hotel programs,” Hackett said. “There is so much that is changing on the execution and the mechanics of rate availability. It is without a doubt the most interesting negotiation season I have seen in the past 20 years. And it’s not easy.”
NYU’s Hanson said companies continue trading down: “They’re reallocating their portfolios of contract-rate hotels to include more upscale, select-service and limited service hotels in place of upper-upscale hotels and full-service hotels.”
Smaller chains and independents including boutique properties also can be viable options. “You don’t have to have 3,000 roomnights in a city to get the best rates,” Wakida said. “You may need that at some of the chains, but if you find a small hotel you can be their number one customer with only a fraction of the roomnights of a large company, which needs to go with a chain because they have so many roomnights.”
In addition to multiyear rates which can “minimize shocks of a large percentage increase and spread it out,” Hackett said Loews even has floated the idea of pre-selling room blocks to accounts. That might be particularly useful for high-demand periods, and he said there’s been at least some interest.
Average Corporate Cost Per Hotel Roomnight
Virtual payment remains a hot topic in managed business travel. The benefits for companies that employ non-cardholding travelers are clear. Not resolved, however, are the headaches associated with faxing card authorizations. Travel managers wonder why the hotel industry can’t get its act together. It’s not as easy as they would hope.
Choice Hotels has received praise for one initiative it’s testing, but that’s a stopgap. The real solution is in the works at the Hotel Technology Next Generation trade association. Its Virtual Credit Cards Workgroup in the spring released a related technical specification. Implementing this spec would flag for hotels that a given credit card number in a reservation represents a virtual card. It also would communicate associated usage rules. Currently, buyers can only hope that hotel personnel keep track of faxed authorizations and know what to do with them. If they don’t, the traveler or front-desk staff may have to track down the corporate manager or a travel agency representative.
“I have been using virtual cards for three years,” said Open Society Foundations global travel manager Chris Gremski. “The problem is that the fax is not tied to the reservation. The card image is faxed to the hotel after the reservation is made and is sitting somewhere in a a pile of junk faxes. I once had guests sitting in a hotel lobby for hours waiting for someone to resend the authorization. It’s a huge issue everywhere, and the hotels need to find a way to handle it.”
Stonegate Mortgage travel manager Monica Whitehead said, “I’m in fax hell all the time. It’s a nightmare.”
Mobile apps can help travelers if they’re trying to check in with a clueless front desk clerk. Travel agents or managers can make proactive phone calls to properties. Adelman Travel’s co-branded virtual card with U.S. Bank incorporates a “proprietary faxing and imaging solution” that records fax confirmations. Depending on how far in advance a reservation is booked, Adelman continues sending faxes to hotels at customer-defined intervals before arrival. “Then we can also incorporate manual follow-up,” the company noted.
As outlined by the HTNG group, the problem is that “there is neither a way for hotels to distinguish virtual credit cards (and other card not-present situations) from traditional ones, nor a systematic way to communicate the business rules, payment instructions, terms and conditions of using them. This results in inefficiencies, security and PCI compliance issues, declined payments, poor customer check-in experience and additional back-office processing.”
HTNG last month published a handbook on virtual payment for hoteliers that outlines some of the challenges. Now it’s trying to get the word out to all the players in the chain, and there are many. Payment companies have work to do. Global distribution systems are deeply involved and the booking systems that use them may need alterations. Hotels use a variety of internal central reservations systems and property management systems. Complicating matters, some hotel chains use multiple PMSs. And some PMS providers have multiple software versions in production.
In short, this is going to take some time.
“For the business travel community, there’s hope things will get better,” said HTNG COO David Sjolander. “But it will take a while because there are so many systems involved. All these systems need to implement our standards. It will be a gradual process. We can’t turn a switch and make it all work.” The good news is that it shouldn’t be too expensive. “These types of enhancements just involve adding a few fields,” said Sjolander. “These are sort of normal enhancements.”
Paul Raymond is director of strategic relationships for virtual payments company Conferma. “Creating a specification is a really positive step and means everyone will have something to work to,” he said. “The challenge is getting the people in that supply chain to commit to delivering that data throughout the process. If one of them doesn’t, the whole process may fall down.”
“Getting rid of the fax a high priority” for virtual payments firm CSI Enterprises, according to a statement from VP of travel and mobile solutions Juliann Pless. “We are working with our hotel partners to understand what needs to take place.”
Sjolander said the specification is new enough that he would be surprised if anyone has begun coding to it. He said the GDSs are the lynchpin. “All three major GDS companies participated in the workgroup, so I am hopeful that they will prioritize the changes into their development cycles,” he said. “However, I don’t have a specific timeline.”
The GDS companies offered some general statements.
Amadeus supports the standards initiative. “As with all industry standards, the initiative will only work if it is adopted by the industry as a whole so we would also encourage all participants – including property management systems, hotel chains and card issuers – to work on adoption,” according to a media relations official.
A Sabre spokesperson indicated that the company “welcomes the recent modifications in the hotel reservation messaging standards to identify virtual card transactions and will seek to enhance that process in future releases.”
According to a Travelport official, the company before HTNG released its specifications “developed a structured set of GDS codes that enabled agents to, amongst other things, flag the payment card in any booking, against any rate, as single use.” Travelport called that “a more efficient alternative to the industry resolution of free-text fields in the GDS booking, supplemented by what many consider an archaic, but ubiquitous, fax process as back up.” As with the standards, however, “in order to realize the full benefit of our development, hotels need to hand this down through their systems to the property, which will require development effort and resources.” The official called Travelport “aligned to the HTNG virtual card principles.”
The Choice solution requires some manual intervention. It utilizes a field in reservations records that was not designed for this purpose. Sjolander said he was told Choice plans to move to the HTNG specification. Choice did not offer comments by press time.
Get It In Writing
As they wait for solutions, corporate travel managers are “a whole lot angrier than the hotels,” said Sjolander. “There’s pent-up passion among that group.”
Some travel buyers include v-card acceptance requirements and lost-fax instructions in hotel rate requests for proposals.
“We’re working with customers as part of the RFP process,” said Conferma’s Raymond. “They ask hotels, ‘Do you understand what it is? Can you accept it?’ This is a relatively recent development. We have seen that there are business discussions taking place where if a hotel provider is not supporting that process, it’s being pointed out that they need to. We’re also seeing it included in corporate RFPs to TMCs.”
Additional info: Several large hotel chains declined to comment. HTNG workgroup members include the three major GDS firms; Hilton, Marriott, Starwood and some smaller chains; payment firms such as Travelport’s eNett, U.S. Bank, Visa and Wex; and hospitality tech providers including Infor, Oracle Hospitality, Pegasus Solutions and Tac GmbH.
Meritor global travel manager Jack Reynaert Jr. is a quintessential example of knowledge as power. For the Detroit-area drive train manufacturer, Reynaert established a highly insourced, no-nonsense program. The roads that led him there were a lot like his booking policy compliance — nearly perfect.
Seemingly the industry’s only second-generation travel manager, Reynaert has travel management in his blood. His late father was one of the founders of the Michigan Business Travel Association and a travel manager at Ford Motor Company for four decades. Junior was inspired to enter the travel industry. At the University of Michigan in the 1970s, he majored in economics and minored in geography and psychology. Nice combo for this gig.
His first jobs were in agency and airline reservations. Reynaert then worked as a travel manager for 10 years at Ameritech and another three at Kelly Services. He did a one-year stint at National Car Rental. But it was the more than ten years at Travelport, from 2000 to 2011, which really taught Reynaert “where the bodies are buried,” as he likes to say.
Learning the industry plumbing means Reynaert just knows things it would take a beginner days to research.
Now in his fifth year at Meritor, Reynaert takes full advantage of this history. He helps his firm with a do-it-yourself approach that frequently uncovers new opportunities. He continues to demonstrate 10 percent savings each year.
Part of financial shared services reporting to the CFO, Reynaert’s department runs the Concur Travel and Expense solutions, charge card, T&E policy, reporting, relocation travel and meetings. He manages on-site agents employed by Ohio’s Traveline Travel Services under a rent-a-plate configuration.
In the beginning, he said, “After six months on the job it was determined that to drive results we would have to bring more in house. All the revenue opportunities could cover the cost of the staff and on-site agents. We moved from a considerably outsourced program to a totally insourced one. Now we provide extended services, not just order taking. We’re doing many jobs the company’s admins were doing, at higher levels of professionalism.”
Additional services include pre- and post-trip auditing, booking tool tech support and risk management.
Reynaert said if he allocated dollars to the saved administrative time and improved service, the department would be a profit center. Even excluding them, it’s approaching break-even. This is because revenue from card rebates, VAT tax recovery, GDS incentives (Meritor holds its own contract), airline override commissions, car and hotel commissions and income from the Dinova dining program offset the cost of the rent-a-plate, agency salary and benefits, ARC fees, GDS fees, staff salaries and staff travel.
Reynaert’s latest initiative to centrally handle meetings management continues the trend of unloading travel-related tasks from administrative staff. Meritor on Sept. 1 changed its policy to require that off-site meetings for more than 10 employees (or any that require a contract) are handled by the global travel and meeting services department. Among other formal procedures, the new policy removes the ability for meeting planners to earn points for personal gain based on venue selection or other spending.
“When cost is not impacted, earned ‘Meeting Planner Points’ are to be applied to help offset future Meritor meeting expense and cannot be retained for personal gain,” according to the policy. “Attendees may still accumulate points earned resulting from their individual stays; however, selection of venues must not be influenced by personal preferences.”
Now that his department is handling meeting logistics, Reynaert said admins are freed up to work with their bosses and staff on content. “This enables them to have a more fruitful meeting,” he said.
Adding meetings and other components represents what Reynaert calls his “evolving span of control.”
A big part of Reynaert’s success is due to his ability to speak finance to the CFO. The company regularly reviews the ratio of travel spending to corporate revenue.
Reporting figures by business unit establishes “friendly competition” and earns senior-level support to shift behavior, said Reynaert.
He said if he had to put a finger on a single, best metric, it would be compliance: “You should equate a dollar amount for booking compliance. For us, a rough number is that every point of policy compliance represents $10,000.”
Reynaert said global travel booking compliance stands at 96 percent.
According to its annual report, Meritor employs about 11,000 people in 19 countries and recorded $3.8 billion in revenue during its most recent fiscal year.
At the beginning of the year, this publication laid out reasons why airfares may not follow dropping fuel costs. Nine months on, it’s clear they have, but it’s not all because of oil prices.
Demand growth this year isn’t as robust as expected, dragged down by sharply reduced volumes from the energy sector. There’s been some pick-up in overall capacity led by increases at Alaska, JetBlue, Southwest and Spirit Airlines. More seats to sell can mean lower prices to fill them. Cheaper oil gives airlines room to cut fares as a competitive tactic and, this year, still rake in record profits.
In an Oct. 13 report, J.P. Morgan analyst Jamie Baker partly blamed the “competitive bravado” of airline managements for “pricing the domestic product at levels below what passengers are willing to pay.” During a conference call last week with Delta, Baker said current industry revenue data would imply the economy is in a recession. “But the fact is, we aren’t,” he said. “And other consumer sectors don’t suggest this level of demand weakness.” So why is unit revenue down?
Delta chief revenue officer Glen Hauenstein said “close-in, short-stay travel and corporate contracted travel are all at record levels” but that Delta is “not obtaining the yields that we had in the past.” He declined to elaborate.
“Revenue performance in markets where low-cost carriers or ultra low-cost carriers are growing are clearly performing worse than in markets that don’t have that,” said American Airlines president Scott Kirby today on a conference call with analysts. “But a similar story is true in markets with a lot of legacy carrier growth.”
Kirby pointed out that low-cost carriers can impact pricing outside of the specific markets to which they fly. Pricing at Raleigh-Durham where there is low-fare competition, for example, affects pricing at Greensboro where there isn’t. Those airports are 55 miles apart “and customers have indicated a willingness to drive.”
In all, Kirby said, “north of 85 percent of domestic pricing is either directly or indirectly influenced by low-cost carrier pricing.” He said that wherever AA faces direct competition on nonstop flights, it will match competitor fares. AA execs hinted at new low-fare offerings next year that would match low-cost competitors while providing various optional add-ons. The airline discussed a step in that direction this week at an ARC event: paid seats via Sabre GDS channels.
United chief revenue officer Jim Compton said Thursday that overall demand has been lower than what the carrier expected at the beginning of this year. Even so, and leaving aside the energy sector where corporate client volume plummeted 35 percent in the third quarter, “demand is relatively strong,” he said.
Asked about softer domestic yields (a proxy for airfares), Compton noted “competitive pricing actions” and pointed specifically to Dallas, Houston and Chicago.
Southwest has been expanding quickly at Dallas Love Field, and Spirit Airlines is heaping on new service at DFW. That has pressured American, which also “has been trying to match Southwest’s fares” in Chicago, according to Cowen and Company analyst Helane Becker. During the third quarter, “the company clearly gave up yield (down 9.2 percent), in favor of load factor (up 2.2 percent).”
Yon Abad of CWT Solutions Group during a Sept. 30 webcast also mentioned Chicago — along with Seattle and Los Angeles — as among “a handful of markets that have growing competition.”
Alaska Airlines “has maintained its 55 percent share of the Seattle market even while competitive capacity grew by 13 percent” during the third quarter, according to Becker.
Despite third-quarter average fare and passenger unit revenue each dropping 4 percent, Southwest CEO Gary Kelly said Thursday that the carrier’s revenue performance was solid considering the “brisk competitive environment.”
He explained that Southwest for the past decade or so has relied less on fare hikes as it focuses on filling planes with more passengers, a strategy that can’t last forever. Southwest’s load factor increased 15 points during the past 15 years. It hit a quarterly record of 85.4 percent for the three months ending in September. “If we’re all lucky and energy prices remain low for an extended period of time, I can assure that we’ll continue to offer low fares,” Kelly said.
Looking ahead, Spirit Airlines in an investor update this month wrote: “Prices in the markets we serve are low, and we don’t expect that to change in the foreseeable future.” CWT and BCD Travel’s Advito expect 2016 corporate airfares in North America to be about flat versus this year.
The Global Business Travel Association this month updated its business travel inflation forecast (for all travel prices combined) to 0.5 percent for this year and 3 percent for next year. That’s down from its July forecast of 1.7 percent and 4.2 percent, respectively. “The collapse in global oil prices is finally beginning to impact consumers, particularly when it comes to air travel spending,” according to the October report.
Cowen’s Becker pointed out that ticket prices historically track to oil “with a one quarter lag.”
Published And Corporate Domestic Airfares Heading SouthData from Prime Numbers Technology, based on nearly 6 million roundtrip tickets purchased primarily through U.S.-based corporate travel agencies:
|Month||Avg. ticket cost|
2014 / 2015
|Avg. published fare
2014 / 2015
|Jan||$486 / $467||$761 / $715|
|Feb||$515 / $497||$817 / $752|
|Mar||$526 / $506||$812 / $746|
|Apr||$531 / $504||$757 / $745|
|May||$549 / $519||$776 / $763|
|Jun||$561 / $517||$791 / $728|
|Jul||$542 / $504||$800 / $730|
|Aug||$500 / $463||$737 / $648|
|Sep||$505 / $469||$748 / $653|
Additional info: Capacity remains a tale of two airline groups. Big Three carriers American, Delta and United expect their domestic capacity growth in the current quarter and next year to be somewhere between flat and up a few percentage points.
Southwest capacity should rise by about 7 percent this year and at a projected 5 percent to 6 percent rate next year. Kelly said lower fuel prices provide a “cushion to mitigate expansion risk” and help drive record profits. Alaska expects fourth-quarter capacity to jump 12.5 percent. JetBlue, which reports earnings next week, in July said its full-year 2015 capacity growth plan was unchanged at 7 percent to 9 percent. Spirit Airlines’ latest capacity guidance has its growth soaring at least 20 percent next year.
On the demand side, in addition to the energy sector, Becker noted declining government traffic and Delta president Ed Bastian mentioned lower volumes from manufacturing clients. On the other hand, Bastian cited “notably strong” demand in transcon and West Coast markets and “meaningful improvements” among clients in the healthcare, financial services and media sectors.
In terms of fares, auditing firm Topaz International reported lower average prices per domestic passenger name record among its clients for every month this year versus 2014. The difference was $123 in July, $137 in August and $42 in September. Prices for international itineraries also have been lower in most months this year.
According to ARC, average fares in September fell across the board. The average roundtrip airfare purchased via mega travel management companies, for example, fell to $707 from $731 in September 2014. ARC also reported some steep price cuts in particular city pairs, including Chicago O’Hare-New York city airports (down 24 percent year-over-year in September), O’Hare-Los Angeles International (down 20 percent), Atlanta-Orlando (down 20 percent), New York City-Miami (down 13 percent) and O’Hare-San Francisco (down 10 percent).
The Airlines for America trade group for September reported a 5.6 percent decline in domestic yield and a 3 percent year-to-date drop, based on data from Alaska, American, Delta, JetBlue, Southwest, United, US Airways and their respective regional airline partners. The U.S. Bureau of Labor Statistics for September reported that the Consumer Price Index for airline fares fell marginally, following sharper declines in July and August.
They have hinted about it before, and American Express Global Business Travel officials this week reinforced the company’s desire to own an online booking tool. The big question is, in what sense?
“We will have our own solution,” said chief sales officer Christine Ourmières-Widener during an interview Tuesday. She said the company fully expects to continue supporting a variety of tools, but “having our own solution moving forward is important.”
Undetermined is whether the company will build or buy a product. Partnering also is on the table, but not in the traditional fashion. Under different ownership, GBT two decades ago partnered with Microsoft and then nine years ago teamed with Rearden Commerce to offer online booking technology.
American Express Global Business Travel VP, digital traveler Evan Konwiser said he has something different in mind. “Partnership hasn’t been tried before in the full range of options — they were pretty vanilla,” he said. “There are ways to build better partnerships. The two levers we look at in a partnership are differentiation and some control. I care that it’s powerful, integrated, user-friendly and consumer grade. Whether or not we got there with [prior partnerships] is up for debate. We get client demands all the time and our ability to meet client needs is limited by a partnership with a company that has lots of other priorities.”
Acquiring an existing solution is a possibility. Options for the underlying technology aren’t necessarily limited to players in the corporate market. The company could, for example, buy and alter a more generic booking engine.
One challenge there is that few products are multinational. GBT has clients in more than 60 countries, said Ourmières-Widener.
Another challenge is that buying a product doesn’t get the acquirer out of the business of investing to maintain a system. The costs of such upkeep led Carlson Wagonlit Travel a few years ago to shut down its booking tool product. CWT ended up going with a partnership approach, first with Rearden (now called Deem) and later with KDS, of which it owns part.
Hiring developers to build from scratch could take a while and cost a lot. Hiring a development shop to do it is probably the better bet.
TripBam founder and president Steve Reynolds in the late 1990s led development of a TRX booking tool later acquired by nuTravel. Asked what it would cost to build a tool these days versus, say, 15 years ago or even five, Reynolds said it would be difficult to quantify but “infinitely easier” thanks to new web development tools, easier connections for content and greater availability of programmers. “It can be done in half the time with half the money and with a lot more functionality,” he estimated. “Take your time. Get it right. Hire a company with expertise to build and own the source code.”
Reynolds said a global travel management company “should really own their booking tool and agent desktop if they want to survive. The booking tool is the TMC and becomes the brand over time.” Egencia has both; Travel and Transport is building an agent desktop.
Other experts appreciated Konwiser’s reference to control.
“When we help customers try to choose a TMC, more often than not they have a substantial amount of online booking,” said GoldSpring Consulting partner Will Tate. “A big part of the TMC’s functionality is to support the booking engine and the usability. A lot of clients buy through the TMCs as resellers. So there’s that intertwined relationship between the TMC and booking tool. But when problems happen, there’s a lot of finger-pointing. The concept of being able to wholly own it is absolutely the expected response from the market.”
Travel Tech Consulting president Norm Rose said that “more than simply acquiring an OBT,” the GBT initiative projects “a need to own the entire customer journey experience.”
“The focus is likely on mobile as the entire market shifts,” he continued. “I believe they are likely to try to emulate the Roadmap platform which allows the corporation to choose the booking tool but syncs up with the traveler on every step of the journey, providing services during all steps of the process.”
GBT will offer a mobile app, and it may not be part of “a full stack delivered in one product” along with the OBT, said Konwiser. It’s also looking to improve telephony technology to better recognize callers from across its customer base regardless of configuration and location. This is all part of the “multichannel” vision laid out in December by chief commercial and technology officer Philippe Chérèque.
Rose and Tate also talked about the importance of controlling content.
“If clients want to book any supplier in the world, we need to improve this experience for them,” said Ourmières-Widener.
She referenced independent hotels in Europe, but a good example is playing out right now in the airline business, too, with Lufthansa.
“Where those segments go is a battleground,” said Tate. “Own and control those fulfillment transactions, gain leverage with suppliers and GDSs.”
“The other factor with owning the booking tool may have something to do with NDC,” said Rose. “Perhaps American Express sees that for some airlines, an NDC connection that bypasses the GDS may be necessary and thus by owning the booking platform, they can integrate both NDC and GDS content seamlessly. This fits well with the fact they have a customer profile that exists outside of the GDS that can work with any booking platform.”
Nearly a year on, GBT’s tech strategy is “getting a little more baked,” said Konwiser.
While some accounts are testing parts of the approach, execs recognize that clients can’t buy on promises.
“You’d better sell what you have, not what you will have,” said Ourmières-Widener. “We are explaining to customers what we’re building, but it’s important to not over-promise. It’s a long cycle. We are not saying we cannot offer solutions today.”
[UPDATE, Jan. 28, 2016: BCD Travel announced it acquired GetGoing, including its San Francisco and Kiev-based product and engineering teams. Co-founder Alek Vernitsky joined BCD as SVP, product strategy, reporting to EVP of supplier relations and global strategic sourcing Rose Stratford.]
About four in ten surveyed Canadian and U.S. business travelers at companies with travel policies said another person made their latest hotel booking. This may have been a travel agent, a travel arranger or someone in their company’s travel department. Even when travelers did make their own booking, half of them said they communicated with at least one person first. One in five said that person was a travel agent.
Based on April research among 537 business travelers conducted by Carlson Wagonlit Travel and the Global Business Travel Association, the results serve as a reminder that although self-booking represents the majority of activity, travel agents play a major role in arranging managed travel hotel bookings. So what’s new at that point of sale?
Global distribution systems have ongoing programs to provide more information and promote better choices. Now, relative newcomer GetGoing is gaining traction with its own software layer on top of the GDS interface. After signing and then expanding its arrangement with BCD Travel, GetGoing this week announced a new deal with Adelman Travel. The problem it’s trying to solve is similar in nature to a big issue individual travelers face when attempting to book lodging through corporate booking tools: limited ability to focus on the most relevant options.
Hotel “conversion” is an important metric for Adelman, said chief information officer Ivan Imana. “We have looked at a lot of products,” he said. “We did our due diligence and discovery, and are excited to deploy automation in the agent process to ensure travelers are taking preferred hotels and make sure that transaction is happening in the TMC environment.”
Adelman at year-end plans to roll out the software, which GetGoing calls Hotel Intuition. The graphical display offers “pictures, descriptions of the hotels, their rates and amenities, a map with client offices or their client locations and customer ratings, among other relevant items,” according to the companies. The platform “allows for greater customization in hotel searches as it takes into account the customer’s preferred hotels and corporate rates as well as the hotel preferences of the individual traveler.”
They said GDS displays don’t meet these needs, offering rate descriptions “without much ability to modify the search to the customers’ and travelers’ preferences.” Achieving that requires additional commands and clicks on the Internet.
After testing in Europe, BCD Travel in July said it would “more broadly” roll out the GetGoing technology. It echoed Adelman’s goal of stemming leakage and making greater use of clients’ preferred rates.
GetGoing CEO and co-founder Alek Vernitsky said the company is scaling up to handle $4 billion in hotel bookings next year. It has a handful of other TMC clients, which he declined to name.
As the GDS companies learned long ago, tweaking the agent environment can be a sensitive matter.
“Different things work differently for new versus seasoned agents,” said Vernitsky. “We don’t want to change the workflow. It’s the same workflow, but with the technology and integration so that the platform comes up automatically. Information about the client down to the traveler is searched on automatically for the agent, and now they’re focusing on the results rather than trying to find the content that is most appropriate for that client.”
The software “listens” for sell commands on airline GDS bookings and starts working in the background based on the needs of the trip. “We’re having the same conversations with the booking tools as to how we can integrate with their technologies,” Vernistsy said. The company has no plans to work directly with corporate accounts. GetGoing also provides technology on mobile platforms including BCD’s.
GetGoing charges clients a piece of any commissions, or can levy transaction fees. Adelman’s Imana said he does not expect to charge clients extra for the service. “It’s an easy story because anything that reinforces our or their negotiations is a win,” he said. Not to mention improving data capture for duty of care.
While the system can hook up with any source the client brings in, GDSs represent “by far” the greatest source of content, said Vernitsky.
ACT corporate travel manager Jennifer Steinke said these developments are overdue. “I don’t think the agent community is trained or encouraged to do anything beyond” basic bookings, she said. “They have to book as many as possible per hour. They need to be more service-oriented and interface improvement could make it work.”
Travelport has focused heavily on improving the booking experience for non-air segments. The company claims more than 650,000 properties in its system. But senior vice president and managing director for global hospitality, car and digital media Niklas Andreen said big numbers aren’t enough.
“With that breadth of choice, no one can fathom how to do that in a list format,” he said. “You don’t want all options. You have to get to relevant choice. We’re all kind of triangulating on the same thing. It’s a matter of identifying the different definitions of what’s relevant.”
Travelport is developing its Smartpoint interface to better recognize personal and corporate preferences, and location. Mapping and searching by address or corporate office are key components. Ratings and reviews are as well.
Amadeus North America head of corporate product and innovation Jay Richmond said the filters, mapping and graphics that the company is adding to its Amadeus e-Travel Management self-booking product also will be in the Selling Platform graphical agent interface.
What an agent needs, however, can be different from what helps a traveler.
“What we see most is that travelers who contact an agent have already done some research on the hotel side,” said Richmond. “We haven’t yet decided that the same kind of smart search based on what the system knows about the traveler would be effective in the agent environment.”
Part of the challenge is that many agents are not yet comfortable with the more graphical interfaces that enable some of these features. It’s also not clear how they can apply such information to a decision when they may not necessarily be on the phone with the traveler at the time. Many requests come in by email or web form.
Sabre did not offer information for this article. “Shopping for hotel rates can be tedious,” the company notes on its website. The Sabre Red desktop allows agents to find hotels on maps by proximity to specific locations. Agents can also pull information on “amenities, commissionable add-ons that make trips memorable and more than 275,000 hotel photos.” Sabre now is testing more comprehensive search capabilities with a shopping cache allowing users “to search by both property amenities and room type.”
Industry opinion on what it’s like to shop for hotels in corporate booking tools falls somewhere between cumbersome and atrocious. Inexperienced travelers or those with few preferences might call it good enough. Travel managers don’t. They want improvements, and some have given up on providers delivering them.
Not so fast, say developers including Amadeus, Deem, Egencia and nuTravel. They’re working on it. Meanwhile, Concur is focused on supporting off-channel bookings and improving the mobile experience.
A big part of what these providers are trying to do better is surface the most relevant options. Adding thousands of properties and more sources for rates helps. Next on the agenda are better filters based on personal history, corporate preferences and location.
Exploring this topic, Carlson Wagonlit Travel and the Global Business Travel Association in April surveyed 537 business travelers in Canada and the United States. Respondents said “finding the right hotel” for their needs was their top priority, but finding the right price and the ease of the booking process were close behind.
Sixty-eight percent of the respondents indicated their companies had a travel policy. Of those, 56 percent said they booked their own hotel on their last trip. Of those, 29 percent used a hotel website, 28 percent used a third-party site and 16 percent booked with their company’s online booking tool. At companies with more than 5,000 employees — where an online booking tool is a more likely component of a managed travel program — OBT usage rose to 36 percent.
CWT/GBTA found that two-thirds of the hotel website users were “very satisfied” with the experience. Third-party sites came in at 55 percent, while 44 percent said the same of online booking tools.
Major hotel brand websites tend to offer a quality experience both online and on mobile devices. How are managed travel providers keeping up?
Identifying The Problem
Booking hotels “has always been the weak point in online booking tools,” said SAS director of travel operations Richard Clowes. “It’s cumbersome. They could do more to make it easier and quicker.”
Corporate booking tools are “not as user-friendly for the traveler,” said Stephen Gheerow, manager of travel services at the Ford Foundation. “A lot of millennials want to do things themselves. They want to see where they’re staying, what part of town. It’s not as vibrant an information path as you can find in other tools. They’re very static: here are the preferreds, rates and room types.”
Tribune Media corporate travel manager Valerie Fender downplayed the importance of a pretty interface. Her issue is that rates are either not in the system or they’re too hard to find. “Hotel chains have taken action to encourage direct booking,” she said. “I don’t blame them. They don’t have to pay GDS fees.”
Other travel managers report that hotels are trying to get their loyal customers to book directly. They sometimes use special rate promotions. Access to content is an obvious issue. Broadly it’s been getting better as GDSs in particular bring in more properties (and rates). But what the booking systems do with all that content is equally important.
Advisory Board Company vice president for information systems Steven Mandelbaum said online booking tools haven’t cracked the best way to present hotel options.
“The targeting has never worked,” he said. “They show you the three preferred choices, or whatever your number is, and the traveler says, ‘I want X and the tool doesn’t give it to me.’ Offering a few choices is the same as offering a lot with a good sort. Instead of showing three, show a lot but sort them. My travelers are going to keep digging to find what they want, so you’re sort of forced to show them a lot that you may not want them to book.”
There are several issues, according to Egencia senior global product director Ian Knox. Travelers say the process takes too long. They need to hit too many sites to get the information they need. There are too many results, and they’re confused about cancellation policies and amenities.
One common metric is the attachment rate. That’s the percentage of airline reservations that also have a hotel booking attached.
“In my opinion the biggest challenge on attachment rate is the fact that travelers are well-trained and informed that you need to book air as far out as possible to get the best price,” said nuTravel chief strategy officer Rich Miller. “So they book their air but are not ready to book that hotel yet. They also know there are many hotels near where they need to be, so there isn’t that sense of urgency and they leave it and then never come back. They just end up booking it on their own.”
Amadeus North America head of corporate product and innovation Jay Richmond blames leakage on “policy lockdown.”
“Not enough flexibility for convenience and total cost is given to the travelers,” he said. “The tools are configured to drive policy, but they reduce visibility into the options that may be better for a specific trip purpose. Travelers are trained to look at sites that don’t limit their visibility into options.”
Deem senior director for product management Jason Kim agreed. “Business travelers have a lot of choice, and temptation to book outside the online booking tool,” he said. “We’re trying to combat that by ensuring the experiences are consumer-like, simple and clean while layering on policy and workflow so it’s not obtrusive or heavy-handed.”
Not everyone agrees on the exact problem, which is likely a function of the variety in business travelers. To meet a wider set of needs, some say, the tools must be more flexible.
Surfacing The Most Relevant Content
Egencia rebuilt its hotel interface and started rolling it out in North America in August. It’s moving into Europe and Asia/Pacific this month. The full client base will have it by year-end, according to the company.
Egencia demonstrated the new release at the GBTA convention in July. It includes better capabilities to zero in on the traveler’s specific destination using Google’s mapping service. Corporate office locations, for example, can be loaded in and then pop up after just a few letters are typed. Results change based on distance to locations but also corporate and personal preferences. Amenities like WiFi and parking are identified “immediately.” The system can behave differently depending on booking history and whether the user is a newbie or a brand-oriented veteran. Reviews from corporate travelers through TripAdvisor and high-definition pictures are easily accessible. Reminders to book a hotel when an air reservation is made can be included.
“You can find a hotel in under a minute,” said Knox. That’s after shrinking the pool of content from client negotiated rates, Egencia’s business rate program, parent Expedia’s rates and GDS rates.
The Egencia interface is slick, but other providers are talking up similar enhancements.
In its next phase, nuTravel is working to bring in the traveler’s history with a “previously stayed at” filter, among others like amenities and brand. Office and conference locations can be plugged in. “Filtering is becoming more and more important,” said Miller. The system already offers customizable, email-based attachment reminders. And nuTravel is gathering as much content as possible, including soon from Expedia.
Along with its partnership with Microsoft to integrate the Outlook calendar and travel booking, Amadeus e-Travel Management is testing “smart results” for air and hotel. This “dynamically” incorporates traveler preferences, past bookings and corporate policy to promote the best options to the top of results lists. Reviews and ratings from travelers in like communities help guide users. Other features allow searching by city and zip code but also street address or point of interest including custom locations (like corporate offices) using geocoding.
Focusing On Mobile
Asked how Concur is incorporating things like traveler history into its travel booking tool, a spokesperson provided an answer related to its mobile app: “Personalized hotel recommendations is new feature on the Concur mobile app that provides users suggested hotels based on their previous stays, their co-workers’ past stays and those that are popular with other business travelers. We also reference that with hotels that are preferred by their company as well as rooms that are within their policy.
“With the introduction of this feature we hope to give business travelers clear options on the mobile device that help them make an appropriate choice without a lot of scrolling, sorting and filtering,” the official added. “Travel administrators … will appreciate that this feature encourages travelers to book hotels that are popular with their co-workers, which should be advantageous to the efforts procurement professionals are making on negotiating better rates.”
Were it not for lots of customers who are cranky about its Concur Travel desktop booking solution, Concur could be forgiven for prioritizing it below TripLink and mobile. Mobile is the platform for growth, though, especially in hotel bookings.
Speaking on The Company Dime’s latest podcast, Carlson Wagonlit Travel vice president for emerging products and innovation Patrice Simon said mobile is taking off more quickly than online did in the 1990s. Just six months after CWT enabled hotel bookings in its mobile app, a few accounts were showing more than 15 percent of all hotel bookings transacted on mobile devices.
Throwing In The Towel?
Back to the desktop, Tribune’s Fender said frustration over the lack of easy access to rates or even information about rates — refundability, for example — is driving her company to “loosen the noose.”
“We want people to start their search on the corporate tool,” she said. “If they’re not finding a reasonable option, they are allowed to search off-channel. We’re doing best we can to utilize TripLink, which is not a total solution by any stretch but it will allow us to capture some of what is already being booked off-channel. I understand why people find the booking tool burdensome. We have enough legitimate reasons to insist air bookings be done on the company tool, but the argument for hotels has gotten weak and I just can’t support it.”
Jennifer Steinke is corporate travel manager at ACT, a non-profit. She’s using the FindIt tool from Short’s Travel Management to allow travelers to shop where they want and bring the result back to the TMC.
At the Ford Foundation, a Concur Travel client, Gheerow said the organization needs to consider the fact that travelers are getting special offers from hotel loyalty programs.
“As long as they know whether they’re booking on distressed inventory sites where they may be getting the room by the ice machine, it comes down to the cost savings,” said Gheerow. “If they use the credit card we can capture that data.”
Advisory Board’s Mandelbaum called the situation “fundamentally broken.” But he’s not ready to give in.
“I have to fight travelers over that to get them in the program,” he said. “Otherwise we don’t know where they are. I say if you ‘have to’ book outside, then you have to tell us about it. I want to run TripBam against it.”
The CWT/GBTA survey found that 56 percent of travelers who booked outside a company channel were required to share booking information with someone at their organization.
As ever, much depends on company culture, said consultant and former travel manager Debbie McKay.
“If a travel manager communicates well with travelers, and travelers feel the travel manager will listen to them, nine times out of 10 they understand why they shouldn’t book outside the program,” she said.
Indeed, human intervention remains a big part of the managed travel hotel booking process.
Houston – You’ve got employees at an overseas location during an outbreak of a nasty disease. Local authorities start clamping down. Quarantines set up by U.S. health officials mean some of your workers can’t re-enter the country, if they can even leave the scene of the outbreak. Maybe some of your employees contracted the disease. Maybe they’ve been detained. What do you do?
The Global Congress on Travel Risk Management here this week played out that scenario. The exercise placed attendees within a fictitious U.S.-based multinational firm operating in a fictitious Middle Eastern kingdom. The disease sprung on them was the very real Middle East Respiratory Syndrome (MERS).
Opening the conference, host Stephen Barth of HospitalityLawyer.com stated the key goal: breaking down silos between various internal departments like travel, legal, procurement, human resources and communications. That may be easier said than done during a crisis, which is why a thorough risk management plan already should be in place. That includes some fairly obvious components and several that most never think of.
There are plenty of considerations: minimizing financial liability, ensuring business continuity, protecting non-human assets like facilities and defending organizational reputation. Keeping employees safe, though, is paramount, especially as more companies grow into emerging markets throughout Asia, Latin America, Eastern Europe and Africa.
Travelers to those areas “may not contemplate or fully understand the risks when they agree to take on the assignment,” said UnitedHealthcare Global associate general counsel LaCosta Wix.
Organizations should diligently train employees about risks in particular locations, provide destination intelligence, clearly spell out terms and conditions of overseas assignments and stress adherence to corporate policies. Grant Caplan of Travel Consulted laid out a few best practices: require an employee’s mobile phone number before issuing airline tickets and require employees to respond to emergency text messages. He added that there can be “automatic communications from the TRM company — general email for certain countries, risk-oriented email for others, and an educational phone call for the highest-risk areas.”
Preventative measures also include implementing traveler tracking systems, making available an emergency hotline, establishing relationships with local U.S. embassy personnel and local law enforcement, recognizing U.S. and foreign duty of care laws and understanding insurance coverage.
Insurance regulations vary by country. Wix raised a few questions: “Does your existing coverage extend to expatriates or to employees on short-term assignments overseas? Do you have evacuation coverage in the instance of medical emergencies or security risk?”
Organizations also should know their responsibilities in bringing home employees who become injured or ill during an international assignment, and bringing their families to see them.
Avoiding illness of course is preferable. “A yellow fever shot costs $3 or $4, but what is the cost of bringing an employee home from Sierra Leone with yellow fever?” asked iJet senior security consultant Ed Clark.
Aligning suppliers from the outset is crucial. Service level agreements with and between travel management companies (including local franchises around the globe), travel risk management providers and others can sort out who is responsible for capturing and storing travel data. “Your TMC’s primary focus in support of your TRM programs should be on data quality and consistent delivery to a qualified TRM provider,” said independent TRM expert Charles Brossman.
TMCs oftentimes offer crisis communication programs, “which are nice to have,” Brossman said, but don’t exclusively rely on them. “Organizations must have their own crisis communications plans based upon your company’s risk tolerances, priorities and procedures.”
“Bear in mind that technology alone does not constitute TRM,” Brossman added. “Does the person trying to sell a TRM solution to you truly understand the discipline and can they holistically address each of the TRM3 [Travel Risk Management Maturity Model] key process areas? What is their recommended solution’s criteria for quality risk intelligence, and who is producing it?”
When working with suppliers of all sorts, attention to detail is helpful. For example, UnitedHealthcare Global vice president of global risk Charlie LeBlanc posed some questions organizations should ask of their air charter and evacuation companies. Understand the “safety background and culture” of those operators, he said. “You want case studies so you can talk to other customers that have been through high-risk situations. How will they communicate with you? What kind of scalability does your provider have? If these questions are not asked today they will be asked tomorrow when senior execs play Monday morning quarterback to the decisions you made. Be inquisitive. Push your providers to answer the hard questions.”
Back to the scary, hypothetical scenario: Cases of MERS are being reported in Aladdinia and all hell is about to break loose in the capital of Abu, where you have 1,450 employees on assignment.
Some early steps:
- Assemble your crisis management team and immediately contact your local country and security managers.
- Stop all non-emergency travel to the country. Determine who is en route and, if possible, contact them and change their plans before they embark on their last leg.
- Determine exactly which employees are there, including expats and travelers on assignment. Don’t forget support staff and contractors. Contact them through text messaging or other risk messaging services. Ask them to provide their status.
- Determine who recently traveled back from the impacted area so they can seek medical attention and/or be subject to a quarantine if necessary.
- Open lines of communication with U.S. embassy personnel in Aladdinia.
You then find out that five of your employees are infected. The United States has capped the number of infected citizens allowed back into the country. What now?
- Work with U.S. government officials to see how many of your employees will be allowed entry. For those that are, arrange with local ground transportation providers and security personnel to move them to the airport from which your charter or evacuation provider is operating.
- Arrange medical care for them when they arrive in the United States. Maintain communication with employees’ families.
- For those not allowed re-entry to the United States, determine if a third country with sufficient medical care is an option. If it isn’t, work with embassy officials in Aladdinia to ensure the best possible in-country medical treatment.
Authorities in Aladdinia use cell phone signals to track all foreign nationals and place them under house arrest. Two of your employees don’t comply with the order and are jailed.
- Message employees that they must comply with local authorities.
- Regarding those detained, your legal team should be identifying any breaches in international protocols.
- Ask the U.S. embassy to intervene.
- Interface with other private-sector companies facing the same situation. They are a resource. In such circumstances, competition takes a back seat to cooperation.
- Identify other ways in which your suppliers can help. Their capabilities may extend beyond the services for which they were contracted.
- Update all in-country employees with information as it becomes available. Explain symptoms to watch for and complications from pre-existing conditions. U.S. health information privacy laws (HIPAA) may be a complication, but not necessarily.
- Guard against “incident management fatigue” by creating sub-incident groups to handle components of the crisis.
In addition to the immediate health and safety concerns of impacted employees, organizations must consider knock-on effects. “If travelers lose confidence in your ability to protect them,” LeBlanc said, “they’ll start saying no” to assignments in high-risk areas.
These courses of action don’t represent an exhaustive list. The more advance planning, the better off you’ll be in this type of situation.
- Being a leader means making tough decisions and delivering bad news to senior executives.
- Have multiple plans in place, because Plan A won’t always work.
- There’s a standard health app on iPhones. Users can input some of their medical information which is accessible to those without passcodes even when the devices are locked.
- Government websites provide lots of information, but they can be “subject to political winds,” said Steve Cocco, president of Security Strategies Today. “So don’t rely on them.”
- LeBlanc pointed out that due diligence with suppliers goes only so far. “Some people think they have contractually put that risk back on suppliers,” he said. “Case law doesn’t support that. Throwing a contract out there does not and will not release you of that liability.”
Purchasing consortia are big in the higher education space. Some have been around for a while and others are relatively new. When dabbling in travel, car rental contracts seem to be an entry point. Now, there are agreements covering hotels, travel agencies, T&E software and visa processing services. There’s even a rare consortium air contract in play. Collegiate purchasing collectives are looking to do more.
Colleges aren’t the only entities that band together for travel procurement. Some not-for-profits do it, as do some state governments and private-sector companies. The rationale is simple: the sum is greater than the parts when it comes to leveraging volume and realizing cost savings. But it’s also about finding process efficiencies, pooling resources and sharing best practices. For suppliers, working with groups has similar benefits, and exposes them to more business that they otherwise might not have pursued on an individual basis.
In higher ed, joining a consortium may help institutions apply analytical rigor to their finances, get better insight on travel data and actively manage the category for the first time.
“The trend in higher ed has been to engage with the procurement office much more than 10 years ago and the procurement office has gotten much more involved in travel,” said John Anthony, owner and CEO of Anthony Travel, a travel management company serving universities.
Being part of a consortium raises some natural questions on fiefdoms. Speaking during a Society of Collegiate Travel and Expense Managers conference last month, Enterprise Holdings regional sales manager Cathy Barthel said some travel managers “are not sure how to react” to consortia opportunities. “Some feel like they are giving up control that they like to have or some of the value around their job is eroding or disappearing,” she said. “But if you recognize that you are not big enough to get the best deal and can get together with others, you are able to bring some value. This happening in business, it’s happening in the hospital and medical community and seems to be happening on college campuses.”
The University of Washington is part of the Fore group of non-profit travel buyers. Pete Crow, a travel specialist at the school, said “it’s not an act of defeat” to seek assistance from peers. “It’s a sign of synergizing. The airlines are merging, maybe it’s a good idea for us to merge too. We’ve taken that approach to some of our better relationships.”
Also speaking at the SCTEM conference, Crow explained how travel managers at Fore members each handle one aspect — maybe contracting with airlines or car rental firms on behalf of the organization. He looks after hotels. InterContinental Hotels Group is a contracted supplier. “I don’t have to spend 20 hours a week working on A, B and C because I have very competent people handling it very well,” he said.
Crow later told The Company Dime that UW historically hasn’t had a big presence in developing countries. Joining Fore means he can “collaboratively troubleshoot with several of the industry’s top travel minds when it comes to emerging markets, as well as contemporary travel challenges.”
Fore isn’t the only collective in which UW participates. Crow noted that “the higher ed travel vertical is coming up with a number of solutions at the state, local, regional, national and athletic conference level.”
E&I Cooperative Services, a nationwide not-for-profit sourcing group with 3,700 members throughout the educational community, has started working on travel contracting. It’s got deals with Wyndham, Hertz (along with subsidiaries Dollar and Thrifty), Enterprise Rent-A-Car (and subsidiary National Car Rental), PanAm (a travel agency) and Concur. The organization also has a deal for the American Express Corporate Purchasing Card.
Gary Link, senior vice president of contracts and consulting, said E&I now is “researching the feasibility of going much, much deeper.”
Beyond The Big Ten
As it is elsewhere, a big challenge in collegiate travel management is “getting your arms around the dynamics of the spend,” said Jeff Oberg, associate director of operations at the Committee on Institutional Cooperation. “What is all the data saying in terms of your destinations, roomnights, etc.?”
CIC consists of The Big Ten universities and the University of Chicago. The organization was born in the 1950s; the purchasing component came about around 15 years ago. Travel started with car rental. Oberg said the current CIC deal with Enterprise/National is “a big one,” with 12 of the 15 member institutions using it.
It’s how Enterprise got into the consortia game. National had the Big Ten contract when Enterprise acquired it. From there it began exploring other groups and signed a deal with hospital consortium HealthTrust.
“Digging into the space led us to realize we can provide a tremendous amount of value to the members and probably find a new way of getting us a bunch of new business as well,” said David Heywood, Enterprise assistant vice president of business rental development. He explained how a menu approach helps when working with multiple customers under an umbrella agreement. Insurance needs, for example, will vary. In return for preferential pricing, Enterprise nowadays asks for marketshare commitments.
Meanwhile, CIC also works with hotels to extend local agreements signed by member institutions. This year it completed a solicitation for expedited visa processing when it selected CIBT.
The group has discussed collectively sourcing TMC services, but hasn’t pursued the idea. It’s a tricky proposition. Members of travel purchasing consortia have disparate policies, politics, management approaches and needs. That requires varying agency configurations.
“How do you put something in place that can appeal and apply to all the members, yet still have the flexibility that is needed to match the needs to the solution on any given campus?” asked Anthony. “That’s the challenge.”
New York-based TMC Altour in 2012 inked a three-year deal with Bowling Green State University that stipulated pricing terms be made available across the Inter-University Council Purchasing Group of Ohio. That organization has 88 members across the state, including state universities, community colleges, technical colleges and private educational institutions. According to Altour senior vice president of sales Doug Payne, only Ohio University and Miami University in Oxford, Ohio jumped on.
It was Altour’s first foray into consortia contracting. When the deal expired this summer, Altour negotiated new, individual agreements with Bowling Green and Ohio University.
In terms of more consortia work in the future, “if an opportunity comes about and it’s structured correctly, we’d certainly purse it,” Payne said. “We learned a lot.”
At E&I, PanAm Travel secured a contract “based on their ability to customize for the institutions,” Link said. He acknowledged that fewer members than expected make use of it, “but it is continuing to grow.”
E&I has a new TMC solicitation scheduled for the first quarter of next year.
Members seem more attracted to a deal with Concur. “We are getting more and more institutions that are interested in managing their travel more effectively,” Linked explained. “The expense management aspect of that is very critical to gain that knowledge, to consolidate and to understand where their travel dollars are going.”
On hotels, Link envisions a rate category for higher education that is similar to a AAA rate. “You go to a Hilton or a Marriott site and they have E&I rate,” he said. “That would be my future goal. I am not sure we can make it happen.”
A Rare Exception
Cindy Shumate is Princeton University’s travel services manager and a veteran of corporate travel. She, too, said purchasing consortia can help college programs understand their travel data.
“If you don’t know on which airline you are spending money, it all goes into a big bucket called airfare,” she said. “That’s not helpful when you are trying to negotiate with specific carriers or for specific routes. For some universities that don’t have a managed program, once you join the consortia contract it helps you measure your data. Everybody in the consortia still gets separate reporting, so you still have visibility into your piece of that larger contract.”
Princeton is getting in on an airline contract with the Philadelphia Area Collegiate Cooperative. “Our participation raises the volume and challenges a certain carrier to go back and sharpen their pencils on what they offered,” Shumate said. “I would like to see them offer a deeper discount so in the booking tool they are more competitive.”
Established in 2000, PACC has about 20 member institutions. Drexel University is one. Debbie Rizzo is the school’s procurement services director of diversity, p-card, travel, expense and external relations. At the SCTEM conference she said the group sourcing contract with Delta Air Lines “is just unbelievable” and “we want to do more.”
Delta’s involvement is interesting. U.S. airlines typically don’t agree to deals with multiple entities. They don’t focus narrowly on volume. With their thin margins, the quality of that volume matters (read: higher yield). Accounts often must prove they can manage their travel, perhaps through strong policies. Corralling multiple entities with diverse policies and geographic travel patterns isn’t an attractive model to most carriers.
Southwest Airlines’ multi-state government program was a rare exception. The carrier doesn’t seem interested in others. “We always look at opportunities on an individual basis,” according to a spokesperson.
Fore has deals with two foreign airlines but hasn’t approached any domestic ones. Members are happy with their existing unilateral relationships.
For other universities, “it goes back to the challenges of understanding what the spend is and how much control you have over it, and being able to channel the spend through the agreements that you actually source,” said CIC’s Oberg.
Link contrasted air sourcing with car rental. “We’re able to obtain car rental data easier from universities which we then can apply to negotiating discounted rates, and car rental companies are more open to negotiating with a consortium,” he said. “Airlines haven’t been – unless you want to buy inventory, and we’re not interested in doing that.” But he is interested in citypair deals with airlines. “We just don’t have the data right now to do that to such specificity,” said Link.
Additional info: With roots back to the 1930s, E&I Cooperative Services claims to save members $200 million annually with “best-in-class competitively awarded contracts, electronic procurement platforms and expert consulting services.” Based on 2014 activity, it returned to members about $3.5 million in “patronage refunds,” determined by a member’s annual purchases. Link said the consulting group “from time to time” gets involved in travel. That may mean help with policies, processes like approvals or expense management. He noted that next steps for E&I include exploring bus and air charter opportunities for collegiate athletics, limo services and potential cooperation with the likes of Uber and Lyft.
The Committee on Institutional Cooperation encompasses $77 million in consortia spending across 28 active contracts. The current deal with Enterprise/National covers both business and personal use. According to CIC’s website, projected savings exceed $1.2 million a year more than a previous agreement.
The Massachusetts Higher Education Consortium is open to various education and not-for-profit entities in New England. It claims that members in 2014 purchased $162 million worth of goods and services via more than 50 MHEC contracts. Those include travel management from PanAm Travel, vehicle renting and sharing through Enterprise/National and deals for charter transportation and airport parking. According to the MHEC website, the procurement staff on average spends 480 hours per bid. “If each member school bid all of MHEC 57 contracts individually, each school would need almost 13 full-time procurement and purchasing staff.” MHEC primarily is funded through a contract service fee paid by suppliers based on how much is purchased through the collective contract.
Delta did not respond to requests for information.
[UPDATE, Oct. 9: Amadeus statement included. An Oct. 12 BCD Travel statement is here.]
Travel and expense management providers don’t expect drastic changes in response to the European Court of Justice’s annulment of a key EU-U.S. data privacy accord. The data will still flow. But they’re attentive to these and similar developments, and thinking about where they may need to stand up new servers.
Invalidated on Tuesday, the Safe Harbor pact for 15 years has enabled participating companies — now more than 4,500, according to the Wall Street Journal — to legally transfer data on European citizens to servers in the United States. European Commission and U.S. negotiators already were working to replace the agreement. It appeared inadequate following revelations in 2013 of private-sector collaboration on U.S. National Security Agency surveillance. The court ruled compliance with the agreement does not adequately protect private information of European citizens on U.S. servers. Now national data privacy regulators in EU states have authority.
This means businesses and other organizations need to evaluate internal employee data going across the Atlantic and potentially update contracts that address privacy based on Safe Harbor.
Safe Harbor isn’t the only framework for legal data sharing. Companies can seek individual consent. Data protection agreements also can incorporate the EU’s model contracts. Microsoft last year included compliance with the models as a standard part of its enterprise cloud services contracts. Salesforce now is working to incorporate the clauses.
Another option is operating under binding corporate rules. American Express Global Business Travel claims it is the only travel management company to do so. “While our BCRs mean that our data operations remain lawful, we are also investing in a data center in the EU to give customers even greater comfort about service, privacy and customer confidentiality,” according to a GBT press official.
Now that checking the Safe Harbor box in agreements covering European users means nothing, providers of travel management services may need to put money and time into new contracts to avoid fines or enforcement orders. Chris Babel, CEO of data privacy management company TRUSTe, told the Wall Street Journal that it may be too expensive for small companies to build their own European facilities or pay companies that already have them.
They must make that tech investment if they want to collect personal client info in Russia. The country’s privacy laws as of Sept. 1 require companies collecting electronic data on nationals to process and store that data within Russia. Moscow said it would be checking for compliance this year and named the “banking sphere, air travel, hotels, mobile operators [and] e-commerce” as focus areas. Air travel booking data apparently is excluded, as is international visa information in some cases. Apple said it’s building a data center in Russia.
Expense management provider Databasics is a TRUSTe client. Its customers wound up taking automated services offline in Russia as a result of the regulations. With much more business in the EU, that’s really not an option.
“There are a number of possible expedients, including contractual changes with affected customers, that can address the court ruling,” according to Databasics CEO Alan Tyson. “We also understand that EU and American negotiators have been working on a Safe Harbor update and that they are now accelerating their efforts. We will do whatever we need to comply with EU privacy law, but we do not see at this point that this is a crisis. Still, we are watching this closely.”
Expense firm Chrome River “generally” includes the EU model clauses in its agreements, meaning the ruling “will have little or no legal impact on our customers,” according to CEO Alan Rich. He said expense management firms already adhere to tough standards, such as the Payment Card Industry Data Security Standard.
Travel data specialist Cornerstone Information Systems is conducting a legal review and working to incorporate the model clauses in its client agreements. Companies like Cornerstone and Grasp Technologies already were considering new data centers within the EU and elsewhere, officials said. A Concur statement suggests the SAP-owned company is thinking about data localization: “As we continue to grow our data processing capabilities around the world, we strive to ensure we are able to meet the requirements of local laws and regulations.”
Radius Travel said it is studying the ruling. Sabre indicated it does “not believe there is any impact to our business.” Travelport noted its use of binding contracts and affirmed that “bookings are being processed with adequate protections for personal data and in compliance with European and national data protection law.” Amadeus said it does not expect a significant impact since its data center and headquarters are based in Europe.
Everyone’s watching closely.
“This ruling does bring a period of uncertainty for travel businesses until the Department of Commerce and the European Commission can agree and put a new framework in place,” according to Cornerstone CEO Mat Orrego. “For the moment, it’s about compliance and contracts and making sure there is consent between the parties as to what is happening” in terms of the frequency and nature of shared data.
“There effectively have been no decisions on what, if anything, U.S. companies need to abide by and we need to wait until we see what those are,” noted Grasp Technologies vice president Dave Lukas.
Delta Air Lines has taken its interest in building loyalty among young business travelers to the corporate level. A relatively new, sometimes aggressive discount program targets up-and-coming midsize and tech businesses. It doesn’t require marketshare or volume commitments to get started.
Sources said the deals run from 2 percent discounts off restricted coach to several more percentage points depending on the fare class and perceived long-term opportunity. Delta did not comment on requests for information sent this week and last.
Egencia director of client services Nathan Brooks said Delta has different programs for mid-market and tech companies. They offer tiered domestic and international discounts based on performance relative to Delta’s QSI. For some tech companies, he said, Delta is even providing dedicated check-in. “They understand from a cultural perspective that there is less of a mandated travel culture in those companies,” said Brooks.
Delta and Egencia jointly service a lot of clients in these categories. Separately, the pair in July announced integrated check-in for Delta flights on the Egencia mobile app.
For one “upstart” company, Delta made a “2 percent and 5 percent ladder offer,” according to a source. For another company heavy on international travel, the inclusion of Delta’s alliance partners is a bonus.
“They’re not measuring a goal, but you’re still watching where you are versus the market,” said a travel manager who asked not to be named because of non-disclosure agreements. “Their spin was, ‘We know your travel spend is not consolidated. We know some of this you’re not sure about. But we’d like to get in early.’ ”
One company’s share with Delta grew significantly under their initial contract. While the client has little in the way of mandates, Delta was winning by offering discounted fares in the company online booking tool. The company’s travel agents also promote the preferred airline and its partners for international travel, which they often still arrange.
It’s not unusual for airlines to offer generic, no-commitment contracts. Targeting growth sectors with a more attractive version dovetails with Delta’s recent opportunism. It also helps the airline compete along the Pacific coast. Delta is boosting capacity on its West Coast shuttle. Heady competition with Alaska Airlines in tech-heavy Seattle is well-documented.
Building lifetime loyalty in the airline business is huge.
“What is interesting to us is this emerging high-value customer,” said Delta director for specialty sales Norma Dean at last week’s Society for Collegiate Travel and Expense Management conference. She said the carrier has “deep” relationships with nine universities in the eastern United States as part of a loyalty and marketing program designed to position Delta as a “lifelong travel partner to future customers.”
“Commitment and loyalty really go a long way,” said TCG Consulting senior advisor Barry Rogers. When considering changes to preferred suppliers, for example, companies “have to put a lot of weight on who they have been with in the past. It takes a lot to move those people.”
Campus programs are nothing new. Their priority has ebbed and flowed during the airline industry’s financial history. Carriers in bankruptcy, for example, find it difficult to demonstrate a return on investment in long-term endeavors.
These days Delta is running quite the idea factory. Its performance guarantee, Edge program for “beyond-contract value services” and Corporate Priority reporting system all address the managed business travel market. According to an August client letter, Delta soon will launch an automated waiver tool.
Happy with its perceived strength in the travel agency and corporate communities, the carrier seems uninterested in potentially disruptive distribution initiatives like Concur’s TripLink and the International Air Transport Association’s New Distribution Capability.
Leesburg, Va. — It’s not uncommon to find travel managers who believe in Concur’s vision for TripLink but question whether it’s ready. Aggressive marketing has inflated expectations. Concur has acknowledged that building the service takes a long time. Maybe the mantra now should be “slow and steady” as the company ticks off delivery of key functions.
A couple of newly developed capabilities appeal to travel managers concerned about loss of policy and control. Reports show Concur Travel and Expense customers the savings missed when travelers booked directly on supplier websites without using the discounts their employers secured. Data from that same sort of reservations also is hitting the Concur Travel booking tool’s policy rules engine, and soon the agency mid-office, to potentially flag supplier-direct bookings that fail to meet policy or spending parameters.
Meanwhile, BookingBuilder, the web aggregator popular among travel agencies, will soon begin testing TripLink integration to relate online hotel bookings to GDS bookings.
“For the over 25 years that I’ve been involved in agency technology I’ve regularly heard from agencies about hotel bookings made directly by travelers,” according to BookingBuilder CEO Seth Perelman. “With the integration of TripLink and BookingBuilder, agents can finally get immediate visibility into these bookings. Whenever an agent displays a booking in the GDS, BookingBuilder queries TripLink and will show any outside bookings alongside the GDS display. This visibility will allow agencies to manage these bookings, better serving their customers, and integrating these bookings into the various agency processes that corporations rely upon.”
Speaking on the sidelines at the Society for Collegiate Travel and Expense Management conference here this week, Concur director of supplier services Tom Wilkinson said the company’s new reports can help clients quantify leakage costs recoverable by using TripLink. “You spent this much booking direct on those suppliers last year, and you have an average discount of x percent, therefore you will start capturing all that savings on all those bookings that are still going online,” he said.
It’s an issue that plagues travel management, especially at institutions of higher learning. Maybe TripLink is the solution, but not all suppliers are participants.
During the conference, Georgetown University’s Aliz Agoston took a Delta representative to task over the gap. “Through the TMC we spend about $300,000 with Delta, but if I look on the card the spend is over $1.3 million,” said Agoston, director of policy, systems and administration in the university’s Office of Financial Affairs. “How can I capture the other $1 million? We are trying to enforce people to use our contracts and go through the TMC. If they decide they want to book that particular flight on delta.com instead of going through the TMC, from my perspective I don’t care. It’s money I am spending with you.”
“I’ll throw that back at you and say we can’t drive compliance under your roof,” said Delta director of specialty sales Norma Dean. “Our university contracts are modeled after corporate contracts, where if you don’t have compliance you don’t get a contract.”
A preferred airline wants to see that an account can manage its travel and direct share. The more it can, the better the deal. That is harder to do outside designated channels.
“Delta and the other vendors need to look at things differently because there are technologies, and Concur has one, that are starting to allow negotiated discounts to be used on sites and data to be passed back to corporations,” said Wilkinson in response. “That’s the future.”
Importantly, when TripLink booking data flows through the managed travel channel, Concur officials said it also would feed the Prism reporting that airlines use to monitor corporate contract performance.
American and Southwest are among the other key travel suppliers that haven’t lined up with TripLink. United Airlines has, but implementation is delayed until next year. The carrier first needed to switch on its new website, which finally is live. Hertz, Hilton and Hyatt also are big business travel suppliers with no announced plans to be part of the program. But booking details on these supplier sites can be emailed into TripLink. The new reporting includes those and supplier-direct bookings coming through its API.
Concur of late has talked up the possibility of TripLink wrapping in policy after travelers make bookings. A recent press release referenced “insight into travel expenditures before they happen.” According to Wilkinson, for supplier-direct bookings “the record is transferred in real time as soon as the reservation is confirmed by the supplier on its website. The message is sent via API by this website to the TripLink API, which posts that and would, for example, create an e-receipt. It can be pretty darn fast and can be kicked out certainly within minutes, depending on the carrier.”
“The info from the API drops into the itinerary,” said Travel Incorporated senior vice president of business development Tony Peter during a Global Business Travel Association webinar on Thursday. “Then it’s a matter of capturing it in a report like any other exception and firing off notifications so you can understand this is going on, and give the travel manager the intel and ability to perhaps correct that behavior right away, as opposed to later when it shows on a reimbursement request for an expense report.”
Changing hotel and airline bookings when a preferred or otherwise cheaper option is available often makes sense. It’s reminiscent of post-booking quality control systems and re-shopping methods.
Unclear is whether the notion will sell in a travel management market accustomed to pre-booking policy controls. Corporate booking tools and agents typically inform travelers if they’re about to buy something out of policy. Sometimes they document the reason. Non-preferred options normally are subdued in some way. Travel managers especially at big companies may not be keen on constantly watching booking data and deciding how to take action on non-compliance.
Concur’s own travel manager, Ralph Colunga, explained during the webinar how he uses the data: “We provide a weekly update of all bookings for the next two weeks to EVPs. There are seven or eight categories and — this is new — we’re able to identify which bookings are [supplier direct] versus those made through our online tool or being serviced by our TMC. We can identify if someone is booking in a class of service they shouldn’t. We want our TMC partners to highlight and question questionable bookings and [send] that to us, so we can reach out to the traveler and say, ‘You’re out of policy.’ ”
The new reporting doesn’t address all the concerns about TripLink. Travel managers worry about opening the door to supplier site bookings after years of pushing preferred tools. They point to limited supplier participants. Where there isn’t a supplier agreement, they fear travelers won’t email their booking confirmations. Like many TMCs, some travel managers express uncertainty about revised travel distribution economics. They are hesitant to alter relationships with key partners like the global distribution systems.
Other travel managers say they do not have problems with leakage, particularly on air travel. Concur officials believe that in some cases, they don’t know what they’re missing. “Most companies are shocked by how much leakage there really is,” said Wilkinson.
TMCs and booking tools also offer comparison shopping, a valued service that you don’t typically find on supplier sites. Speaking at the GBTA convention in July, Concur EVP Mike Koetting acknowledged this is a “potential weakness.”
Nevertheless, sources called the new functionality a step in the right direction toward saving money and enforcing policy.