Monthly Archives: November 2016

Why It’s Difficult To Update Travel Agent Desktops

New York — It’s easy to make fun of the traditional “green” screens that travel agents use, but it’s really hard to replace them. Executives with large travel management companies deposed for the US Airways v. Sabre lawsuit, now in trial here, pointed to tens of millions of reasons.

“It was a money pit,” said BCD Travel EVP Rose Stratford of the company’s Renaissance desktop, abandoned in 2009 after swallowing more than $20 million. “We don’t make that much money to invest that much in one single product. We’d have to maintain the product, which we knew was going to be millions of dollars a year.”

Former American Express Global Business Travel and Carlson Wagonlit Travel exec Andrew Winterton said CWT shut down its Symphonie project for some pretty solid reasons: “It was negatively impacting the business in that our customers didn’t like it because it led to higher agent costs, because it was less productive than the GDS environments that we operated.” A Sabre attorney cited Winterton as saying Symphonie cost CWT $10 million to $15 million per year to develop and maintain.

At GBT, Winterton said, the similar TravelBahn Gateway project cost “on the order of magnitude of $100 million.” He said “we underestimated the costs, time and resources.”

Apollo terminal

A 1980s-era Apollo terminal / Image: Benj Edwards, Vintagecomputing.com

TMCs and tech providers have looked into developing new desktops in part so they can point them to various sources of rates and inventory. Clients often demand the capability to access non-GDS content, which every few years appears set to grow as airlines pressure distributors on costs. Even when things aren’t so heated, travel managers receive complaints that preferred systems are missing rates travelers see elsewhere.

Addressing this with technology requires multiple connections and the ability to “store, aggregate, develop and display any of the information you get from those different sources,” Winterton said in his deposition. But, he said, Amex “ended up creating a desktop that was single GDS and had limited content integration capabilities.”

Plaintiffs’ witness Steve Reynolds, a former TRX exec who now runs TripBam, in Nov. 17 testimony said Winterton’s description of the needs was “on point.” However, Reynolds argued that such a product could be developed for less money than Stratford and Winterton referenced in their depositions a few years ago. “TMCs aren’t very good at software development,” Reynolds said.

At TRX more than a dozen years ago, Reynolds led the creation of a graphical agent desktop called Selex. TRX charged Amex, BCD and Rosenbluth $350,000 each for it, he said. Reynolds claimed using the graphical user interface was just as quick as typing in a GDS text interface. When he left the company in 2003, Reynolds said, Selex was on about 100 agent desktops.

GDS companies have tried to introduce point-and-click graphical interfaces but agents, for the most part, prefer to keep both hands on the keyboard and whiz away with cryptic formats. A Sabre attorney here compared it with the stenotype machines court reporters use to type entire words by hitting multiple keys simultaneously.

They are no longer green and they don’t live on dedicated hardware like they did in the 1980s, but otherwise GDS screens look pretty much the same. Sabre has been trying to move beyond its “classic view” for two decades.

“We’re now on the third version of the graphical user interface,” said Sabre vice chairman Greg Webb, testifying for the defendants last week. “The issue is, professional travel agents are really fast. It’s not sexy-looking but fast is sexy to travel agents.” A graphical view now is an option on every Sabre desktop, said Webb, who plans to leave the company at year-end.

Also departing is Sabre CEO Tom Klein. He testified this week in part about his role at Sabre in the mid-to-late 1990s when he was responsible for Planet Sabre, the company’s first GUI for agents. Rolled out by 1999, he said, it was state-of-the-art. It won design awards. “The bad news was, agents didn’t use it much,” said Klein. “They didn’t find it efficient.”

Despite the challenges, Klein said, Sabre has tripled the investment in its agent interface (Sabre Red Workspace) since he took over as CEO three years ago.

Controlling the interface is a strategic imperative for Sabre, according to evidence in the case. The thinking is reflected in some of its policies for tech partners.

A February 2007 document indicated the company considers multi-source desktops to be a business risk. According to the document, such products could reduce Sabre’s ability to add value to suppliers and agencies, cut down on its influence and cause it to lose bookings.

A juror asked Reynolds why Concur — which had been demonstrated as a multi-source aggregator for travelers — could not be used by agents. Reynolds said Concur executive Mike Koetting at one point told Reynolds that Concur would like to build a multi-source agent desktop. However, Reynolds testified, “Sabre prohibits them.”

In his 2012 deposition, Koetting talked about how the Sabre authorized developer agreement prevents Concur and its users from searching elsewhere for content that exists in Sabre. When one of Concur’s many direct connections is used to book outside Sabre but the information is brought into Sabre to complete a travel record, Concur pays Sabre $3.75 (a fee that Concur passes to clients).

If Koetting commented during the deposition on the desire to develop an agent desktop, it was not shown in court. Citing the ongoing trial, Concur opted not to comment.

Airline direct connect developer Farelogix has had some success with an alternative to GDS desktops. The 150-employee company originated as a provider of consolidator rates, then pivoted to be a multi-source aggregator. Now it sticks to direct connect technology, which it provides to 17 airlines including American Airlines, Air Canada, Emirates, Lufthansa, Qatar and WestJet.

According to testimony by Farelogix CEO Jim Davidson, American Express in Canada beginning around 2007 and for about eight years used a graphical user interface provided in conjunction with Pass Consulting. It didn’t bypass Sabre, said Davidson, but rather supplemented GDS content with Air Canada’s direct connect and Via Rail info.

Davidson said he was surprised by American Express GBT exec Mike Qualantone’s comments about Farelogix. “I don’t believe his comments were valid,” said Davidson. “He worked with us in Amex Canada and helped us define some of that functionality. I find it shocking and don’t agree with it.”

BCD and CWT also were Farelogix users. Davidson said Farelogix was part of CWT’s Symphonie and that BCD also used Farelogix for hotel content. But when the Farelogix-Sabre authorized developer agreement ended in 2009, he said, the projects began to wind down. (Sabre grandfathered the Amex initiative in Canada.)

Nowadays, the Farelogix Sprk interface does not aggregate multiple sources, said Davidson. The demand for that went away, he said, after GDS companies secured full-content agreements with the big carriers.

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As Basic Economy Spreads, So Do Its Headaches

[UPDATE, Feb 3, 2017: We published new information related to this article here.]

[UPDATE, Jan. 19, 2017: American Airlines’ version of Basic Economy goes on sale Feb. 21 for travel starting March 1, first in 10 select markets. Like Delta’s and United’s, AA’s new bottom-level product is meant to provide more choices for customers and a defense against no-frills competitors. Those purchasing the nonrefundable fares cannot make any changes, get an upgrade or use overhead bins. They get seat assignments at check-in (or 48 hours in advance for a fee) and board last. Their one allowable carry-on bag must fit under the seat. Violating that means incurring a checked bag fee and “a $25 gate service charge per bag.” Some restrictions are less onerous or don’t apply to elite-level customers and eligible AAdvantage credit cardmembers, but AAdvantage program accruals are halved.]

Proving that a travel program offers all the fares a corporate traveler would want is a never-ending task. The proliferation of “basic economy” fares might make it harder. Yes, they’re cheaper than other fares, and corporate travelers may see that. But no, for various reasons those travelers don’t want basic economy, even if they don’t know it. As when web-only fares first emerged, travel management has to sort this out.

As Delta customers know, the stripped-down fare type is very restrictive. You can’t pick your seat. You can’t change the ticket. You can’t upgrade. Without proper loyalty program status, you board last. These fares don’t allow for combinations with other fare types or interline combinations with other airlines. Corporations can be price-sensitive, but they are usually not that sensitive. Because travelers don’t always recognize the implications, many companies configure booking tools to exclude the fares and direct travel agents to dissuade travelers.

United Airlines economy class

Image: United Airlines

United Airlines early next year will start offering its version of basic economy. It will be even more restrictive — customers buying this fare type can’t place bags in overhead bins (without sufficient status) and frequent flyer mileage accrual won’t count toward elite status. American Airlines is preparing a basic economy fare for early 2017. It hasn’t announced specifics.

During Delta’s third-quarter earnings call last month, J.P. Morgan analyst Jamie Baker explained how his employer “walled off” Delta Basic Economy. “Can’t see it, can’t buy it, fine with me, probably fine with you,” he told Delta execs. “I prefer to be kept in the upgrade lottery and have some flexibility on the day of departure.”

In answering Baker’s question about whether J.P. Morgan’s approach is typical, Delta president Glen Hauenstein said that it is for “a significant number of major corporations in the United States.”

Executive Travel Consultants indicated that many clients had asked that Delta’s Basic Economy not be offered to travelers. “ETC will treat United’s new basic fares the same as we do for you on Delta and if permission has been granted, we will turn these airfare booking options off on our online booking tools (Deem or Concur),” according to the company.

United president Scott Kirby this month said it’s a decision for each company, and that United would help block Basic Economy if asked.

The airlines say it is all about segmenting customers based on what they want and what they are willing to pay for. It’s part of the broader trend toward personalization.

In a Nov. 15 research note following United’s announcement, J.P. Morgan analysts wrote that United in essence “is raising corporate fares.”

Basic Economy “is increasingly proving anathema to corporations,” they added, partly because checking bags means more time in airports. That “will only further diminish the value proposition of this fare category for business travelers. The solution for such flyers is obvious: buy up to a less restrictive fare category.”

The Bill & Melinda Gates Foundation came to the same conclusion on restricted fares in general but for another reason. “We allow people to book upgradeable fares if they want to use their own miles to upgrade,” said global travel manager Pam Massey. “It’s easy for a traveler to assume they could get an upgrade without asking to book an upgradeable fare so we want to remove roadblocks.”

Massey said the hard part was quantifying the potential impact of allowing travelers to book more expensive fares that permit upgrades. “We took that dollar statement up to leadership and said, ‘If this is what you want, this is what it could cost. Are you willing to incur that?’ ” she said. “Implementing isn’t hard because you put it in the tool and on your request form. We are allowing it by request only, not automatically.”

In cases like those, program managers are looking out for what they think is in a traveler’s best interest in terms of comfort. In other cases, organizations warn travelers that they’d be on the hook for extra expenses should plans change.

Michigan State University, for example, keeps Delta Basic Economy fares out of its Concur Travel booking tool. “If you are price comparing, please make note of the fare types you are comparing,” according to an MSU travel page furnished by Conlin Travel. “Michigan State University will not be responsible for any lost funds from a traveler booking this option against our recommendations should a cancellation or change be needed.”

In a blog post, Christopherson Business Travel VP of operations in Alabama Jeanine Eissler wrote that travelers should spend their employers’ money wisely — but not to a fault. “As a business traveler who also assists companies in optimizing their travel budgets, establishing policies and managing travel programs, I have seen first-hand what happens when companies handcuff themselves to so-called ‘money-saving’ policies with excessive restrictions,” according to Eissler. “Unfortunately, the results can be paltry savings in exchange for trip flexibility, convenience and traveler satisfaction.”

Additional info: United will start selling Basic Economy fares in the first quarter of 2017 for travel starting in the second quarter. They will be available in select markets.

According to Delta, “Corporate customers desiring to suppress or inhibit Basic Economy Fares should contact their agency. Agencies with questions on the latest suppression capabilities provided by a GDS should contact their GDS provider.”

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Explainer: IATA’s One Order

Airline reservations and global distribution systems create passenger name records. Airlines issue tickets. Electronic miscellaneous documents account for ancillary sales. This multitude of records, ticket numbers and reservation numbers complicates revenue accounting and can confuse travelers. The International Air Transport Association is working on a better way, which corporate buyers and travel management companies may get a look at next year.

“All of that has never been simplified,” said Sebastien Touraine, head of IATA’s budding One Order program. “With e-ticketing, we just automated the complexity.”

One Order is a single customer order record, holding customer profile data, order items and info on payment and fulfillment. It’s early days in a multiyear effort. It would build on the group’s New Distribution Capability — itself a work in progress.

IATA touts benefits for airlines, their customers, travel agencies and various third parties. Touraine described the goal as “a single source of truth of what has been purchased, paid for and what will be delivered to the passenger on behalf of the airline.”

Sebastien Touraine

Sebastien Touraine, head of IATA’s One Order program

Like NDC, One Order is voluntary. IATA said airlines adopting it would streamline their back offices and “behave as true retailers.” Traditional network airlines and newer-age “ticketless” carriers would more easily interact. They could provide seamless service (think interlining). Touraine referenced airline groups like IAG, Lufthansa Group and Qantas that own both kinds of airlines.

Travel agents, in turn, would use a consistent process when booking any airline. That would bring about efficiencies.

Third-party tech vendors wouldn’t encounter “the constraints of legacy data and processes,” according to IATA. “All parties will follow this single process to service the customers throughout their entire product purchase and delivery experience.”

The bottom line for travelers is having a single document and reference number when dealing with suppliers. According to IATA, this would help avoid problems when changing itineraries, booking with one alliance carrier for a flight on another and dealing with flight disruptions.

One Order will jump off from NDC, which is establishing new data communications standards for airline offers. Airlines would host the One Order document. IATA said an airline could choose to apply One Order in non-NDC enabled channels. But to make the most of the new order management process, it recommends carriers deploy both — starting with NDC.

Paul Tilstone, managing partner of the Festive Road consultancy, described One Order as “a logical next step after NDC to take the notion of order all the way through delivery, fulfillment and revenue accounting.” Festive Road has helped IATA engage with the corporate travel community on NDC.

One Order is not a “super PNR” that pulls together all aspects of a trip regardless of sales channel. One Order encompasses only what an airline controls.

“We are cleaning the mess on the airline order side,” Touraine said. “For the rest, it is up to each supplier in the industry to have relationships with sellers the way they want. It is up to sellers to have super PNRs on top of airline orders. The super PNR would be a giant step for the industry, but the first baby step, at least on the airline side, is the fare and any [ancillary] items on top of that.”

IATA’s Passenger Services Conference last month adopted the resolution supporting the One Order framework. The organization has several groups of stakeholders addressing the issue.

Touraine said IATA learned a valuable lesson from NDC development: be more inclusive. The focus thus far has been on airlines and major providers of their passenger service systems. “Amadeus, Sabre and Navitaire have been participating in a task force from day one,” he said, noting that the first two also represent interests of global distribution system operators. “We did much more education up front as opposed to NDC.” He said IATA also is working with airline tech firms Farelogix and Datalex.

Moving forward, IATA also intends to engage with intermediaries. Touraine said work next year will focus on developing standard messaging between various players in the chain. That includes TMCs and corporate buyers. Pilot testing would follow.

Related

Explainer: IATA’s New Distribution Capability

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Upside Enlisting Travel Management Companies To Support ‘Self-Managed’ Service

[UPDATE, Feb 3, 2017: We published new information related to this article here.]

In the words of founder Jay Walker, Upside aims to convert unmanaged business travel to self-managed business travel. So why does the company have a website showing nine corporate travel management company partners?

Currently in beta, Upside sells customized air and hotel combo packages. Travelers earn gift cards for picking lower-cost options. The company says small businesses can shave as much as 15 percent from their travel expenses.

Upside is recruiting TMCs to help with what Walker called “a full-service travel buying alternative.” He said they would support “the small businessperson” without a managed travel program.

Yet, the Upside site describes something different: “a partnership platform for travel management companies, designed so you can effectively deliver Upside to your client base.” It talks about “capturing rogue travelers” and earning a “financial benefit when you introduce your clients to Upside.”

Upside's Jay Walker

Upside chairman Jay Walker

“All of this,” it continues, “and you can continue to provide reporting and duty of care for your clients with fully integrated trip data.”

The site initially quoted BCD Travel senior vice president Jennifer Townsend Walley on bringing Upside services to BCD clients. A TMC official said the quote has been revised because it “implied a connection between Upside’s offering and BCD’s customers which was misleading.”

Asked to clarify its involvement, BCD provided a statement attributed to Walley: “BCD Travel is both an investor and supplier to Upside. We provide Upside with agent support, including reservation changes, cancellations and fielding questions on gift cards. BCD agents assigned to Upside are called ‘Navigators.’ Because Upside sells directly to individual travelers rather than contracting with corporations, and doesn’t offer negotiated corporate rates, their offering doesn’t overlap with current BCD Travel customer needs.”

Other TMCs apparently on board to provide support to Upside include BCD Travel affiliates Activa Travel, Balboa Travel, Christopherson Business Travel, Fox World Travel and Ovation Travel. Also listed on Upside’s travel agency network site are MacNair Travel (an American Express Representative Network member), Omega World Travel and World-Wide Travel Associates (a Tzell Travel Group branch).

Christopherson CEO Mike Cameron said that because his agency is a BCD affiliate, he was asked to help advise Upside. “I saw this as an opportunity for us to gain some insight into a new model that is being offered to unmanaged business travelers,” he said.

According to Omega VP of information technology and data analytics Nadim Hajje, the TMC during the Upside beta is “providing some expertise and guidance” but not customer service.

Officials from Balboa, Fox World Travel, MacNair and Ovation said it’s too early to discuss their involvement. Activa and World-Wide Travel Associates did not respond to inquiries.

Speaking this month during The Company Dime’s Teleconference, Walker said: “We need to provide top quality customer service and top quality support. All those we have partnered with have helped us learn how to better manage business travel needs so that when we serve the small business customer they will get the same kind of service that now is only available through a TMC or through a disappearing breed of super travel agents. We plan to be the best service option for small business buyers and maybe even midsize business buyers.”

He noted that Upside will use call centers in the United States and the Philippines.

Will it be awkward working with some BCD Travel competitors when BCD has a minority stake in Upside? “No,” Walker said. “They have no access to our information. This is an open platform and we designed it to work with any travel supplier. We are happy to have them all.”

Upside officials declined to answer additional questions about the role TMCs will play.

Good Things In Opaque Packages

Whatever role that is, and regardless of exactly who the end users are, the product is packages. Upside isn’t selling any standalone airfares or hotel stays.

Best known as Priceline’s founder, Walker said packages haven’t taken off in corporate travel because available technology didn’t suffice. “Leisure packages work because the customer adapts to the package,” he explained. “In business, I have to be there for a 9:00 a.m. meeting downtown and need to be home by 4:00 p.m. There is no package for that. However, with big data, the cloud and the ability to do things instantly, I can now create a custom package for you and service it.”

He said selling packages would make Upside “the low cost provider” by obtaining “opaque discounts” from airlines and hotels. “The beauty of custom packages,” Walker said, “is that neither supplier has to reveal what their real component cost is.” This, he asserted, will “completely change how the bottom of the market is going to play the business travel game.”

Walker said a thousand hotels and more than a dozen major carriers established Upside relationships “because they want us to concentrate our business travelers in their” properties and airplanes.

In any given city, Walker said in a June interview, Upside partners with only a few hotel properties.

Asked then about his target market, Walker said, “I think it’s less about employee size and more about company philosophy. Some giant companies are unmanaged. Some giant companies are loosely managed. I think the majority of our customers will be between two and 20 people on the road, say $250,000 to $500,000 in spending. But that makes up probably about half of all business travel expenditures in the U.S. The big guys get all the press, and dominate the front of the plane.”

For its initial service, Upside lists dozens of domestic and international destinations. According to the website, “There are no one-way or multi-city trips (yet).”

Without “too many holes,” Walker expects to exit beta in the next month or two.

Upside would join a spate of business travel tech firms to recently launch with TMC backing. Atlas Travel and Technology Group and W Travel, for example, work with NexTravel. S.R. Travel Service partnered with TripActions. TravGroup supports 30SecondsToFly.

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Data From Price Assurance Tools Promise Power For Buyers

[UPDATE, March 10, 2017: FairFly completed integration with Travelport’s Galileo global distribution system.]

Price assurance has taken root in corporate travel. TripBam and Yapta, especially, have made serious inroads. Another airfare reshopping firm, FairFly also is building a business on travel price volatility. These specialists are compiling huge data repositories. For travel managers, this may represent newfound power. They can watch (and maybe influence) traveler booking behavior. In some cases they also can benchmark against peers and perhaps negotiate better deals with suppliers.

TripBam is tinkering with a hotel rate benchmarking tool for clients. Yapta announced enhanced airfare and hotel rate analytics. FairFly also furnishes detailed data to users. These purveyors say they strive to provide transparency for customers.

TripBam already offers a portal showing user activity. CEO Steve Reynolds said customers want more. In particular, they want to know how their hotel rates compare with the rest of the TripBam universe. The company now is preparing those comparisons, by market, by star rating and by individual property. Some clients are testing now and Reynolds expects wider availability next year.

A demo this month included data from 1,200 corporate customers totaling about 1.5 million records. Reynolds said there is no noise from prepaid or other heavily restricted rates that few corporate travelers use.

price assurance data

Image: Thinkstock

For example, the portal displayed 2016 info based on 12,500 bookings at four-star San Francisco properties. It showed how often TripBam found a rate lower than whatever client travelers booked (29 percent of the time). It also compared the average rate TripBam found ($306) versus the average negotiated rate among its clients ($356).

TripBam also can report which way rates have been trending by market and by property. To a limited extent, it shows where they are going (naturally, it doesn’t have as many bookings in the future as it does in the past). Data indicates where clients have negotiated rates that, for whatever reason, aren’t used. This may signal a last room availability issue.

“A lot of travel managers use our data in the negotiating process,” Reynolds said. The new sets of metrics “give the travel manager some ammunition to fight that battle. They want to make sure they have a good deal, one that is strong relative to the market.”

Users also can look at average rates by brand, day of week and advance purchase period. In general, Reynolds said, “the closer to check in, the lower the rate. It’s a systemic problem in the hotel industry. They are training their customers to wait to book.” That can get dicey in markets with tight availability.

TripBam’s analytics present a few other intriguing possibilities. One would give hoteliers the option to poach guests. This has happened on the airline side. Carriers have used data from global distribution systems to shift travelers booked on competitors. With TripBam, the analytics portal highlights travelers who are booked at hotel rates that are higher than the market average. Reynolds said hoteliers may be willing to provide a one-time “private rate” that is cheap enough to prompt a switch. He said one undisclosed chain is interested.

Another potential development — also familiar on the airline side — would make market share the basis of contracts. Reynolds said hoteliers want that but “have never quite known, by company, what the market share is at individual properties.” He said TripBam data can show those calculations by property and brand in a given market. The trick, Reynolds said, is getting buyers and sellers to agree on appropriate competitive sets. Location within a market matters, as does quality within a star rating. Both sides also must trust in the legitimacy of TripBam data. He said one major chain is considering it.

Yapta does both airfare and hotel reshopping. In September it announced enhanced analytics. Like TripBam, it claims data encompasses more than 1,200 customers. A premium level comes with customized airfare and hotel benchmarking. Chief product and services director Valerie Layman indicated customers can compare to peers based on booked room types — by specific hotel properties or chains.

The premium tier also shows pricing trends by market and class of service or room type. For hotel rates, Yapta can break down data on amenities. This enhanced reporting shows clients “whether they received discounts on Best Available Rate and/or were offered last room availability,” according to the company.

A standard part of Yapta’s service shows how “price tracking programs and bottom-line realized savings are performing against other customers,” according to Layman.

Franklin, Tenn.-based Community Health Systems is a Yapta airfare tracking user. Corporate travel services director Tamara Laurinas said she sees value in sharing data internally. “I have a department I report to for all travel savings,” she said last month. “I just hooked them up with the dashboard. They see what I see.”

Laurinas said the company’s annual air spend is about $9 million. Year to date it saved $143,000 reshopping fares. Thirty percent of the savings goes to her agency for administering the program. That’s Carlson Wagonlit Travel, a Yapta partner. “To me it’s like found money,” she said. Now the company is considering adding Yapta’s hotel reshopping service.

Education products company Pearson also is a CWT client that uses Yapta — for both domestic U.S. airfares and hotel rates. Travel manager Mitchell Stern described Yapta’s analytics as “tremendous” and “comprehensive.” He said he examines the timing and rate of conversions (how often savings opportunities are realized). By reviewing data on room and fare types purchased, he said he can check on traveler behavior.

Stern considered working directly with Yapta, but opted for CWT to manage the service in exchange for a cut of the savings. For re-ticketing to occur, he said, savings on Pearson airfares must be greater than the sum of the $200 nonrefundable penalty, the extra agency transaction fee and “a little bit more for good measure.”

Mitchell said the company has saved about $200,000 this year, or 2 percent of spend, “without actually doing anything.” He said sometimes Yapta finds airfares that beat Pearson’s negotiated prices. For hotel, Pearson is saving $125,000 this year, a little over 3 percent of spend.

CWT representative Paul Richardson said 11 percent of client bookings on the service trigger alerts. About half of those result in rebookings.

Egencia is among the other TMCs using Yapta technology. It’s now scaling up to offer domestic U.S. fare tracking for all clients. Once the service is in place, client travel managers pick which traveler groups’ bookings should be monitored. Egencia charges a fixed fee for each changed booking. The fee varies by client.

Michael Tribuch, Egencia director of supplier revenue and strategy, said savings has amounted to 1 percent to 2 percent. That’s based on the dollar amounts of tickets tracked.

He said clients access a portal to view details of each tracked passenger name record and various savings and conversion metrics. The latter includes peer benchmarking.

Like most other applications of Yapta tech, CWT and Egencia for now only are changing airfares for the same flight.

“Although agents make every effort to maintain the actual seat assignment, there’s no guarantee that will happen,” Tribuch said. “When an agent voids a ticket to rebook there is that moment in time when that seat may not be there any more. But I have not heard of a single instance of us losing a seat yet.”

At CWT, a dedicated team reviews client rules to make sure changes are appropriate. “If there is a new fare that would mean moving the seat, we keep them in like for like,” Richardson said. “Not aisle to middle, and not from the aisle at the front to the aisle at the back.”

Both Stern and Laurinas said they wanted minimal traveler inconvenience. In CHS’ case, airfare changes occur only during the 24-hour void window (when no change fees apply for most tickets). “Also, if they can’t get the same exact seats, we don’t touch the record,” Laurinas said.

Stern said there’d be too much “stress” in changing flights or hotel properties. “It creates anxiety and its not worth what we anticipate to be the savings,” he said. “We have had zero complaints, zero lost seats and zero customer service issues.”

Accepting Some Disruption

FairFly is different.

The Israel-based company began a few years ago as a consumer airfare reshopping tool. Since August it has been working with travel agencies and corporate clients. FairFly looks for better fares on the same flight and others. It also considers other airlines and flights from other airports. That’s a level of disruption to the traveler that Yapta thus far hasn’t pushed.

FairFly co-founder and vice president of sales and marketing Gili Lichtman said clients and their TMCs determine what is appropriate. That can be by department, employee group or even individual traveler. Maybe there are time parameters on changing flight schedules. Maybe alternative flights only should qualify when operated by preferred airlines. Clients may want changes only when they save a certain amount or abide by other policy rules.

U.K. TMC Business Travel Direct is one client FairFly has identified. Ian Ferguson, the company’s travel solutions consultant, advised against overly broad use of the technology. “If it’s the identical flight and just a difference of the spot market rate where nothing else changes, that’s a much easier sell,” he said. A bigger switch “is more complex and requires greater one-to-one contemplation with travel managers.” That means understanding the citypairs and airlines on which booked fares most often are beat during reshopping.

It’s not always about cost savings. FairFly looks for options that might have shorter flight durations. Lichtman said “a classic example” is when a nonstop flight had no availability when the traveler booked but seats later opened up. A change also may be based on comfort. Lichtman pointed to the disparity in the quality of business classes.

FairFly uses “patent-pending algorithms” and an internal data source to scan for options. Lichtman said using that data source cuts down on “hits” to the GDS. That reduces processing costs. She gave no details about it, and wouldn’t say whether FairFly built it or paid a third party.

When FairFly finds a more favorable fare, it validates availability in the GDS. (The company hooks into Sabre and is working to establish a connection with Travelport.) The TMC takes it from there. Once clients set boundaries, FairFly can automate much of the process.

Business Travel Direct hasn’t gone to full automation with any clients. “We are cautious of doing that,” Ferguson said. “It’s not because we don’t believe in the product, but we are not 100 percent sure the customer is ready.”

Ferguson said a big benefit is the data collected. Buyers, he said, struggle to find reliable benchmarking to assess their programs. “If they sit down with airline X in a year or two,” Ferguson said, “comparing their corporate negotiated rates to a consistent, independently tracked set of benchmarks empowers them with a richness of data that a lot of buyers have never had before.”

Lichtman said FairFly’s analytics dashboard tracks a client’s total spend, potential savings, realized savings and the specifics of all monitored PNRs. Users can sort data by route or by airline. She suggested the data could help optimize travel programs by making them more dynamic. Business Travel Direct will use reason codes showing why travelers did not accept alternatives.

FairFly claims to find savings on one in four tickets. It collects from users part of realized savings. It also charges a “small” fee based on the volume of PNRs tracked in a given month.

Additional info: FairFly is backed by Waze co-founder Uri Levine and venture capital firms Blumberg Capital and Emery Capital.

CWT now is looking to bring Yapta-powered price tracking beyond the United States. In the U.S. market, for now it’s focused on connections to Sabre and Apollo.

Egencia also is using Yapta’s service only for U.S. airfares (via Sabre). It’s considering expansion to other markets and possible use of the hotel rate tracking component.

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Nobel Laureate Opines On Who Should Fund Business Travel Distribution

New York — “Business people are very excited about competition in every sector except their own.”

With that quip, Columbia University professor Joseph Stiglitz opened his testimony here this month in the US Airways v. Sabre antitrust trial. Called by the plaintiffs, the Nobel Prize-winning economist Time magazine once named among the 100 most influential people had studied the business travel market. His star power drew the case’s largest crowd to date.

The GDS business, Stiglitz argued, is not a competitive one. Among the indicators of an abnormal market, he said, is an industry practice that has often puzzled observers: the movement of payments from airlines to GDSs to TMCs. Known as inducements, incentives or financial assistance, these funds when paid to TMCs help support business travel distribution.

Given this setup, businesses directly pay only part of the cost for services that enable travel purchasing in the way they want. Another source of funding is base commissions to travel agencies, which disappeared years ago for many airlines but still are paid by other suppliers.

Big airlines for years have argued that since they have lower-cost ways to distribute tickets, the subset of customers who want to use intermediaries for more services should cover the added cost. That subset is mainly made up of travel management companies and their business clients.

Joseph Stiglitz

Columbia University professor Joseph Stiglitz / Image: Raimond Spekking via Wikimedia Commons

Stiglitz called the flow of funds a “curious roundtrip.” As the money moves, he said, “chunks are being taken out.” In a competitive market, he said, the consumer of a product or service pays for it and influences product development. If he or she is instead getting paid, this is a distortion.

Asked directly who should pay for GDS services, he said the TMCs that use the systems. If that happened, this cost likely would be passed on to clients.

The plaintiffs noted that Sabre paid more than $1.2 billion in incentives to the top four travel management companies between 2006 and 2012. Stiglitz claimed these payments are derived from Sabre’s “excess market rents” and would disappear in a more competitive market. He argued that the rents come from abnormally high pricing for nearly all airlines.

The big exception is Southwest Airlines, which as of 2010 was paying Sabre $1.35 per segment for bookings at U.S. points of sale. This was 55 percent cheaper than American Airlines paid, and 150 percent cheaper than US Airways paid. The delta helps explain the big network airlines’ consternation with GDS costs over the years, and their support for alternatives.

With Southwest, Stiglitz acknowledged, agencies do not earn the incentives they do on the legacy network carriers. TMCs and their clients in fact shoulder some of the cost for Southwest’s limited participation in GDSs and other systems. [Citing video testimony by a former Southwest official, an AA attorney later said, “Southwest even gets paid by Travelport” to participate in its systems, according to a court transcript.]

Stiglitz said the Southwest setup is more like a hypothetical competitive market he envisions, in which users of the distribution systems would pay for more of it than they do now. Southwest’s $1.35 Sabre fee is closer to what he thinks airlines ought to be paying, because it’s representative of “cost plus reasonable profit.” The $3 or more that other big carriers paid, he said, is a result of Sabre’s market power.

Stiglitz testified that Southwest buys from Sabre essentially the same service as other carriers. But Sabre’s counsel listed a bunch of processes big network airlines purchase from Sabre that Southwest does not, including: providing seat assignments, showing seat availability, making international bookings, facilitating interlining and accounting for multiple plane types. The attorney noted that Southwest carries relatively fewer business passengers, and organizes its network in a simpler point-to-point rather than hub-and-spoke fashion.

Stiglitz didn’t deny any of this. “In a competitive environment,” he said, “price is supposed to be equal to cost plus reasonable rates of return. That’s why I focused on cost and didn’t do an analysis of how much each of them valued it. The cost of writing a ticket is not that much different, except for the possibility of seat assignments.”

Stiglitz said there’s some disagreement among economists about the role of value.

Asked if he analyzed whether the “Southwest basket of services would have been acceptable to US Airways at $1.35,” Stiglitz said, “No.”

Nevertheless, he said, the Southwest fee remains a useful benchmark because the carrier’s more limited services are not delivered at a significantly lower cost for Sabre.

Sabre’s attorneys lobbed more questions at Stiglitz on the extent to which agency incentives and airline fees represent market power and limited choice. Part of the economist’s argument is that the agency incentives “perpetuate” a system of little choice because in any given location, agencies typically do not use more than one GDS.

Treading into less familiar territory, Stiglitz suggested it’s easier with “modern technology” for corporate clients to “move all the records over” and change GDSs. However, he said, GDSs and TMCs try to minimize that because of their shared benefits in the GDSs’ market power. Later when he was asked whether travel agencies can use “any channel,” Stiglitz said yes. But, he added, there’s a cost of switching. He said corporate accounts are linked to a GDS and moving them is difficult.

Does American Express Global Business Travel ever switch corporate accounts from one GDS to another? In his deposition for the case, GBT senior vice president and general manager for supplier relations Mike Qualantone said the TMC may switch them because of “network rationalization” related to combining offices, shifting personnel or maximizing GDS incentives. Or, he said, “we can just switch them just to make sure the GDSs know we can,” to “make sure we’re not beholden.”

Big agencies like GBT have benefited by sharing in Sabre’s “market power” revenues, Stiglitz said. “This is a game where they can get a bigger share,” he testified. “The way I view this, Amex is trying to get a larger share of the market power.” He further described it as a “vicious circle.”

GDS No Entrants

Attorneys and witnesses for American Airlines (now US Airways’ parent) have highlighted the lack of new entry into the GDS market. There’s been only consolidation, they said, and Sabre raised its North America market share to 58 percent in 2010 from 46 percent in 2003.

This is part of the reason why, a decade ago, big airlines supported so-called GDS new entrants Farelogix, G2 SwitchWorks and ITA Software. Some also have promoted their own direct-connection programs. Stiglitz admitted that for these alternatives to be real choices, they would have to be acceptable to agencies. Sabre’s lawyers produced evidence that they were not.

Having dealt with Farelogix “for years,” Qualantone said in his deposition, Amex concluded it was “a shell of a GDS” that “cannot meet agency needs without a GDS for access to content.” Farelogix, he said, is “a lightly capitalized company [that] would never meet our broad global (or U.S.) needs.”

According to an internal American Express email that Qualantone wrote in 2010, American Airlines’ Direct Connect program “does not work for travel and would cost hundreds of millions to us in operational and technology costs, and lost revenues, over just a few years. It would also likely make our competitors stronger and cost us substantial business. While AA will try to diminish the cost and complexity [of] their Direct Connect, it’s still a standalone solution that only has AA content.”

Based on experience working with Southwest and Air Canada, GBT had concluded that its reservations costs would rise by one-third for direct bookings, Qualantone added. Direct connections do not offer key components that GDSs do, he wrote, including refunds, exchanges, full passenger name record storage, settlement with ARC and credit cards, and integration to downstream systems.

In his 2013 written deposition, former Carlson Wagonlit Travel exec Andrew Winterton indicated that time-and-motion studies in 2010 told CWT that booking a direct-connect ticket would add costs of between $25 and $50.

Stiglitz remained convinced that a “competitive” economic outcome could include scenarios in which travel agents use a GDS and one of the aforementioned alternatives, plus systems like Kayak or Concur, to obtain all the travel products their clients need.

It’s “easy,” he said, to offer a “one-stop shop.”

Stiglitz admitted he’s neither a technology nor travel agency expert. He also repeatedly attacked the credibility of travel agencies: “You can’t take what they say at face value because they’re getting paid.”

Stiglitz confirmed he’s making more than $1 million for his research and testimony on the case.

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Case Details Sabre’s Airline Segment Fees, Including Southwest’s Advantage

[UPDATE, Dec. 21, 2016: Adds testimony at bottom about the differing levels of service provided to Southwest versus legacy U.S. network carriers like US Airways.]

New York — Industry pros always figured Southwest Airlines paid less to global distribution system providers like Sabre than other big airlines. Now they know how much.

Southwest’s 2010 per-segment fee to Sabre at U.S. points of sale was $1.35, according to testimony in the US Airways v. Sabre trial here. Segment fees that year were $2.09 for American Airlines and $3.13 for United Airlines. As of 2013, they were $2.11 for AA and $3.14 for United. Delta’s fee dropped to $1.99 in 2013 from $2.36 three years earlier, apparently thanks to a new deal signed that year — the first after its combination with Northwest.

According to an Oct. 2010 email to Sabre from US Airways, discounts off of rack rates can take into account the airline’s size and also whether it uses the GDS firm’s internal reservations tech, as AA does with Sabre.

U.S. District Court for the Southern District of New York

Thurgood Marshall
United States Courthouse, Lower Manhattan

An economist testified that it costs Sabre no less to process Southwest transactions than it does to transact for its rivals. Sabre attorneys countered that Southwest buys fewer services from Sabre than other airlines. Ideas about value versus cost in assessing the competitiveness of a market, based on its pricing, is debated among economists. The issue will be central to this trial as it continues to unfold.

The evidence offered additional previously undisclosed information about airline distribution conflicts.

Quick review: Airlines created computerized reservation systems in the 1960s and 1970s. They started installing them at agency offices in the late 1970s. In the 1980s, travel agencies’ share of airline distribution spiked thanks in no small part to the automation. By the 1990s, GDSs dominated the distribution landscape and airlines saw fit to make some money off them. They soon sold.

With the Internet, the airlines had options. They started offering “web fares” on their own sites, but not in the GDSs for travel agencies. GDSs didn’t like that. By 2003, GDSs had established new kinds of agreements with airlines. These addenda to the traditional “participating carrier agreement” guaranteed GDSs would have at least equal access to fares and inventory as any other channel. In return, they charged the airlines fees that were discounted off rack rates.

When those deals came up for renewal three years later, airline-supported GDS alternatives had (coincidentally?) emerged in the marketplace. According to a 2010 US Airways email presented in evidence, US Airways found that the existence of G2 SwitchWorks, Farelogix and ITA Software helped big airlines negotiate 35 percent lower fees from GDS companies.

Sabre airline segment fee

An October 2004 Sabre email disclosed at the trial showed Sabre thought the alternatives were serious competitive threats. According to a transcript of the proceedings, one of the airline attorneys, citing former G2 and ITA executives, said Sabre “wanted to buy” those companies.

Sabre had considered a “low cost, low price” structure that would cut per-ticket fees by about half from roughly $9. It was not implemented. [A segment is one flight, so a roundtrip nonstop ticket has two segments while a roundtrip with connections both ways has four. The industry average is about 2.5 segments per ticket.]

Another data point coming out of the trial is that Sabre’s “rack rate” as of 2010 included differentiation based on the ticket price.

In their home countries, airlines without a discount deal paid differing per-segment fees depending on what the traveler paid. If the fare was under $250, the per-segment rack rate was $7.19 for carriers using Sabre’s highest-level distribution service. At more than $800, the rate hit $9.54. For bookings elsewhere in the airline’s region but not its own country, Sabre’s 2010 highest-level fee was $8.72 per segment. Outside the home region, rack rate per-segment fees came in at $10.47.

Home-country passive bookings were $7.19, versus $8.37 elsewhere in the region and $9.50 in the rest of the world. Agents and others use passive bookings to enter into a passenger name record data from bookings made elsewhere, such as a convention hotel. Cancellation fees were $0.39 and ticketing fees were $0.75 across the board. Rack rate data came from a 2010 Sabre email to US Airways disclosed during the trial.

According to the 2011 US Airways-Sabre agreement presented during the trial, the airline’s “rest of world” fee was more than twice it’s local region fee. For example, the contract called for US Airways to pay $3.67 per segment locally in 2014 versus $8.59 elsewhere.

Meanwhile, according to a 2010 internal airline email, contracts negotiated in 2011 had US Airways paying Amadeus $3.59 per segment and Travelport $3.28 per segment (the latter a blend of Galileo and Worldspan rates). Amadeus drove less than 6 percent of the carrier’s revenue at the time, Travelport delivered about 21 percent and Sabre processed tickets for 36 percent.

Additional info: Sabre vice chairman Greg Webb testified that comparing the no-frills GDS participation level used by Southwest Airlines with the highest level employed by legacy network airlines is like “apples and oranges.” In the “Basic Booking Request” level, he said, schedule updates are limited, availability covers only a single cabin, bookings do not occur in real-time in the carrier’s internal res system, the airline is not included in low-fare searches, ticketing occurs only in the United States, and there are no assigned seats or interlining. For the full “MaxConnect” airline users, he said, schedule updates are unlimited, availability incorporates multiple cabins, bookings are real-time and low-fare search, global ticketing, assigned seats and interlining all are available.

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Trial Reveals Sabre GDS Incentives Paid To Big Travel Management Companies

New York — As they consolidate and grow, travel agencies earn more incentive money from global distribution system providers. Just how much has been hard to ascertain, since incentives are not specifically teased out in GDS company financial reports. With the US Airways v. Sabre case underway here, some interesting numbers are emerging.

According to data originating with Sabre, the GDS firm paid more than $1.2 billion in incentives to the top four travel management companies between 2006 and 2012. American Express Global Business Travel earned $504 million in that timeframe. For Carlson Wagonlit Travel, it was $493 million. At BCD Travel, the total was $184 million and for HRG, $43 million.

TMC attorneys convinced the court to omit the number of segments these amounts covered, lest the exact negotiated rates be revealed. The concern suggests the data remain relevant despite being a few years old.

Internal American Express emails from 2010 presented in the case estimated GBT’s annual take at a minimum of $70 million from Sabre and $130 million from all GDSs.

Incidentally, in his May 2013 deposition for the case, American Express Global Business Travel senior vice president and general manager for supplier relations Mike Qualantone indicated GDS incentives delivered one-half or one-third the amount GBT received in airline commissions and overrides.

Sabre mega nagency incentivesGBT used Sabre for 63 percent of its bookings in the United States, according to undated stats presented in the trial and attributed to Sabre. For CWT, the same figure was 82 percent, for BCD it was 65 percent and for HRG it was 97 percent.

In their Sabre contracts, all four TMCs received upfront cash and per-booking incentives. They also had minimum booking volumes and penalties for failing to reach those thresholds.

Other documentation indicated that GBT was operating under a seven-year contract with Sabre, CWT’s was for 10 years and BCD’s and HRG’s were both for five-year terms.

All four TMCs, according to the evidence presented, also used Travelport in the United States. All but HRG used Amadeus, as well.

According to 2013 data attributed to Sabre, the average fee it charged all suppliers for North America points of sale as of the first half of 2013 was $4.20 per segment, while the average agency incentive per segment was $1.94. The average incentive was $1.70 five years earlier, and $1.54 five years before that.

Sabre and other GDS companies for years have been telling investors that one of their challenges is keeping a lid on incentives. From Sabre’s latest annual report:

“Travel agency incentive consideration is a large portion of [GDS] expenses. The vast majority of incentive consideration is tied to absolute booking volumes based on transactions such as flight segments booked. Incentive consideration, which often increases once a certain volume or percentage of bookings is met, is provided in two ways, according to the terms of the agreement: (i) on a periodic basis over the term of the contract and (ii) in some instances, up front at the inception or modification of contracts, which is capitalized and amortized over the expected life of the contract. Although this consideration has been increasing in real terms, growing in the low-single digits on a per booking basis in recent years, it has been relatively stable as a percentage of [GDS] revenue over the last five years, partially due to our focus on managing incentive consideration.”

GDS firms have been working to offer more services for which they charge travel agency users fees.

Sabre’s report hints at a transition: “We believe we have been effective in mitigating the trend towards increasing incentive consideration by offering value-added products and content, such as Sabre Red Workspace, a software-as-a-service product available to our travel buyers that provides an easy to use interface along with many travel agency workflow and productivity tools.”

Columbia University professor Joseph Stiglitz, a Nobel Prize-winning economist, testified for the plaintiffs in the case. At one point he called incentives paid by GDSs a “bribe.” He argued that they are evidence of a non-competitive market.

If incentives didn’t exist, Stiglitz said, TMCs would have to pay for GDS services. In turn, business clients would have to pay more to TMCs. TMC execs have said as much time and again.

Stiglitz also said business travelers might end up paying less overall because fares could drop in accordance with the suppliers’ lower costs, all else being equal.

As the market for travel technology becomes more competitive, Stiglitz said, “we might also get more innovation.”

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Teleconference 6: Traveler Engagement

Traveler Engagement
Feb. 9, 2017

Thanks to all our attendees and speakers! This event’s recording may be purchased here or gifted here for $10. Grab the slides here.

A big part of travel management is traveler management, or it should be. Our sixth teleconference featured four practitioners discussing the tools, metrics, benefits and challenges of traveler engagement. Speakers: Festive Road associate Mia Andersson, Shire senior global travel procurement manager Mary Batal, Microsoft global employee engagement and user experience lead Julia Fidler and Advito principal and vice president Lesley O’Bryan.

Find information on other upcoming Teleconference episodes and download previous ones here.

Background On Teleconference 6:

We all have access to more information than ever, and we are as finicky as ever. For corporate travel managers, this presents a big challenge. Keeping travelers compliant, productive and healthy — and making sure they don’t jump ship for a job with cushier travel — requires two-way communication across various channels.

tcd-teleconference-featured

This gets into the culture of an organization and the methods it and its suppliers use to interact. Social networks. Mobile communications. Crowdsourcing. Surveys. Focus groups. Travel councils. Travel program marketing. A lot goes into effective traveler engagement. Once feedback is collected, travel program managers can do all kinds of things with it.

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New Corporate Booking Platform Using Artificial Intelligence

There’s a new player in corporate booking technology. Before the year is out it expects to activate a booking portal for an undisclosed Fortune 10 company. Phase two early next year would bring a proactive artificial intelligence service scanning emails and calendars to present optimal itineraries based on corporate policies. It’s already working with two travel management companies and has aspirations to connect with more. Like several corporate travel entrants in recent years, it started on the consumer side.

WhereFor launched this spring at the SXSW conference. It’s a travel search engine that helps leisure travelers decide where to go. Users input a budget and the system presents favorable flight and hotel options for various destinations. Within two days of the SXSW presentation, WhereFor had more than 250,000 users, according to co-founder and CEO Ryan Wenger. About a week later, Wenger said, a director from that Fortune 10 company contacted him.

“She asked if we could customize the product for their business travel needs,” Wenger said. “I learned they were incredibly frustrated by booking trips with their corporate booking tool.” He didn’t identify that tool, but described it as “one of the two big boys out there.” This client, he said, didn’t like how many screens and clicks are required to find the right flights and hotels.

Wherefor CEO Ryan Wenger

WhereFor co-founder and CEO Ryan Wenger

The model for corporate travel, of course, isn’t the same as WhereFor’s consumer service. Business travelers generally don’t have discretion on where they’re going. So rather than a budget to help determine a nice vacation spot, corporate policy dictates the optimal itinerary. But Wenger said the underlying, patent-pending tech is applicable — “programmable algorithms meant to optimize an itinerary for a variable.”

WhereFor got to work building the AI and booking tech with the help of Options Travel, an under-the-radar Chicago-area TMC serving clients with less than $30 million in annual travel spending. Options has been providing fulfillment for WhereFor’s consumer service.

The result, Wenger said, is “an AI-powered personal assistant for every employee.” It actively monitors emails and calendars to determine travel needs and automatically alerts users to the best-suited itinerary. Travelers click to book or view alternatives in an online portal.

Those options — possibly only from preferred suppliers, if a client configures that way — are based on price differentials relative to the initially presented itinerary. “Then you can decide for yourself if it’s worth it to save an hour of flight time if it costs $400 more,” Wenger said. “We report that cost to the company, and they can compare frivolous spending by employees or by department.”

Asked about privacy concerns related to scanning employees’ emails, Wenger said companies have different tolerances. The email and/or calendar scanning can be switched off.

All that is part two, due out early next year. At launch, the service will scan Microsoft Outlook email and Google calendars. The plan is to expand in next year’s second quarter to Gmail and Outlook calendars.

Predictive booking capabilities based on calendar integration isn’t a new idea. Early attempts go back a decade. More recently, Microsoft has embarked on projects with Amadeus and Concur to make Outlook the origin of business travel reservations. Serko also is using calendar information as an input for predictive bookings. Consumer tool Hipmunk, now owned by Concur, suggests travel options based on Gmail calendar integration.

Speaking today on The Company Dime’s Teleconference, Microsoft global travel and venue group lead Eric Bailey said he wants a booking tool “to be what a good travel agent used to be.” Once a traveler’s origin, destination and travel dates are known, he said, it’s not hard to predict the flights they’ll pick. Alluding to the “Amazon experience,” Bailey added that travel programs benefit when tools show travelers the options they’d probably want, but also some cheaper ones.

Bailey said work underway with partners won’t lead to a Microsoft product, but rather tools for those partners to bring to market. “I want it to be an industry solution,” he said. He expects commercial launches in 2017.

Part one of WhereFor’s corporate product, scheduled to go live in about six weeks, is the white-labeled portal. That’s where client travelers can initiate bookings themselves. It will have the same basic approach — give a location and a date, get the optimal itinerary. Wenger said the goal is to create a faster, more user-friendly version of the existing booking tools in the market. A native mobile app is coming next year.

For content, WhereFor is linked to Travelport and can include corporate negotiated rates. Multi-source shopping also searches rates and fares from certain consolidators. Wenger said WhereFor is experimenting with providing heavily discounted, nonrefundable fares and hotel rates. The latter might include prepaid rates.

For payment, Wenger said the initial client faced frustration in its reimbursement process partly because traveling employees don’t necessarily carry corporate cards. WhereFor set up the system so bookings go onto its own corporate card. The client will reimburse WhereFor weekly or monthly. Asked how WhereFor would use credit card rebates, Wenger said there are no plans yet, though he suggested they may “help us keep our transactional fee lower than the competition.”

Options Travel owner Donald Buynack said inputting all payment info, including cost center codes, can be a nuisance for travelers. A central billing process like WhereFor’s, he said, allows for quicker transactions.

For the first client, bookings will go to Options Travel for fulfillment. When client travelers need human assistance, they contact the TMC. Options isn’t the client’s incumbent agency. Buynack wouldn’t detail the parameters for servicing the client, saying only that they’re working together on scaling up and determining agent and telephony resources.

Wenger said WhereFor is working with Options to introduce the product to other clients. It’s doing the same with Executive Travel, a WhereFor investor, and is looking for other TMC partners.

Executive Travel CEO and founder Steve Glenn said WhereFor is presenting to some of the TMC’s key clients and prospects next week. “The whole business model is B2B, using the TMC as the marketing and fulfillment tool,” Glenn said. “We invested because we feel it’s promising enough and disruptive enough.”

Additional info: WhereFor will present next week at the Phocuswright conference. Wenger said the company also is funded by investors including 500 Startups, Global Trust Group and celebrity entrepreneur Rob Dyrdek. Before starting WhereFor, Wenger was a corporate lawyer for seven years.

Options provides custom technology for other travel and related products. One is travel and expense firm Trippeo.

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Sabre Sees An ‘Inflection Point’ On Ancillaries Via Travel Management Companies

[UPDATE, Dec. 20, 2016: Commentary from witnesses during the US Airways v. Sabre court case addressed the challenges of selling US Airways’ Choice Seats via the Sabre GDS. This post has been updated to include some of those comments.]

Air Canada since September has been selling paid seats through Sabre. It began listing its branded fares there in April and now distributes its full content to Sabre subscribers. Once an enemy of the global distribution systems, Air Canada has traded in its maverick approach for real support of mainstream corporate travel channels.

According to Sabre vice president of travel product solutions Shelly Terry, Air Canada has added to the “critical mass” of content available in the GDS. The industry, she asserted, now is at “an inflection point” for ancillary airline sales through travel agencies.

All three primary GDS operators report growing interest among airlines in using new merchandizing capabilities. Ancillary sales volumes are rising. Sabre began selling American Airlines’ paid seats in February. Terry said two more prominent airlines will follow early next year. The International Air Transport Association’s New Distribution Capability promises to make all of this much easier for many in the industry.

Shelly Terry

Shelly Terry, Sabre vice president of travel product solutions

So far, corporate travel agencies have been either unable or unwilling to sell lots of add-on airline products and services through GDSs.

US Airways began selling its Choice Seats via Sabre during the first half of 2013. According to evidence produced in the ongoing US Airways v. Sabre trial, the airline sold 9,200 of the options through Sabre (before the start of the 24-hour check-in window). Contrast that with more than 1 million sold directly. During testimony last month, former US Airways distribution executive John Gustafson (now AA’s VP for digital channels) described Choice Seats sales in Sabre as a “robust failure.” Even agents, he said, would go to US Airways’ website to book the option for customers.

Why? Gustafson said that agents had to pay once for the fare and once for the seat. That it was a two-step process, he claimed, meant lower sales. He also admitted that US Airways had declined to offer intermediaries a commission.

Sabre laid the blame on US Airways for insisting on a process that didn’t use Airline Tariff Publishing Co. and Electronic Miscellaneous Document standards.

“They wanted to do it the same as their website,” said Sabre vice chairman Greg Webb during his testimony at the US Airways v. Sabre trial. “It doesn’t work that way for travel agencies. In a professional agency, you make the reservation and unless you’re traveling in an hour, it goes through quality control. Much of the time it gets re-shopped. There’s a quality assurance process. It’s put in a queue. At night, off peak, they book all those tickets at the same time. Until that time, we hold the inventory but it’s not ticketed yet. Or paid for. By midnight, the ticket went through and agencies hadn’t changed the QC … so the seats were sold as well. This wasn’t effective. The tech teams talked. We had spent a significant amount to get it implemented. We looked for ways to improve it. We needed the agencies involved — they had rules and agencies in some cases weren’t willing to spend.”

Webb said Sabre spent $3 million to enable the airline’s custom approach. It didn’t charge extra for the bookings.

In a taped deposition three years ago, American Express Global Business Travel exec Mike Qualantone said GBT had gone so far as to turn off the function for its corporate accounts.

The airline’s non-standard route, he said, led customers “to believe a seat was purchased but it wasn’t. Customers were showing up at the airport and finding they had no seat.”

According to IATA-funded research published in October 2015, agents still were more likely to book ancillary products through airline websites than GDSs. Allowing for multiple responses, the study found that 64 percent of about 240 responding corporate TMCs used airline websites. Forty-nine percent said they used GDSs. Forty-six percent said they called airlines directly and 22 percent used direct connections to airline res systems.

For fulfillment of ancillaries, Air Canada is among those airlines going with the Electronic Miscellaneous Document. Terry said corporate customers value EMD because it ties the ancillary purchase to the ticket, easing reporting. But she acknowledged that having a separate transaction for an optional service “does add an element of maybe additional complexity and work.”

EMDs haven’t exactly been going gangbusters. Speaking on The Company Dime’s Teleconference in September, ARC president and CEO Mike Premo described a slow trickle. “ARC agencies this year,” he said, “have only processed about $21 million in ancillary sales via the EMD process.” Even excluding bag fees, he noted, airlines are generating billions in ancillary revenue overall.

At least on the shopping and booking side, the newer generation of GDS-supplied agency desktops is meant to improve ancillary sales.

Terry explained that agents using the Sabre Red Workspace, when booking Air Canada for example, see all the Preferred Seats information. They see which ones require an additional payment and which already qualify based on fare type purchased, and the characteristics of those seats. “The experience of what you get for what you pay is very much enhanced but actually the workflow itself has not changed,” Terry said.

Speaking last week during Sabre’s third-quarter earnings conference call, outgoing CEO Tom Klein said “hundreds” of agencies are beta testing the latest Sabre Red Workspace, which is due out next year.

“The bulk” of ancillary sales, Klein said, “come from things that are either bought at the airport (mostly bags) or things going through the direct channel (mostly seats) or the sale of miles, which in our view isn’t a new ancillary sale.” He said airlines “have more or less saturated the direct channel” with those ancillaries. “Our conversations with airlines validated that they want to sell more through the intermediated channel. That’s a technology issue and a product mix issue and a sales compensation issue.”

Compensation is a big rub. A March 2012 internal US Airways email presented at the trial indicated American Express and Carlson Wagonlit Travel told the carrier “they need to monetize or [it’s] not worth the effort or time in the booking process to pursue” paid seats.

According to the October 2015 IATA study, agencies’ preferred compensation model for selling ancillaries is airline-paid commissions. Sixty-three percent of responding corporate TMCs said as much. That was followed by airline-paid transaction fees (23 percent), traveler-paid fees (9 percent) and GDS-paid fees (6 percent).

Egencia in March began selling bag checks online through Amadeus for customers of 14 European airlines. Amadeus director of managed travel Arlene Coyle this summer said other TMCs were “still struggling with the business model.”

“We do have ancillaries sold today through other TMCs — it’s more ad hoc,” Coyle said. “You won’t read about majors using ancillary services from Amadeus. It’s not a strategy. It is more a response to clients. Selling an ancillary service is a production issue for TMCs. If you solve production and economics, there’s no reason we should not see massive adoption.”

Sabre’s Terry said conversations along those lines between airlines, agencies and corporate customers are underway. “There are mid- and back-office processes where, quite frankly, agencies have to make adjustments and make sure there is a value proposition to make changes necessary to drive transactions,” she said. “Bookings are happening on branded fares and ancillaries today. We are delivering millions of dollars in revenue through the Sabre marketplace and there is a lot of room to grow.”

She also alluded to corporate policies that may not provide for reimbursement on optional add-ons. Sabre attorneys during the trial pointed out the same, suggesting those dampened the uptake of US Airways Choice Seats purchases in the GDS.

Meanwhile, according to the IATA study, there has been “extensive frustration and unhappiness across the travel agency community toward the various distribution channels they use to book” branded fares and ancillaries.

Two-thirds of TMC respondents indicated they used airline websites to sell branded fares. Forty percent said they used GDSs.

GDSs, corporate booking tools and airlines have made progress since that study. For example, now that Air Canada lists its branded fares in Sabre, it means distributors connected to the GDS through Sabre’s APIs also access them. That includes online travel agencies and corporate booking tools. Each would have to complete an implementation. Asked if GetThere now is displaying Air Canada’s branded fares and paid seats, an official did not have an answer by press time.

Additional information: Unlike AA’s paid seats in Sabre, which use AA’s XML-based API, Air Canada’s paid seats and branded fares get to Sabre via traditional fare-filing mechanisms provided by the Airline Tariff Publishing Company.

The IATA-funded 2015 study was conducted by WTAAA, T2Impact and Atmosphere Research Group. It surveyed 1,034 travel agency executives — 23 percent from corporate TMCs — primarily in Australia, Brazil, Canada, India, New Zealand, South Africa and the United States. Among TMC respondents, 62 percent indicated that NDC would open up access to a more complete set of airline fares and products. Forty-two percent said using a single screen for all products would be a top benefit of NDC’s role in selling ancillaries.

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ARC, TMC Exec Raise Red Flags On Ticketing Fraud

As with hacking, if it hasn’t happened to you yet, fraud will.

Travel management companies can be unwitting participants in deceit. In one unsettling but increasingly common scenario, scammers search the Internet or buy hacked information to find out companies’ travel agencies and other details. They masquerade as executives from those companies in calls to the agencies. They book travel for weeks later using the company’s card on file. After cozying up to the agents, they then book more travel using stolen, compromised or phony credit cards for supposed colleagues.

World Travel Inc. EVP of operations and strategic planning Pam Zager said her company noticed an uptick this year in fraudulent bookings. Zager called ARC and found the problem is a growing one.

“These are complicated processes, and it’s easy for someone to get their nose under the tent, and suddenly you’re out a lot of money,” said ARC president and CEO Mike Premo. “We have seen agencies go out of business because they get hit from a fraud ring that gets a hold of agency credentials over the weekend. They come in after the weekend and the people have already flown. Agents are liable for chargebacks to improperly issued tickets, and ones that are not paid for.”

TMC-fraud

Image: Thinkstock

Corporate agencies are just one subset among the victims. The International Air Transport Association says fraud costs the airline industry $1 billion each year.

Last month, a law enforcement operation nabbed 193 suspects allegedly attempting to travel on illicit tickets. The crackdown included cooperation from airlines and other industry groups. It spanned 189 airports in 43 countries, 75 airlines and eight online travel agencies.

Enforcement agencies and the private sector are “tackling this international phenomenon on a daily basis,” according to Europol.

“Two or three years ago we found a lot of this happening out of Africa,” said Ovation Travel SVP Sunil Mahtani. “People getting into the systems, making reservations, issuing cash tickets at 2 a.m. on a Sunday for a flight leaving in two hours.”

ARC convened a panel on the topic at its TravelConnect conference last month. During the discussion, Zager said that especially in the past year, “a smart group of bad guys are impersonating people from our clients (for example, high-level execs) and booking travel for themselves a month out. Then, as they build a relationship with a counselor, they say, ‘Oh, while I have you on the phone, can I make a reservation for a consultant doing work for me traveling in the Middle East?’ ”

That reservation, say for $2,000, may use a stolen card, Zager continued. The ticket then is resold in an underground market for maybe $1,500.

In a follow-up conversation, Zager pointed to another scenario. An impersonator contacts the travel manager, who forwards the call to a company travel agent, who in turns makes the booking. Zager said the liability here is unclear. Maybe the TMC didn’t follow a standard operating procedure. But did the travel manager’s accidental endorsement play a part?

AdTrav Travel Management CEO Roger Hale said fraud is growing and perpetrators are trying new tactics. “We’re seeing the same guy calling multiple times, so he may get shut down with one agent and he turns around and calls another,” Hale said during a separate interview last month. “We’re getting multiple calls per day over a week. It will stop for a bit and we’ll get it again. Fortunately, it’s been a long while since we were burned.”

According to a Phocuswright paper published this summer, agencies spend 1 percent to 2 percent of revenue managing fraud. More from the report, co-sponsored by Amadeus, Cybersource and IATA:

“The costs represent not only lost bookings and revenue, but also staff time and resources allocated to reviewing suspect bookings and disputing chargebacks. Current processes to detect and manage fraud are largely manual, with the agency owner or manager getting involved at some point in most suspect transactions for smaller and midsize agencies. Larger agencies are most likely to have some automated tools to detect and handle fraudulent bookings. The greatest vulnerability is in the midsize agency category of $1 million to $10 million in gross sales volume. These agencies do just enough volume so that not every transaction is personally handled by an agent. They do more online business – about one-sixth of total sales, on average. But they are not large or sophisticated enough to have the more robust automation of the larger agencies.”

Zager said a travel agency has to “sell a lot of tickets to make up for” any chargebacks for which it is on the hook. “You make it part of your business,” she said. “It has to be in regular conversations.”

What To Do?

TMC execs stressed agent training. Verifying a customer’s identity is the key defense. When a call comes in from a phone number that doesn’t match records, agents should inquire. They might ask the caller to provide their employee ID or cost center, or list other previous or upcoming trips. Or, Zager said, they might ask the if they can call back on one of the numbers listed.

“In the corporate space, the profile is your insurance,” Zager said. “If we have to book for non-profiled travelers, how do we get approval? You can call it in. Maybe there’s a list, but the overall policy is we don’t book without a profile.”

ARC suggested agents should confirm itineraries using the employee’s company email address.

“You don’t want to take away from service by being super paranoid but you want to make sure it matches,” Zager added. That can be awkward for agents speaking with those who seem to be client VIP travelers.

Ovation’s Mahtani said the company also put up “fences” to stop ticketing under certain circumstances — such as on weekends and holidays when requests are submitted on a cash basis.

Experts also recommended that travel departments refrain from putting information about their programs online. Universities, in particular, often post policies and preferred vendor information on publicly available sites.

The main takeaway on fraud prevention, Premo said, is that “it takes a village.” That includes cooperation from payment firms, GDSs, airlines and agencies. He also pointed to an old adage: “I don’t have to outrun the bear, I just have to outrun you. To the extent that [fraudsters] are aware we’re on top of it, maybe they attack others.”

Additional info: Concerned travel pros can contact ARC’s Fraud Prevention team at (703) 816-8137 or by email.

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ABC Global Services Creates Midmarket Hotel Rate Sourcing Service

Aiming to help smaller and middling travel management companies compete with the biggies, ABC Global Services launched a hotel sourcing service targeting midmarket corporate accounts. The program goes beyond the consortia rate program ABC already offers, helping businesses contract in markets where they have enough volume to do better than those group rates.

Several other entities serving travel agencies offer consortia rate programs. They have differing views on providing sourcing services outside them.

Like firms of all sizes, midsize companies find it challenging to make room for hotel sourcing. As it established a hotel sourcing service in North America, HRS last year co-produced research with ACTE advocating outsourcing in the face of limited bandwidth.

Both HRS and ABC compete against large TMCs offering hotel negotiations as a service through their consulting arms. Big clients say these programs are pricey.

Eric Altschul

ABC Global Services CEO
Eric Altschul

ABC’s sweet spot is midsize TMCs. “Account managers in the fall end up doing sourcing for their clients, but it’s not even really sourcing — it’s RFP processing,” said ABC Global Services CEO Eric Altschul. “They’re not sourcing experts. They’re doing a client service for processing an RFP and taking the most burdensome part, but that may not lead to client satisfaction. There’s no consultative piece, no analytics, no benchmarking.”

The new sourcing service is distinct from ABC’s consortia program, which offers negotiated rates through TMCs at 42,500 hotels. Users of that program, however, do earn a price break on sourcing.

“As good as a consortia program may be, individual companies always have had needs based on their individual hotel spend,” said Altschul. “We may have a client with 400 hotels they negotiate with because they have high volume there. But they might stay at 4,000 hotels, so they need a program for it all. We’re now saying, not only can we help with that supplemental business, but also we can help ensure you’re getting maximum benefit with those you negotiate directly.”

Clients, including agencies on behalf of their own customers or companies with ARC’s Corporate Travel Department designation, “can outsource as much or little as they want to us,” said Altschul.

Like many others, ABC is building these analytical capabilities on top of automation. Altschul would not say from where it comes, though Sabre, Lanyon and Lodging Logistics all emerged in conversation.

These companies facilitate requests for proposals and also offer some of their own sourcing services. Independent consultants, too, provide sourcing support.

Agency services provider Hickory Global Partners has a hotel rate program but not sourcing services. “That market is getting pretty crowded,” said president Chris Dane. He added that some of Hickory’s agency members offer hotel sourcing themselves, oftentimes using a third party.

CCRA Travel Solutions president and CEO Dic Marxen pointed to another consideration. If an agency’s client negotiates its own hotel rates, that reduces volume funneled through consortia rate codes.

Even so, Marxen said CCRA — which does offer consortia rates — will be adding sourcing tools in early 2017. Small and midsize corporate agencies need help finding and keeping corporate clients, Marxen said. Providing the means to help accounts build their own hotel programs through analytics and reporting is one way to do that.

“I don’t see it as a huge revenue opportunity for us but it’s very important in supporting our best customers and giving them more added-value,” Marxen said. “We have to be in the position to be a true partner, not just a vendor.”

A different animal than the agency consortia, Radius Travel and the GlobalStar Travel Management networks also have hotel rate programs (GlobalStar’s furnished by CCRA). Member agencies earn commissions through them.

GlobalStar doesn’t offer a centralized consulting service, though account managers can assist member agencies and their clients. Radius sometimes will take on sourcing directly, more likely in conjunction with a member agency working with a multinational account.

“As you see more SMEs look to consolidate their travel programs in general — for reasons of efficiency or traveler experience — part of those conversations are whether there is an opportunity,” said Chris McAndrews, Radius Travel SVP of product and partnerships. “Questions that a small company wouldn’t have asked a while ago they are asking now.”

McAndrews said Radius brings to bear its global data and analytics capabilities to help companies make the determination. “A big part of this, especially for first-time consolidators on the low end of the scale, is helping them get a fix on what they are doing in different regions,” he explained.

“You still run up against some of the math,” McAndrews said. “For SME-size clients, in many cases it may not be good economic sense for them and us to invest the time and effort. That’s where our global hotel program comes in.”

Where there are opportunities, Radius can apply its own RFP technology or clients can use their local agencies’ tools.

Altschul said ABC is differentiating by charging a lower-than-market fee on a menu basis. Options include initial data crunching; the RFP process itself; hotel directory creation; analysis, reporting and benchmarking; and rate auditing.

ABC kicked off the program in August with a select group of existing clients. Altschul said the company has processed thousands of RFPs for 2017 rates. In January, it will open the program to the market at large.

ABC is hoping to land some clients who want to negotiate their hotel rates off the calendar year. Altschul said hotels and clients may not quite be ready for that. “It makes sense, so we don’t have this big crunch,” he said.

Next up for ABC is an airline commission program for agencies, beginning in January. It will primarily cover international routes. CCRA and Hickory already have airline commission programs. In the case of Hickory, member agencies must use the hotel rate program to access the air program. CCRA’s air program includes only international airlines.

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