Author Archives: David Jonas

About David Jonas

David in 2006 co-founded business media firm ProMedia.travel after ten years as a journalist with Business Travel News. David rejoined BTN in 2010 as executive editor when its parent company acquired ProMedia, and in 2014 co-founded The Company Dime.

Marriott’s 48-Hour Cancellation Policy To Affect 2018 Rate Negotiations

In light of related tests by big chains in recent years, Marriott International’s June 15 introduction of 48-hour cancellation policies at nearly all Americas hotels wasn’t a surprise. That doesn’t make negotiations for next year’s rates any easier.

Like it or not, and most don’t, Marriott’s decision exemplifies the lodging industry’s efforts to better manage inventory and generate additional revenue. Many hotels a few years ago switched from same-day to 24-hour cancellations. The Starwood acquisition gave Marriott more clout to push further. Expect competing chains to follow, though maybe not right away as they try to leverage a competitive advantage.

This development is bad for business travel, restricting last-minute planning and late changes. According to one commenter on FlyerTalk, a 48-hour cancellation is as restrictive as prepaid reservations. “So is the strategy now never to reserve until the day of or day before when it’s concrete?” asked another. “There go any ‘advance’ upgrades.”

And there goes some latitude. Partnership Travel Consulting’s Andy Menkes gave this scenario: “I made a booking for June 3 at a Marriott for $250 a night. On June 1, I see a comparable hotel has dropped their rate to $199; it’s too late for me to make that change.”

As generally used today, popular third-party reshopping tools like TripBam and Yapta won’t help much. They often stop searching at 48 hours out. As such, “their effectiveness is unlikely to be impacted in the short term,” according to GoldSpring Consulting partner Neil Hammond. “If other chains follow suit and the periods are further extended then this may become an issue.”

Corporate negotiated rates often have looser cancel policies, but for 2018 rates that flexibility looks to be harder to come by. It will be especially challenging in markets where travel programs have modest hotel volumes.

“Corporate buyers will just need to do a better job to negotiate same-day or 24-hour cancellation,” according to Advito senior director Marwan Batrouni.

How should they do that? Consultant Mick Lee of Arrow212 said savvy buyers would be more attentive during RFPs — rather than simply “checking the box.” She said they should consider alternatives like Airbnb and review data “to ascertain the locations with the biggest impact to their expenses.”

Marriott CEO Arne Sorenson
Image: Reuters/Fabrizio Bensch

Marriott’s policy also will impact dynamic pricing programs and “hinder the ability of buyers to take advantage of inventory pricing shifts,” according to Lee.

Assessing all of this may take longer than usual. Donna Brokowski, GM of Travel and Transport’s Partner Solutions Group, said Marriott’s new policy could lead to a longer hotel RFP process and a “possible shift away for some key hotels.”

Travel Consulted’s Grant Caplan said companies would have better luck working with individual properties than through brand HQ. That means local relationships are “now even more valuable,” he said.

According to FINRA corporate travel services manager Carol McDowell, the new policy is “a game-changer” that may require strategy adjustments.

Carlson Wagonlit Travel Hotel Solutions director Eric Jongeling expects cancellation policies to be a “key element” in negotiating with and selecting preferred properties. “One of the most important considerations is ensuring business travelers are aware of cancellation policies and ensuring the terms are communicated,” he said. “We expect preferred hotels to provide better terms than travelers can find on their own and this change could present additional opportunity to drive more program compliance if negotiated deals provide greater cancellation flexibility.”

In 2015, Marriott International CEO Arne Sorenson told Wall Street analysts that allowing guests to cancel up until 6:00 p.m. on the day of originally intended arrival “created greater risk of overbooking” and made it “harder to revenue-manage the hotels.” During a conference call last month, Sorenson said the company had been testing a 48-hour window for “a number of reasons.”

He elaborated on the benefit of reduced overbooking after the earlier switch from same-day to 24-hour cancellation — a strategy Marriott copied rather than initiated. “There’s nothing worse for a traveler than to show up at a hotel with a confirmed reservation and not have the room there,” Sorenson said. “We’d like to be full every night without a single room empty and without a single customer walk. Now that’s not necessarily something that we will ever achieve, but I think we’re making good progress on that.”

Meanwhile, Marriott’s move helped raise the profile of last-minute B2C services like Hotel Tonight and Priceline “express deals” among several commenters on FlyerTalk.

Additional info: Marriott International’s policy impacts hotels in the United States, Canada, the Caribbean and Latin America, “across all brands except for Design Hotels,” according to a company statement. “Guests will now be required to cancel their room reservation by midnight 48 hours prior to arrival to avoid a fee. This will allow hotels a better chance to make the rooms available to guests seeking last-minute accommodations.” A Marriott spokesperson noted that the policy is 72 hours “in a few select locations.”

Related

Hilton Ends Test Of Seven-Day Cancellation Rates

Hotels Consider More Cancellation Policy Tweaks

Lodging 2017: Time For A New Approach?

Hilton Swinging For The Fences?

Little Hope In Travel Management For Change In Marriott’s Ways

What Does Expedia’s New Power Mean For Lodging Rates?

CWT Using Points, New Rate System To Capture More Hotel Bookings

Podcast 11: James Filsinger, Tom Botts, Chris Vukelich, Flo Lugli and Mitchell Stern

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Rail Revolution? A Travel Pro Can Dream

[UPDATE, June 23, 2017: Expedia completed its acquisition of a majority stake in SilverRail. Terms were not disclosed.]

[UPDATE, June 16, 2017: Adds information about Amadeus Cytric.]

Announcing plans to acquire a majority stake in rail distribution and IT firm SilverRail, Expedia CEO Dara Khosrowshahi last month said rail was “ready for an online revolution.” It can’t come too soon.

Attempting to integrate rail content into corporate travel programs is not for the faint of heart. The rail sector is fragmented, inconsistent and disconnected. Progress is needed especially in Europe where rail is used frequently for business travel.

Rail’s lingering legacies and some outdated technology are mostly to blame. “Unlike air travel, which was internationalized quickly, or car standards, railways until the advent of high-speed rail were really national affairs,” said Will Phillipson, president and co-founder of SilverRail, during an April interview. “Passenger rail was supported by the state, with a single railway carrier by country. The need for interoperability was non-existent.”

Problems still are apparent even within the same country. “If someone is trying to go down one side of the U.K., go across and up the other side, they need several tickets,” explained HRG global travel services director Ian Windsor. He pointed out that the United Kingdom has 27 train operating companies. “Some offer mobile tickets, some paper, some you have to pick up at the station. Some [tickets] allow you to use the Underground, some won’t.”

Rail content and functionality particularly challenge corporate online booking tools.

“It is more complex than it should be because of the market dynamics,” said Mia Andersson, an associate with the Festive Road consultancy. “Rail content is a key driver of what OBT you will choose. There are many discussions internally in corporates at the moment about the major rail-spend markets and if they can use the same OBT. The answer is a different OBT in each market, but your company wants you to pick one.”

Certain rail processes are easier if travelers book directly, though of course that threatens consolidated data and risk management practices. “Punch-out” solutions from corporate booking and agency systems leverage direct links to local rail companies and may work well from the traveler’s perspective. Single-sign-on brings them seamlessly to these websites. “However, it’s more complex from the corporate perspective when using multiple punch-outs,” Andersson explained. “They need data collection and need to track travelers.”

railAt least in the United Kingdom, HRG’s punch-out to the Trainline intermediary works pretty well, according to Windsor. There is integration with the TMC’s back-office, he said, and “we get management information.”

At FCM Travel Solutions, “we work with several intermediaries,” according to Jordy Staelen, managing director for the TMC in France and Switzerland. “We mainly work with Amadeus, which works pretty well with the French railway. But to issue a train ticket from Italy, we need to connect to another system. We work with SilverRail and Trainline. Sometimes we do a direct connect if there is no other solution. In Switzerland, there is no API to the Swiss railway. It is impossible to automate the connection with them so we just have to go to the website to book.”

Corporate booking tool search displays showing rail and air together sometimes are possible and sometimes not. Amadeus has been vocal about modernizing rail selling and distribution systems. It offers a “modular” technology approach for operators. High-speed service Thalys and Swedish operator SJ are among those deploying parts of the solution. Meanwhile, through a 2016 partnership with content aggregator AccessRail, Amadeus-connected agencies can book 18 rail and bus operators in 26 countries “on the same screen as air travel,” according to the Amadeus 2016 global report.

The Amadeus Cytric corporate booking tool has direct connections with Deutsche Bahn, Evolvi (U.K. rail aggregator), NS International (Netherlands), SNCB (Belgium), SNCF (France) and Trainline. There are punch-outs to SBB (Switzerland), the Deutsche Bahn booking portal and, expected in the third quarter, Renfe (Spain). A connection with SilverRail brings in Amtrak, Renfe, SJ and, planned for the third quarter, Via Rail Canada. Integration with the Amadeus Rail Sales Platform will add another connection to SJ (scheduled for the current quarter) and Italy’s Trenitalia (fourth quarter).

Concur As Microcosm

A look at market-leading corporate booking tool Concur Travel shows the many nuances. It provides access to content from various rail operators, sourced from GDSs and direct connections. Reflecting operators’ range of maturity, features and available services are inconsistent from one to the next. Knowing whether and how one can exchange a ticket can be problematic.

For example, there’s a direct connect to Trainline, a platform encompassing 86 rail operators. Users must contact Trainline directly for changes or cancellations. Sales are “instant purchase,” according to Concur documentation, meaning users can’t hold reservations or use a pre-trip approvals process. Seat maps are not supported. Concur doesn’t provide e-receipts. Its mobile app doesn’t offer Trainline reservations.

Concur also has a direct connection with Evolvi (Concur clients can configure the system for that or for Trainline, but not both). To use it, Concur customers must set up “a private U.K. train booking site set specifically to the train travel booking policies of the company,” according to a Concur user guide. That means no commingled air and rail search results.

The same is true when using Concur to book Eurostar tickets via a GDS configuration. If configured with a direct connection to Eurostar part-owner SNCF (French rail), then users can conduct mixed air/rail searches.

International high-speed rail companies like Eurostar are seen as more advanced than most national railways and more attentive to corporate travel needs. Booking Eurostar through Concur, for example, affords the user lots of conveniences: policy parameters, central billing options, trip cancellations and changes. TMCs can process refunds.

But there are gaps. Users can see Eurostar seat maps, but again only if using the direct connection. In cases where Eurostar assigns seats automatically, the Concur Travel itinerary “will not reflect the Eurostar seat assignment in the expected area,” according to Concur. Instead, TMCs may insert seat info in “an unassociated itinerary remark” that Concur includes at the bottom of the itinerary. Meanwhile, because each Eurostar source (Sabre, Amadeus, Galileo and SNCF direct-connect) classifies train cabins differently, Concur users should be mindful when configuring policy controls.

Concur also has direct connections to SNCF and Germany’s Deutsche Bahn. For both, trips can be cancelled via the Concur connection but not changed. For both, users can see mixed air and rail search results. With Deutsche Bahn, if they select a rail option, they’re taken to the operator’s web portal to complete the booking. Bookings are instant purchase. Trips can be cancelled via the Concur connection but, as with Deutsche Bahn bookings of any kind, the traveler must contact the operator to make changes.

Meanwhile, accessing SilverRail’s API enables Concur to “display rail content in a consistent manner, regardless of rail carrier or point of sale, and provide a simple and efficient user experience,” according to SilverRail. Concur’s SilverRail connection currently gives users access to the Spanish and Swedish rail systems.

Again, these connections do not allow for changes. For Spain’s Renfe, for example, “exchangeable tickets are not supported,” according to Concur documentation. “Renfe cannot change these trips at the train station as [its] reservation system cannot access trips booked outside of their website or internal tools. Concur and SilverRail plan on supporting trip exchange in the future.” Concur also is working to provide mixed air/rail searches including content furnished by SilverRail by early 2018.

For now, SilverRail is the merchant of record for Renfe and Swedish rail bookings. “The TMC as the merchant of record will be supported by the second quarter of 2017,” according to Concur information.

Concur noted that it plans to add more rail operators via SilverRail this year, including Italy’s Trenitalia and Belgium’s SNCB.

That is if Concur’s split with Expedia’s Egencia doesn’t get in the way.

The SilverRail Stretch

The Expedia-SilverRail transaction is expected to close in the middle of this year. Expedia’s Egencia division first connected to SilverRail’s API in 2010 to bring in Amtrak. Last summer, the partnership expanded. The connection now allows Egencia customers to access Amtrak.com functions within their programs. Those include e-ticketing, corporate rates, the display of onboard amenities ticket cancellation. Also last year, Expedia incorporated SilverRail into its U.K. point of sale.

In rail, there are few cross-border standards on pricing or distribution. Speaking on May 31 at a Cowen conference, Expedia CFO Mark Okerstrom said one goal is to “standardize rail fares, standardize all of the availability information and ultimately serve it up in a way that either the rail company themselves can transact online or corporate travel firms, like Egencia, can serve it up in their business, or increasingly, online travel agencies like the ones that we own serve that up to their customers.”

On the distribution side, SilverRail’s ambition is to be a GDS for rail, or as Phillipson said, “the ITA Software of rail,” acknowledging that may “be a stretch.” It already aggregates 35 rail carriers.

It has a web-based agent interface but Phillipson said the ideal approach is for TMCs to connect to the SilverRail API, which according to the company provides “a single, integrated service for shopping, booking, and purchasing tickets across multiple carriers.” That allows them to use traveler profiles and natively access bookings.

Travelers can’t make use of some features on certain rail operators’ mobile apps — like calling up a boarding pass — if they initially booked through an indirect channel. On the IT side, SilverRail is pushing airline-like functionality. That would include populating rail bookings with information from travel management profiles, integrating air and rail search displays and multi-modal tickets, facilitating mobile ticketing and boarding pass access, and allowing for exchanges, cancellations and various payment methods across channels.

“Customers have expectations,” Phillipson said, “and those are being led by online tools and services that other modes of transport provide.”

He said work is underway with rail operators “one by one.”

“Railways are entering a precarious place over the next few years,” Phillipson added. “They need to redefine relevance. Many still are living as government-owned monopolies. There’s also competition from rideshare and intercity buses. They have to be where customers are looking.”

According to SilverRail, it also has partnered with Deem, GetThere, KDS, nuTravel and Traveldoo. It claims more than 1,500 corporate customers.

Additional info: There are pockets in North America where rail is useful for business travel, notably Amtrak’s Northeast Corridor. Amtrak participates on the SilverRail platform. It’s also available through GDSs and booking tools including Concur, Sabre GetThere and Egencia. Organizations booking as part of a corporate program only can do so through third parties “but the functionality is basically the same as through Amtrak.com,” according to an Amtrak official. “The biggest difference in the booking path is that Amtrak.com offers more fare options on the initial search. Our corporate partners can leverage the website and the app to make changes and retrieve travel documents the same as any other Amtrak customer.”

According to Concur, its Amtrak direct connection supports mixed air/rail search displays, corporate discount programs and availability in the Concur mobile app. It provides route maps and cancellations (but not changes, which require a cancellation and a new booking).

Concur also connects directly to Via Rail Canada. There is no integrated air/rail display, though Concur described the Via Rail connection as “a superior experience over current GDS booking and improve agency productivity.” It provides the full range of fares and availability (Concur said GDSs don’t). Users can cancel but not change tickets in Concur. Instead, they have to directly email or call Via Rail.

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Air Traffic Control Privatization Proposal Could Obstruct Long-Term FAA Funding

[UPDATE, June 8, 2017: Adds Global Business Travel Association statement, at bottom.]

Corporate travel constituents want a greater focus in Washington on FAA funding and the related issue of air traffic control modernization. The Trump administration on Monday proposed privatizing air traffic control. Hardly a new one, the idea drew lots of fresh criticism and questions from members of Congress and others.

Last year Congress failed to settle on long-term funding due in large part to controversy around ATC privatization and now some fear the same may happen again. FAA currently is operating on an extension, set to expire in September.

Sen. Jerry Moran (R-Kan.) on Wednesday asked Secretary of Transportation Elaine Chao whether she would “help us pass an FAA long-term reauthorization without the privatization provisions” if those provisions do not receive enough Congressional support. She said she couldn’t answer the question without consulting the White House.

Speaking during a Senate Committee on Commerce, Science and Transportation hearing, Moran said that “with the administration’s support of this concept, the chances of getting a long-term FAA reauthorization, in my view, have now been diminished.”

He added that Chao and the administration need to determine whether the nation’s priority is long-term FAA funding or ATC privatization, “because those two things may be mutually exclusive.”

Ranking committee member Bill Nelson (D-Fla.) said, “This entire discussion over ATC privatization distracts from legitimate matters that must be addressed by Congress” as part of FAA reauthorization. He cited “growing frustrations” among the traveling public and the need for stronger consumer protections.

U.S. Transportation Secretary Elaine Chao, former Transportation Secretary Elizabeth Dole, Vice President Mike Pence and U.S. House Committee on Transportation and Infrastructure Chairman Representative Bill Shuster (R-Penn.) join President Donald Trump as he signs proposed reforms to the U.S. air traffic control system at the White House in Washington, D.C., June 5, 2017
Image: Reuters/Jonathan Ernst

Eleanor Holmes-Norton has a similar opinion. Washington, D.C.’s Democratic delegate to the House of Representatives on Monday told attendees to an American Society of Travel Agents event that ATC privatization would require bipartisan support, and that seems unlikely. She is instead focused on funding FAA, and completing the necessary legislation this month or next, “so we’re not stuck at the last moment trying to get a reauthorization done.”

Holmes-Norton is not optimistic about that, either. “I don’t even think we’ll get our appropriations through,” she said.

Why do President Donald Trump, House Transportation and Infrastructure Committee chair Bill Shuster (R-Penn.) and many others favor ATC privatization? According to a White House statement on Monday, FAA’s ATC function is plagued by federal bureaucracy that slows implementation of new technology. Advocates think a non-profit, non-governmental entity can fix that. The White House pointed to what it said were successful ATC privatizations in dozens of other countries.

FAA would maintain regulatory and oversight functions. The new, separate entity would be “more nimble” in implementing NextGen ATC technology meant to modernize and relieve airspace congestion, thereby cutting delays and saving on fuel. It would improve safety and “protect access to rural communities,” according to a White House statement. Such an entity would “insulate” ATC from political wrangling and “the crippling effects of budget uncertainty.”

Chao said privatization is necessary “to accommodate the expected dramatic increase in passenger traffic over the next decades.”

Asked for a short answer on the rationale, Chao said: “We can procure new equipment faster. Government procurement rules are very bureaucratic.” Committee members pointed out that FAA is exempt from federal procurement regulations. Chao said that hasn’t made much difference.

Current aviation taxes supporting ATC would go away in favor of system user fees collected by the new entity. It would be overseen by a 13-member board consisting of constituents across the aviation industry, two of whom would be from commercial airlines themselves.

Committee members argued that the United States has the safest aviation system in the world. “Why would we risk that by handing the whole thing over to an untested, unproven entity?” Nelson asked. “Why give away billions of dollars in government assets that would be governed in large part by the airlines?”

Sen. Ed Markey (D-Mass.) and other members wrapped in recent, high-profile airline IT outages. “If they can’t upgrade their own IT systems, if they can’t figure out how to do it for their own passengers,” Markey said, “to give them the key seats on this kind of board — given the record of safety of the existing system — would be sequentially wrong.”

Committee members also questioned why a private entity, run in part by airlines, would protect smaller and rural communities.

Sen. Maggie Hassan (D-N.H.) raised the privatization concerns of 115 mayors who worry that it’s already hard to attract commercial airline service.

Sen. Gary Peters (D-Mich.) said “it seems inconsistent” that the president’s budget cuts the Essential Air Services program while the administration asserts privatized ATC run in part by profit-minded commercial airlines would look out for rural communities.

He asked Chao, “How do you square that?”

Chao responded by saying “they are two separate issues.” While she “can defend” that cut in EAS funding, Chao said “the decision was made when the administration was just staffing up.” She also said that removing ATC from the federal government would mean “budgeting certainty” that would help rather than hurt rural America. And she reiterated that commercial airlines would hold just two of the governing board’s 13 seats.

Another criticism is that basing a proposal on other countries’ experiences isn’t a sound approach.

During the committee hearing, Sen. Tammy Duckworth (D-Ill.) said, “We are not Canada, we are not Great Britain.” She called privatization “costly and potentially dangerous.”

Chao said the administration recognizes that each country is different, and that the U.S. airspace is the largest and most complex in the world. “Nevertheless,” she added, “there are lessons to be gleaned from the experience of other countries.”

At the ASTA meeting, Holmes-Norton said Congress is “not in the business of reviewing fees, so there is great concern about who would, in fact, speak for the public if there was no Congressional review” of what the new entity charged. “How would that work?” she asked. “These are among the issues that haven’t even begun to be discussed in the way they would have to in order for privatization to proceed.”

Holmes-Norton also threw cold water on NextGen implementation. “FAA says major functionalities of NextGen will be online in Jan. 2020,” she said, referring to the switch to GPS from radar-based systems. “That date, of course, cannot be made. We are too busy with all the moving parts.”

“Friends, NextGen is a fraud,” said airline consultant Mike Boyd, also speaking at the ASTA event. “Look at any Government Accountability Office report. Any DOT Inspector General report. It all says it’s mismanaged. It’s misdirected. It doesn’t have a clue. Doesn’t say anything about money. They haven’t gotten to the money problem yet. It’s just a clueless program. In 1994 myself and another company studied ATC. FAA came to [Congressional] hearings and said they’d have this program fixed in 2000. Now they’re saying 2020. Santa Claus and Elvis will be back before that happens.”

Boyd added that privatizing isn’t the answer. “All you’re doing is privatizing incompetence,” he said. “I think what Eleanor Holmes-Norton brought up … was entirely accurate. You have to think this through before you do it. There are things that do work within the government. This might be one of them.”

Just don’t cite Canada as precedent. “There are more moose in Canada than people, and they don’t fly,” he joked. “So it’s a different story. I think we need to fix what we have rather than rushing off and privatizing it.”

Additional info: The Association of Corporate Travel Executives welcomed the privatization proposal “if this is what it takes to move the needle” on NextGen, but raised questions about ensuring a smooth transition and avoiding work stoppages.

According to the Global Business Travel Association, “creating a not-for-profit corporation to oversee air traffic control, in theory, does offer a remedy” to ATC’s current shortcomings. The Senate Commerce Committee “should consider the President’s proposal, or seriously seek other remedies to solve the problems that includes the concerns of the business traveler,” GBTA wrote.

Disclosure: The Company Dime has an event and research partnership with ASTA.

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What’s A Business Traveler’s Time Worth?

U.S. authorities this week said an expanded “laptop ban” is “still on the table.” A prohibition on large personal electronic devices in passenger cabins on all transatlantic flights would decimate productivity. The International Air Transport Association estimated the impact at $1.1 billon annually. How did it come up with that number?

Moreover, do corporate travel managers work out how much productive working time travelers lose in transit? Should they? Such questions relate to reimbursement policies on premium class, Global Entry, airport lounge access and inflight WiFi. They call to mind the bigger-picture ROI of travel.

IATA’s $1.1 billion figure includes $655 million from the “loss of productive time of business passengers.” Those are defined as first- and business-class passengers on Europe-U.S. routes. Using a “conservative estimate,” IATA reckoned that half of them used personal electronic devices to work in-flight. They did so for five of an average nine hours per flight.

To convert all those hours into dollars, IATA relied on the U.S. Department of Transportation’s “recommended hourly values of travel time savings.” VTTS, in turn, is based on average U.S. worker compensation as measured by the U.S. Bureau of Labor Statistics. DOT’s 2016 number (based on 2015 data) for business air travelers was $63.20 per hour. IATA adjusted that up to $64.60 to account for the 2016 U.S. Consumer Price Index.

Industry consultants said companies should try to put their own numbers on traveler productivity but suggested it’s not a very straightforward exercise. Some found IATA’s approach interesting but took issue with the assumptions.

Why only premium-class travelers? It’s not comfortable to do so, but plenty of business travelers work on laptops in economy cabins. IATA said it was being conservative in an attempt to not overstate the potential impact. An analysis by an individual organization would likely include all its transatlantic business travelers, regardless of class.

Why five hours of lost time? Laptops or no, some travelers prefer to get as much shut-eye as possible en route to arrive refreshed, rather than working during the flight.

Why base hourly estimates on employee salaries? “Value is in the eye of the beholder,” said KesselRun managing partner Brandon Strauss. “I’d love to see more thought around how the value of an employee’s time should impact corporate policies, but there needs to be a lot more analysis than just $64 per hour multiplied by five hours.”

value of timeThe roughly $300 total is too low, Strauss said, because it doesn’t account for “the output of that work” and the “relative value” of that employee. In other words, if the value of that trip was “only” $300, he reasoned, the traveler shouldn’t go.

Consultant Scott Gillespie of tClara, who has helped popularize the term “traveler friction,” said companies “absolutely” should do some kind of calculation to value their employees’ time. Though he said IATA’s $64 per hour estimate is a reasonable basis for this analysis, he also argued that a business traveler’s time is worth more.

Rather than crunching salary data, Gillespie advocated looking at gross profit per employee. For many big companies, he said, that equates to a figure several times higher than an employee’s compensation. “You should look at what a road warrior is doing for the business,” Gillespie said, pointing to revenue-generating salespeople as an example. When time is lost, “you therefore have to look at what is not getting done.”

On the other hand, Andy Menkes of Partnership Travel Consulting noted, not all employees are profit-producers. He also pointed out that a senior-level exec who flies in premium class probably makes much more than $64 per hour. He said to gauge the value of time, companies should look at the demographics and specific compensation for their travelers, and the purposes of their trips.

PricewaterhouseCoopers explored this topic when Mark Williams was managing travel there in the 1990s and early 2000s. He said compensation was just one of three numbers considered. The others were the hourly rate at which the company billed customers and the average collection rate. The latter, pegged at about 80 percent of the billing rate, accounted for instances when clients didn’t pay in full or the engagement extended beyond any pre-arranged fixed fee.

Now partner at GoldSpring Consulting, Williams said the impetus at PwC was assessing whether flight connections made sense, economically, as a policy parameter rather than nonstops. “It didn’t,” he said.

Williams said he’s not aware of many companies that calculate the value of travelers’ time. He thinks they should, and the big question is determining which dollar amount to use. He suggested starting with the “fully loaded wage cost” (compensation, plus benefits and taxes) and adding some type of premium to recognize that an employee’s value is greater than his or her compensation. What that premium should be, exactly, would vary from one organization to the next.

Williams also pointed to the age-old question of whether, for the purposes of billing, travel time should be included. He said PwC didn’t charge for it unless employees actually were working in transit, while other professional services and law firms include travel time regardless, “even if they’re watching a movie.”

According to consultant Tom Ruesink, companies talk a lot about assessing trip value but he’s seen few do the “heavy analysis in-house as there are a lot of subjective factors to value.”

But Ruesink said companies usually think about such things when they examine class-of-service policies. “The biggest factor now is rest on long-haul flights,” he said. “Does a traveler get more rest in the business cabin and therefore can be more productive when they hit the ground? The cost of time discussions are usually much more observational and less quantifiable.”

Carlson Wagonlit Travel is one that has tried to put hard numbers on the concept, using worker salaries to do so.

In 2012 it introduced the Travel Stress Index. It determined that travelers lose an average of 6.9 hours of productive time per trip. That equated to $662 using an employee compensation benchmark of $96 per hour (including salary, benefits, etc.). According to CWT Solutions Group vice president Christophe Renard, the TMC settled on the weighted $96 figure by considering salary data by seniority level of surveyed travelers, the mix of those levels among travelers and their countries of origin.

Renard’s team has “run our TSI algorithm for some clients to assess the lost productive time of their travelers,” he said. “We used averages for salary data but indeed we can use a company-specific HR data feed to ensure this is a very accurate estimation for that company.”

IATA also estimated that an expanded laptop ban would mean a 9-minute increase in transatlantic travel times: five on departure (due to “the behavioral response of passengers to the additional screening requirements combined with the lost time that it takes to actually screen passengers on departure,” according to an IATA official); three on arrival (for travelers to retrieve their checked electronic device); and one for flight delays. IATA based those “conservative estimates” on observations from the initial laptop ban covering seven Middle Eastern and African airports.

Additional info: DOT has calculated the value of travel time savings (VTTS) on and off since 1997. It said it does so because that value is “critical” for assessing infrastructure investments and rulemaking initiatives.

For business travelers in general, DOT’s VTTS “is assumed to be equal to a nationwide median gross compensation, defined as the sum of the median hourly wage and an estimate of hourly benefits.” For 2016 (based on 2015 data), it was $25.40 per hour.

DOT recognizes that a “distinct wage is justified” when considering air travel (or high-speed rail). The latest government data on that comes from a 2001 U.S. Bureau of Transportation Statistics study. According to the data, the median household income for business air travelers at that time was about $105,000. That was 2.5 times greater than the overall 2001 median household income, as per the U.S. Census Bureau. Applying that 2.5 factor to the 2016 general business traveler VTTS resulted in an hourly business air traveler VTTS of $63.20.

It was $60.70 in 2015, $60 in 2014 and $57.20 in 2011. DOT calculated VTTS in 1997 and 2003 using a different methodology.

These are averages; DOT recommends applying a one percent increase in VTTS per one percent increase in the travelers’ income.

Airlines affected by the initial laptop ban, according to IATA, reported that about 15 percent of all flights were delayed by an average of seven minutes. Using DOT’s calculation of $47.10 for the average value of travel time for all airline passengers (adjusted upward to $47.20 for the 2016 CPI), IATA’s bottom-line annual impact for this component is $216 million.

The remaining $195 million impact in IATA’s $1.1 billion estimate relates to laptop rental costs. IATA assumed 80 percent of passengers normally carry large personal electronic devices, and that half of them normally use them during flights. It used a “conservative estimate” for tablet and laptop rentals, excluding delivery and insurance costs, of $18.50 per day.

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New Private Luxury Terminal At LAX Offers Corporate Memberships, But Are There Takers?

Who will pay thousands of dollars to use a private terminal before boarding a commercial flight? Rich folks, of course, but also maybe those who employ rich folks. At LAX, where celebrities move through and paparazzi pursue, entertainment companies and talent agencies may take a look at The Private Suite, a facility that opened this month. They may not be the only types interested in corporate memberships.

By all accounts, the people who put together The Private Suite thought of everything, at least when it came to designing the actual product. It’s operated by Gavin de Becker Associates, a firm specializing in protecting public figures.

The gated facility is on the opposite side of the airport from the rabble of the main passenger terminals. Members avoid the nasty road traffic getting into LAX. At the private building, they get their own TSA screener (for outbound) or customs official (for international inbound). There are lounges for individuals and for groups. Users get rides in BMWs across the tarmac to their commercial airline’s lounge or direct to the plane. The glitz includes pre-flight massages, manicures and haircuts. A team of eight escorts travelers, handles the bags and attends to special service requests.

It’s a private jet experience without the private jet. All for a mere $2,700 per group (up to four people) for a domestic flight. For international flights it’s $3,000 per group. That’s if you have an annual membership, which runs $7,500. Non-members can pay higher “trial” rates.

Corporate memberships apparently come with similar pricing. A spokesperson said the company still is working to set up corporate accounts and wouldn’t answer questions.

LAX Private Suite

Image: Blackbow17 via Wikimedia Commons

Multiple Los Angeles-based sources who looked at the service thought it would appeal to some despite the cost. They asked not to be quoted because they were not authorized to speak to the media.

New York-based CBS Corporation vice president of travel services Hal Rudy called the concept “interesting.” He questioned the pricing but said he would consider the service for talent travel if more attractive rates could be had.

“It may be cost-prohibitive for us as when our talent does fly commercially, we use a paid greeter service for considerably less money,” he said. “I would imagine if the talent is traveling on their own dime they would use this service when flying commercially.”

Altour provides travel management services to entertainment and other VIP clients. SVP of West Coast operations David Sefton said he could see top talent demand The Private Suite in contracts with entertainment companies. But he also pointed to that industry’s existing private meet-and-greet services. Sefton suggested private equity firms may be the more likely corporate users.

He said Altour is interested in securing volume-based discounts on membership fees for some clients.

United Airlines at LAX receives VIP travelers from and hands them off to The Private Suite “every day,” said Anthony Toth, the carrier’s Western Division managing director. Passengers are taken to the airplane or an elevator from the ramp directly into United’s lounge. “We have our own car for moving Global Services members and stars,” he said, “and could even do a car connection.” United’s Global Services is the ultra-elite level of its loyalty program.

Toth said United is considering how to jointly market to corporate accounts. “There may be ways to partner together for more than just celebrities,” he said. “I see huge applicability: ambassadors, government dignitaries and CEOs who just want that level of service.”

Toth agreed that the proposition “sounds expensive,” but suggested membership may be worth the time saved by avoiding crowded customs lanes after inbound international flights.

It also could appeal to those with excessively long layovers at LAX who want to spend the time resting or squeezing in a meeting.

The Private Suite apparently had to negotiate access to each individual airline’s ramp space but still had a few to secure by the time it opened, according to sources. Not with United. “We took care of that,” Toth said.

A spokesperson for the facility did not answer questions about ramp access or the next steps in corporate sales. Some travel management pros who serve the entertainment industry last week said their calls hadn’t been returned.

Sources wondered if the next private terminal for commercial passengers in the United States would be in New York. There’s already one at London Heathrow, offering many of the same perks as the one in Los Angeles. Called Heathrow VIP and also known as Windsor Suite, it’s been open for about five years to those premium-class passengers who can afford to plunk down another £2,750 per visit. According to a Heathrow Airport spokesperson, the facility does not arrange for corporate memberships.

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Another Travel Startup Leans On TMC Support

Disadvantaged relative to bigger companies that negotiate their own airfare discounts, small businesses mostly pay retail. TravelBank co-founder and CEO Duke Chung is out to change that. In a market full of business travel startups, one of his company’s angles is rebates for users.

TravelBank introduced its first products in November. They are an expense app and budgeting tool, offered for free. This month it added flight bookings. In an interview last week, Chung described the company as a “corporate online travel agency.”

TravelBank has an ARC number. It is using what Chung called a “Midwest” travel management company for after-hours support by phone and chat support between 7:00 a.m. and 7:00 p.m. Central time. He passed on naming the company.

A call to TravelBank’s support line went to Tower Travel Management, based in the Chicago area. Tower CEO John Smith declined to comment.

“We looked at 100” travel agencies, said Chung. “Culture is really important. We share in the success.”

TravelBank earns commissions from aggregated business with airlines. The greater the volume, Chung said, the larger the commissions. Corporate users earn a 1 percent rebate on their spending. Customer service calls incur no user fees.

Chung noted that TravelBank has “direct deals” with more than 10 airlines. A spokesperson listed as partners China Southern Airlines, Copa Airlines, Icelandair, JetBlue, Saudi Arabian Airlines, Singapore Airlines and Virgin Atlantic.

Image: Thinkstock

TravelBank’s app is available for Android and iOS devices. Users input their destinations and travel dates. Applying algorithms and some artificial intelligence, the system delivers results based on various criteria including flight duration, amenities like power outlets and Wifi, price value, upgrade potential and airplane type.

A lot of corporate travelers, Chung said, want to fly on larger airplanes because there’s a higher likelihood of an upgrade. He said TravelBank is working to incorporate loyalty program status into such considerations.

Companies can earn points in airline small business programs when they book through TravelBank, according to a spokesperson. Most small businesses don’t have their own negotiated airline deals, but if they do, TravelBank will incorporate those too.

The system learns traveler preferences and adjusts search results accordingly. Inventory comes from global distribution systems. Chung said TravelBank uses all three primary GDSs for different purposes. “Social seating” lets users see which flights and seats co-workers have booked, if they’ve opted in for that feature.

Hotel and car rental reservations could come later. For the time being, Chung said, TravelBank is focused on getting better at airline bookings. He acknowledged it’s “no easy feat.”

TravelBank claims 3,000 expense system users from 700 mostly small companies.

Receipts from TravelBank flight reservations flow into the user’s expense reports. The system can sync data with corporate credit cards and certain general ledger platforms.

Asked what makes TravelBank’s different from the scores of other expense tools in the market, Chung had three answers.

The first is a predictive budgeting tool travelers can use before booking. They pick the date, destination and cost components they’d like to consider — air, car, hotel, meals and ground transportation. The system calculates a budget based on real-time GDS data and GSA per diem rates.

Users can submit the expected budget to their bosses for approval. Machine learning helps improve predictive capabilities.

Beating calculated budgets earns points for travelers. Those points are redeemable as credits with Airbnb, Lyft, RedAwning, Uber and others. Chung said the concept is similar to Google’s corporate travel program and Rocketrip’s trip budgeting tool.

The second differentiator, Chung said, is the mobile-first approach (it also has a desktop browser interface for adding expenses, but not yet for bookings). The “camera-first” design lets users quickly snap pictures of their receipts. Scanning technology determines expense types, and learns as it goes. TravelBank touts “24-hour direct deposit reimbursements.”

The third is the price: free. Chung said that while most expense system providers charge subscription service fees per user, “that’s not how we intend to make money.” Expense was the entry; supplier revenue from bookings is the moneymaker.

New Entrants New Markets

Other new entrants partnering with TMCs include 30SecondsToFly (now backed by Christopherson Business Travel), NexTravel (Adelman, Atlas Travel & Technology Group, W Travel) and TripActions (S.R. Travel). Upside enlisted a bunch as advisors.

Fulfillment and consulting services are a growing business for Atlas, according to president Lea Cahill. The company has four other such customers in addition to NexTravel. “While one may think these are competitors,” Cahill added, “we feel there is room in the market place for various types of engagements that evolve within the travel industry and leverage the expertise of travel management companies that have industry and technical experience.”

Christopherson has a similar view. “We facilitate the vendor negotiations, travel fulfillment, travel risk management and the servicing of the travelers,” according to CEO Mike Cameron. “We’re always looking for new markets and I view travel tech start-ups as simply that, a new market.”

Cameron acknowledged that 30SecondsToFly is a competitor, “but so is every other travel tech start-up that is working to innovate and create the next travel disruption. We would rather be part of the next big thing than be disrupted.”

“Most of the travel tech start-ups we’re talking to don’t seem to have ambitions in obtaining an ARC/IATA license,” he added. “They want to focus their investment on their technology and outsource the fulfillment to us.”

Additional info: TravelBank parent Travelator Inc. is registered in California and headquartered in San Francisco. New Enterprise Associates and Acel Partners backed the company with $10 million in Series A funding. Chung started his career by building what became customer service software company Parature out of the dorms at Cornell University. In 2014, Microsoft bought it for $100 million.

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Talking Approvals And Expenses With Unit4’s Digital Assistant

Unit4 provides enterprise resource planning systems to governments, not-for-profits, higher education and professional service firms. Based in Utrecht, the Netherlands, it’s known in corporate travel for powering Sabre’s Central Command travel agency back-office software. It also offers an expense management product and, as of this spring, a digital assistant. Named Wanda, the chatbot stems from Unit4’s focus on “self-driving applications.”

The idea is to let human users easily interact with the company’s enterprise software components. Wanda is accessible via popular messenger apps and talks to other digital assistants. Formally announced this month, it is starting with five features. In addition to purchasing, task and time management, one of them is a travel assistant.

It doesn’t make travel reservations. Rather, users tell Wanda (by typing or speaking) about a business trip they’re planning and Wanda asks the user’s manager for approval.

It’s conversational. During a demo for The Company Dime last week, Unit4 global head of presales and product strategist Thomas Staven told Wanda that he needed to travel to Stockholm on the coming Wednesday. Wanda asked for the trip purpose and cost estimate. Users can input an estimate or let Wanda come up with one based on similar, past trips.

Wanda reports back with approval or rejection. If approved, the user goes off to book travel in some other channel.

In a future version, Wanda might search for the best flights and hotel rates — perhaps based on previous trips — and handle the booking via the client’s travel management company. Staven said the company is closing in on embedding travel policies and letting Wanda answer related questions.

A next step is integration with Microsoft Office 365. In that way Wanda would be proactive. When finding calendar entries related to an upcoming business trip, it would ask if the user wants to send a travel request.

Unit4's Thomas Staven

Unit4 global head of presales and product strategist Thomas Staven

The digital assistant also helps with expense reporting. Users can upload a receipt image or manually enter the expense item’s type, amount, currency and date. Wanda guesses to which expense report that item belongs, allowing the user to adjust. Depending on configuration it also may ask the project with which the expense should be associated. It might also press the user on policy compliance. In the demo, after Staven uploaded a taxi receipt image, Wanda asked why he didn’t use public transportation.

Wanda’s roadmap includes location services, more policy features, importing receipts embedded in emails and integration with new payment mechanisms.

It’s built on the Microsoft Azure cloud platform and uses natural language processing, machine learning and artificial intelligence.

Wanda doesn’t have its own voice. “We decided to leverage apps already in use,” Staven said.

It’s accessible through such popular chat apps as Slack, Skype and Facebook Messenger, with more such connections to come. Unit4 introduced Wanda to Amazon’s Alexa.

“This ability to bring natural language controls to any app is a massive game changer for enterprise computing,” according to a January 2017 blog post by Unit4 chief architect Claus Jepsen. He added that it is “great that we can use this for booking travel or claiming expenses for example, but more crucially the ability to ask questions and follow-up in the way you’d have a normal conversation is incredibly powerful. For the first time, speech recognition available through applications like Alexa gives us the ability to build conversational applications that business customers can and want to use every day.”

The company also wants Wanda to befriend Microsoft’s Cortana, Google Home and other digital assistants.

Wanda users must work for companies that have installed Unit4’s expense management software. It comes in two flavors. Business World Expenses is part of the larger Unit4 Business World ERP offering. The company calls this the “standard solution.” Travel & Expenses is the “premium” standalone system designed “for the most advanced requirements.”

Like a lot of systems, Travel & Expenses features receipt capture.

“The innovation is what happens afterwards,” said Unit4 global product manager for time and expense Oistein Nordhagen.

By that he means the system predicting the type of expense and determining if the account has a preferred relationship with the supplier. With machine learning, it gets better at it. Because it’s “public cloud learning,” Staven added, the system learns across all system users, not just among those in the same company.

The newest module now in testing includes “travel management connectors.” Nordhagen said “open APIs” could show expenses that are in and out of policy or whether the user booked directly or with the TMC. Depending on how client companies configure the system, end users might have to explain out-of-policy items before being able to submit.

In North America, Unit4 resells Travel & Expenses via ServeVita, a software integration consultancy.

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Amex Combines Virtual Account Numbers And Centralized Business Travel Accounts

Amid a steady flow of announcements about virtual payment in corporate travel, American Express is putting on a different spin. It has created a model that combines the single-use concept of virtual account numbers with the centralized Business Travel Account setup. Amex’s “enhanced BTA” now is available in Australia and the United Kingdom, with additional markets under consideration, according to a company spokesperson.

The official declined to comment on whether the new offering would be available in the United States, but Amex’s U.S. website proclaims the introduction of “virtual accounts for the reality of travel.” [UPDATE: Subsequent to initial publication of this article, the linked page was revised and no longer mentions virtual accounts.]

Business Travel Accounts, or BTAs, also are known as Central Travel Accounts, lodge cards or ghost cards. They traditionally have a single account number. Employees of companies that have gone this route use that one number mostly to book airfares via their travel management companies. The employer gets one bill and makes one monthly payment to cover all the charges.

According to a Global Business Travel Association/U.S. Bank 2015 study, BTAs are “best utilized for airline transactions, such as allowing the company to purchase blocks of lower-cost tickets and to improve the management of tickets purchased in advance. They also help when reconciling the ticket data, including the passenger name, with the transaction.” The study noted that these payment accounts also protect against fraud and provide travel management reports.

A 2015 BCD Travel report laid out some of the downsides. Of course, BTAs can’t be used for taxis or other en-route purchases. They’re incompatible with low-cost carrier airfares, according to the report, “because they don’t come with the security code that these companies require.” Though BTAs are “less exposed” to fraud than individual corporate cards, their limits “tend to be very high,” BCD noted, and therefore one successful instance of fraud “could have devastating consequences.”

According to information posted to Amex’s Australia website, the company’s “enhanced” BTA would fix some of those problems.

It’s still a centrally billed account that provides spending visibility. The addition of virtual account numbers, though, further minimizes risk and improves policy compliance. That’s because unique 15-digit VANs are generated for each specific booking (air, car and hotel) via the client’s TMC and sent to merchants. As with other virtual payment programs, client managers can set spending limits, valid vendors and effective dates.

“VANs let you customize your BTA using defined data fields,” according to Amex. “The data from the TMC (booking) and the travel providers (billing) is sent to the BTA and is consolidated in a single eData File for reconciliation.”

In written comments, the spokesperson indicated that Amex BTAs heretofore covered “expenses for air and travel management company-invoiced transactions.” Clients expressed interest in expanding central-bill capabilities to more types of travel expenses.

“Enhanced BTA now offers central billing for hotel charges in the U.K. and Australia, as well as low-cost carrier air transactions in the U.K.,” the official wrote. “The centralized account also enables client companies to pay travel expenses for large groups, employees who do not have corporate cards and travelers who are not employees, such as job applicants and consultants.”

Payments company Conferma automatically generates VANs for TMC bookings. The Amex spokesperson explained that single-use VANs roll up to the master BTA account.

virtual-BTA

Image: Thinkstock

Some Acquis Consulting Group clients already are using the Amex BTA with virtual account numbers “in select markets,” according to principal Debra Moss. “The driver seems to be the TMC. In some markets, the TMC provides significantly better terms for using the virtual BTA due to the controls inherent in using a BTA and the security inherent in the VANs. If travel management companies begin to include the use of VANs as a driver for more favorable contract terms, there is no reason to think we won’t see an increase in the use of BTAs with virtual account numbers.”

TCG Consulting senior director Jim Coufal said the problem with traditional BTAs is less about fraud than it is the risk of excessive or unauthorized use. Amex’s enhanced BTA would help prevent that.

And it would help with reconciliation. Coufal noted that by combining its pre-existing virtual payment product with the BTA approach, Amex is creating a single reconciliation process through its online Corporate Account Reconciliation tool. He said that would make life easier for Amex clients and for the TMCs that support them.

MW Travel Consultancy principal Martin Warner said another big benefit would be additional use cases. “For example, virtual cards could now be used for the TMC transaction fee on a per transaction basis and therefore easily allocated to the individual transaction to which it is associated and to individual cost centers,” he explained. “Previously transaction fees were billed in batches on a monthly basis due to the fact that if attributed/charged to the BTA account, they were notoriously difficult to reconcile due to many (hundreds) of ‘same small amount’ transactions without a unique identifier to allocate to the right air transaction.”

Warner said he expected other payment companies to follow with similar products combining CTAs/BTAs with virtual account numbers.

An AirPlus official said the company has been doing it for years. “In all markets where we offer our AIDA virtual payment solution, it can be linked to our AirPlus Company Account,” according to the spokesperson. “This allows us to consolidate all expenses onto one invoice for a customer.”

Coufal said he has observed a general trend away from BTAs due in part to administrative costs. He pointed to fragmented data collection. It’s helpful when data from BTAs feed expense systems, he said, but most customers reconcile outside those systems and “are not getting data in one place.” Instead, some TCG clients opt for individual corporate card programs in a central bill/central pay configuration. That obviates the need to manage credit limits for employees while providing some of the same back-end benefits as BTAs.

Related:

Challenges Could Make A Fiercer American Express

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GBTA Speakers Attempt To Answer Virtual Payment’s Questions

United States Requires Virtual Cards In Next Federal Payment Program

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NDC’s Upshot: Altered TMCs, Evolved Air Deals

[UPDATE, May 26, 2017: IAG informed industry partners that British Airways and Iberia would add a $10 fee as of Nov. 1, essentially for each one-way trip, on tickets purchased in global distribution systems. The fee will be displayed as a “Q charge” in fare constructions, and included in itinerary fare quotes. Refunds will align with the rules of the fare. The fee will not apply to fully flexible fares, and there are some other exceptions. It will, however, apply to tickets purchased for travel on codeshare partners. More details here.]

[UPDATE, May 26, 2017: HRG said it would connect to British Airways using NDC.]

[UPDATE, May 26, 2017: Concur said it would connect to British Airways and Lufthansa using NDC. Concur also has TripLink plans with both carriers. “All these products will be live” later this year, Concur announced.]

British Airways expects later this month to share more details about its distribution strategy. Possibly in conjunction with a surcharge on GDS bookings, BA will discuss use of IATA’s New Distribution Capability. Lufthansa made its big splash along these lines nearly two years ago. Last week the Germany-based airline group hyped NDC-enabled direct connections with a pair of U.K. travel management companies. While NDC’s potential impact on distribution chain economics remains fuzzy, corporate travel benefits are starting to come into focus.

Generally, those benefits fall into two buckets. One is accessing in the indirect channel (TMCs and self-booking tools) all the products and services sold through the direct channel (airline.com websites). Airlines say it’s important to differentiate themselves versus competitors in all sales channels. This should help travel program managers, too, by keeping travelers within designated systems. Working with the KDS self-booking tool, PwC secured such an arrangement with U.K. carrier Flybe.

The second is securing personalized products and services.

Airlines won’t be limited to the 26 letters of the alphabet when constructing fare types, said Festive Road managing partner Caroline Strachan. “In a future contract,” she explained during The Company Dime’s April Teleconference, “you might have 10 different types of an economy fare and 10 for business class, and you can personalize based on the kind of traveler.”

This would transform corporate airline relationships.

“Up until now we have been negotiating purely on costs — discounts, rebates, fixed fares and so forth,” said Ingersoll Rand global travel, fleet and meeting services director Pascal Struyve, also during the April Teleconference. “We’ll start talking way more about experience.”

Each organization would pick the product attributes that are important to them. Maybe last-seat availability comes into play, if an account is willing to pay a premium for it. A member of IATA’s travel manager advisory group in Europe, Struyve said he would evaluate the idea for certain routes. In other cases, it may not be worth it, just as last-room availability in the lodging world appeals to corporate buyers in some but not all situations.

Dave Weaver

Bechtel Corporation manager of travel procurement Dave Weaver

Bechtel Corporation manager of travel procurement Dave Weaver told Teleconference listeners that airlines today block off seats for preferred travelers, “but we don’t have the visibility into that today in all the systems we use.” He, too, pointed to hotel LRA to describe the considerations: “If you have LRA on your preferred rate, you are relying on the faith of the vendor to provide that and be transparent with the information. It is not really measurable and controllable.” If last-seat availability proves otherwise for airline contracts, “great, it’s on the table.”

What’s measurable also colors Struyve’s thinking. The more quantifiable, he said, the better the airline relationship. If airlines want to use NDC to personalize “the right offer,” the client should know how often the airline actually is delivering. “In today’s world, we are held accountable for marketshare or volume targets,” he said, but in the future it would work in both directions. That could mean new service-level agreements or key performance indicators embedded in corporate deals.

TMCs And ‘Service Intelligence’

One concern among travel buyers is the potential flood of product and service information going directly to travelers. Won’t program managers lose control? IATA NDC program director Yanik Hoyles addressed the concern during a Business Travel IQ webinar last week. “Whatever environment we are in tomorrow, the buyer still will be able to control what comes through that pipe with their travel policy,” he said. “It’s just that there will be more stuff to control and more opportunities to allow things to come through if they want to let them through.”

This is where TMCs can continue earning their stripes.

“Corporations still want to manage spend,” said Weaver, a member of IATA’s North American travel manager advisory group. “We still need to control the buy, so how do we do that in NDC? That’s going to put a lot more pressure and a lot more accountability and responsibility on the intermediaries going through this content to deliver the right corporate policy-driven price.”

This is part of what Weaver called “service intelligence.” For TMCs, that also includes understanding the value of client travelers’ time and moving away from strict transaction-oriented mindsets.

Struyve agreed, using the familiar refrain that TMCs must become “travel consultants in the true sense of the word.” Since his program spans the globe, requires consolidated reporting and considers duty of care, he saw no path forward that excludes the TMC as an essential element.

Though it’s not using NDC, Siemens is booking simple transactions on Lufthansa without a GDS. Officials there also talked about the need for the TMC to up its game on what’s left.

U.K.-based TMC Portman Clarity said it is testing with one client the Lufthansa direct connect using NDC. A Farelogix application programming interface connects Lufthansa’s res system with Portman Clarity’s point-of-sale systems. Those are white-labeled versions of booking technology developed by Atriis Technologies and other partners, according to Portman Clarity CEO Patrick McDonagh. GDS and non-GDS content is commingled in one spot for agents and for travelers using the self-service components.

McDonagh hoped GDSs and NDC-enabled channels would work together. Maybe when the dust settles, in some cases, functions including booking, ticket management and schedule changes stay in GDSs while rich content and additional products and services come in through an NDC channel. Portman Clarity embraced the Lufthansa direct connect to “influence change” rather than being left behind, McDonagh said.

He acknowledged that “lots of work” is needed for NDC to replicate everything GDSs do. The parties are in “discovery phase” on sorting out how much manual effort will be required to handle post-ticketing tasks like exchanges and refunds, he said.

McDonagh also said part of the challenge is the loss of GDS incentives and reduced profitability on bookings through the direct connect. “It depends on what we agree with the airline,” he said. “As an early adopter, we are in position to make sure commercially we are made whole.”

Click Travel is another U.K. TMC publicizing participation in the Lufthansa/Farelogix program. Executive chairman Simon McLean indicated in emailed statements that client fees are no different for Lufthansa direct connect bookings. He also discussed losing GDS incentives on relevant Lufthansa transactions and the impact on margins:

“We have anticipated losing such incentives anyway. The world of direct connects is going to change how TMCs work commercially. It’s time to get on board rather than burying one’s head in the sand. The revenue model of travel agencies/TMCs has to change, and the days of being paid to simply make bookings are numbered because travel suppliers don’t see that as adding value to their business anymore. We need to find new ways of providing value to travel suppliers.”

Lufthansa connects into Click Travel’s travel.cloud platform, used by agents and customers. For Lufthansa bookings, McLean said Click Travel also needs the Farelogix Sprk desktop system for “some processes” that are not yet available via the API, “but once they are this will change.”

BA On Tap

Several other carriers are pushing ahead on NDC initiatives. British Airways is among the more active. Asked about BA, McDonagh said Portman Clarity is “working actively on their next stage.” McLean wouldn’t confirm Click Travel’s involvement, saying only that the TMC has “a number of other direct connects under development.”

“BA seems to be focusing on expanding the capabilities offered by their NDC interface, with a (comparatively, at least) wide array of offer and order management features, including cancellations and changes of itineraries as well as the more commonplace ancillary merchandising support,” according to a January 2017 report from airline IT research firm T2RL. “With BA now being connected to various aggregators, agencies and both Skyscanner and Kayak, we feel British Airways has the broadest and most mature NDC rollout to date in the market.”

According to BA documentation, the airline’s NDC program will offer seat and bag purchases, improved product feature information, a lowest-fare finder, reduced debit memos and continued payment by “credit and debit card or IATA BSP (where available).” British Airways declined to make officials available for an interview.

A recent ARC presentation positioned British Airways at one end of a spectrum of airline approaches to NDC. Focused on a “direct distribution strategy with the agency channel … BA would issue the ticket/EMD and bill the credit card. All post-ticketing changes would go through the NDC process,” according to ARC.

On the other end of this spectrum were American and United, whose plans ARC summarized as implementing “one or more of the NDC standards” and making “little to no changes to their distribution strategy with the agency channel.” For those carriers, NDC-compliant distribution comes into play via GDS partners.

Additional info: IATA will discuss NDC at a business travel summit on May 30-31 in Geneva. It reported that more than 100 TMCs participated in its 2016 summit. After partner BA similarly hosted constituents last fall, AA has scheduled an NDC Summit for June 22-23 in Dallas.

Related:

Direct Airline Booking Isn’t Legit For Lufthansa’s Clients That Manage Travel

Airlines Diverging On Custom Corporate Bundles

Explainer: IATA’s One Order

Shelved US Airways Direct Connect Evokes Airline Distribution Aspirations

Explainer: IATA’s New Distribution Capability

Teleconference 8: NDC In Corporate Travel

Teleconference 1 (Beta): Airline Direct Distribution

Teleconference 5: Inside TMC Economics

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Who Speaks For You? (And What Are They Saying?)

Many groups advocate for a wide range of travel issues. Some relate to corporate travel, but who speaks specifically for the corporate travel industry?

Sixty attendees to the Association of Corporate Travel Executives’ New York event this week answered that question as part of an informal poll. They mentioned ACTE, Airlines for America, the American Society of Travel Agents, the Business Travel Coalition, the U.S. Travel Association and a few of their own organizations. Airline reps pointed to their companies’ active government affairs departments. Some said no group really represents the industry voice. By a wide margin, the most often-mentioned organization was the Global Business Travel Association.

That’s no surprise, even among attendees to an ACTE conference.

GBTA is active in Washington, at the local level and in Brussels. It runs a yearly legislative affairs event in Washington, during which members can meet U.S. senators and representatives. The 2017 edition happened this week. GBTA’s government relations committee is co-chaired by travel buyers. The group claims its political action committee is “the only federally recognized PAC representing the business travel industry.”

During a phone interview last week, new GBTA vice president of government affairs Andrew Meehan said there could be room to work with other groups on certain issues. That would please a few poll respondents who gave GBTA better grades for its efforts than for results. Some pined for stronger advocacy through a more unified voice.

“In any position that I have worked in during a decade of government relations, I have found there never is a shortage of coalitions to build,” Meehan said. GBTA recently worked with flight attendant groups on a successful fight to ban inflight cell phone voice calls.

He pointed to the pursuit of expanding (or at least maintaining) the Visa Waiver Program. That position has broad support. Proponents include Airlines for America, the American Hotel & Lodging Association, ASTA, GBTA, USTA and various chambers of commerce.

Andrew Meehan

GBTA vice president of government affairs Andrew Meehan

Despite its advocates, the VWP “comes under constant scrutiny,” Meehan said.

When asked which travel-related issue should be a greater priority in Washington, some poll respondents mentioned visas and border crossings. Anything that impedes travel is of course a concern for industry suppliers and companies that send people out on the road. Travel visa issues (potentially affecting both inbound U.S. travelers and Americans traveling to Europe), the “laptop” ban and the “Muslim travel ban” unnerve travel people. A tarnished image of America only hurts the country’s tourism sector.

Everyone wants a safe and secure aviation system but new rules sprung on the traveling public raise many questions. Both ACTE and GBTA issued statements asking a number of them. For some, though, such statements didn’t go far enough.

To push the message, ACTE executive director Greeley Koch last week spoke at a hearing convened by New York City Council’s Committee on Economic Development. He was there to discuss the travel and tourism ramifications of the travel bans. Koch pointed to a recent ACTE survey showing that “uncertainty regarding travel to the U.S. was suddenly affecting travel agendas.” He said businesses and their travelers “abhor uncertainty.” It leads to cancelled trips. That uncertainty, he said, “needs to end here.”

Thirty-eight of the 60 respondents to The Company Dime poll said they were worried about the Trump Administration’s impact on business travel.

Stateside

The most-cited issues by polled ACTE attendees were FAA reauthorization and closely related air traffic control modernization. FAA has operated with 23 short-term extensions, the current one set to expire on Sept. 30, 2017. GBTA said Congress ideally would pass a long-term reauthorization before that happens.

It’s hard to find opposition to a “NextGen” air traffic control system. It’s of primary concern to Airlines for America, GBTA, USTA and others. President Donald Trump’s budget blueprint calls for the Federal Aviation Administration’s air traffic control function to “shift” to “an independent, non-governmental organization, making the system more efficient and innovative while maintaining safety.”

Several poll respondents said travel taxation needs more attention. Airlines for America wants the tax burden on air travelers reduced, claiming that would “help keep airfares affordable.” Specifically, the association wants Congress to repeal the commercial jet fuel tax (currently 4.4 cents per gallon), reject any increase to Passenger Facility Charges and stop any proposals regarding “a value-added tax approach to airlines’ optional services.”

GBTA argues that more of the security fees paid should go to actually improving aviation security. While Trump’s budget blueprint calls for an increase in the percentage of collected funds directed toward aviation security, “having any amount of this fee go towards deficit reduction or other needs unrelated to the travel industry is too much,” according to a GBTA statement.

“We should all pay our part to cut the federal deficit,” Meehan added, “but security fees are supposed to help TSA recover costs to pay for aviation security.”

He talked up the idea of expanding biometric-based security screening at airports. By leveraging technology, Meehan said, it’s possible to “create a seamless, frictionless screening environment that is more secure than what you have now.” Trusted traveler programs like the Transportation Security Administration’s PreCheck and Custom and Border Protection’s Global Entry are key components.

Discriminatory taxation has been one of GBTA’s biggest pet peeves. Voiced for years, including during congressional hearings, the association’s position is that state and local taxes — notably levied on car rentals — paid by business travelers should not be used to fund projects unrelated to business travel. ASTA has a similar position.

Another travel tax issue relates to airline customers not recovering paid taxes and PFCs when unused tickets are refunded. A key question is whether these are levied on the sale of the transportation or the provision of it. It’s an age-old frustration that came up recently in a Travel Weekly column by industry lawyer Mark Pestronk. It seems corporate travel buyers have a beef but no one is speaking out.

Similarly, why should hotel customers be charged occupancy taxes and such when they no-show or don’t cancel in time? No group is openly complaining about that, either.

Laundry List

Perhaps certain issues don’t rise to the top because the catalog of gripes is long.

Passenger rights: Improving the travel experience and protecting passenger rights always has been an important issue. After the recent United Airlines incident, a few poll respondents said this is the travel topic that needs the most attention in Washington.

Business Travel Coalition said it supports Sen. Richard Blumenthal’s (D-Conn.) proposed Airline Passenger Bill of Rights.

GBTA polled members on the topic and “the three themes we got were dignity, transparency and fairness,” Meehan said. He suggested long-winded airline contracts of carriage full of legalese should be more accessible and understandable.

The American Society of Travel Agents said that while it has supported previous consumer protection initiatives by the U.S. Congress and Department of Transportation, “this disturbing incident should tell us loud and clear that more needs to be done.” ASTA called for “increased protections for overbooked and bumped passengers,” among other things.

Alleged protectionism: The Partnership for Open & Fair Skies opposes additional U.S. services by Emirates, Etihad Airways and Qatar Airways. The group’s members include American Airlines, Delta Air Lines, United Airlines and various airline employee unions. Their argument is that the United Arab Emirates and Qatar infuse billions in subsidies into their state-owned airlines, creating unfair competition. Because of that, the group wants the U.S. government to “enforce its Open Skies agreements” with those countries.

For obvious reasons, Airlines for America also implores the U.S. government “to play its role in ensuring U.S. commercial aviation is operating on a level playing field with foreign competitors.”

BTC is on the other side of this issue, asserting that Open Skies deals do and should continue to foster competition. The Big Three U.S. carriers, BTC argues, are an oligopoly out to protect their dominant position in the transatlantic market.

Similarly, BTC fought against the Big Three U.S. carriers in advocating for approval of Norwegian Air International’s request to add U.S. services. Norwegian won rights to continue expanding here.

Home-sharing: Airbnb is a growing player in corporate lodging. GBTA and others have researched the home-sharing concept but no corporate travel association has come out in opposition. The American Hotel & Lodging Association has. “Rein in illegal hotels” is one of its three top agenda items, along with supporting hotel workers and promoting travel and tourism.

“AHLA believes that there should be a level and legal playing field within the lodging sector, and that regulations and taxes with respect to short-term rentals should be strictly enforced,” according to the association. “We support the rights of property owners to occasionally rent out a room or their home, but commercial operators within the short-term rental industry should not be allowed to operate outside of the law.”

Additional info: GBTA’s Meehan previously worked as the policy director for Keeping Identities Safe and as acting CEO for the Identification Technology Association, a nonprofit representing the biometrics industry. He has been involved with various groups, including some local BTA chapters, on the implementation of the Real ID Act.

Holly Woodruff Lyons is deputy general counsel for the House of Representatives Committee on Transportation and Infrastructure and also staff director for the aviation subcommittee. According to GBTA, she told attendees at the Legislative Summit that the committee’s work toward FAA reauthorization “is up against many barriers such as budget constraints, reductions in force, lack of order in Congress and the fact that there has been no stand-alone travel appropriations bill since 2006.” Regarding the NextGen air traffic control system, she added that there have been “pockets of success” but “no real progress.” Lyons also said that committee chair Bill Shuster (R-PA) proposed the creation of a independent, not-for-profit organization responsible for air traffic control. GBTA said it will share its position on this topic “in the near future.”

Also speaking during the GBTA event, CBP deputy executive assistant commissioner John Wagner said new biometric technologies will be deployed for arriving and departing passengers. He said a test in Atlanta using facial recognition is working well without adding time to the process.

Like GBTA, ASTA routinely meets with Congressional leaders to discuss items of importance. Those include advocating for full disclosure of airline fees at travel agency points of sale, opposing new taxes on travel agency services, fighting the U.S. Department of Labor’s plan to end an exemption for travel agencies regarding federal overtime rules and adopting travel insurance standards. ASTA’s 2017 Legislative Day on Capitol Hill is scheduled for June 6-7.

Trump’s budget blueprint calls for reducing Amtrak subsidies. All federal support for long-distance rail service would be cut, allowing the rail operator to “focus on better managing its state-supported and Northeast Corridor train services.” The blueprint also proposes eliminating funding for the Essential Air Service program.

Disclosure: The Company Dime has a partnership with ASTA.

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Fox World Travel Teams With Professor Brad Seitz For New School

Topaz International CEO Brad Seitz is leaving the travel auditing company he led since 2003 to build resources for corporate travel pros. The idea is to do some consulting, create a buyer community, conduct research and, along with Fox World Travel, formulate an education curriculum.

The last part would address both newbies and those looking for ongoing professional development.

For those entering corporate travel for the first time, there are a few collegiate programs out there, like at Metropolitan State University of Denver. The Association of Corporate Travel Executives’ Around the World program offers entry-level training and internships for beginners. The Global Business Travel Association runs a course on travel management fundamentals and the Ladders mentoring initiative. Sometimes local GBTA chapters get active with area colleges.

Feedback from Fox clients pointed the travel management company down the path. It plans to launch the Fox Travel Manager Institute in the second half of this year. Fox World Travel vice president of client solutions and event strategy Michael Farrell described a two-week pilot class as “extremely successful.”

“The industry is evolving,” Farrell said. Rather than travel agents filling corporate travel management positions, “other departments are starting to inherit those responsibilities — human resources, procurement, finance. Those professionals don’t have a baseline understanding of all the intricacies of the industry.”

The Fox Travel Manager Institute will offer week-long 101-like classes for employees of its clients involved with running travel programs. Fox expects eventually to market the service beyond its customer base.

The program also will offer one- and two-day classes. These more advanced sessions will dive deeper into specific industry topics. Both Seitz and Farrell mentioned contract negotiations and duty of care as potential subject areas.

Brad Seitz

Brad Seitz

“Travel Management 101, that’s easy,” Seitz said. “Where it gets difficult is going deeper, and trying to pique interest of people who have been at it for a long time.”

A professor of business at the University of Southern Maine, Seitz will be one of several instructors. Farrell said some Fox employees also will get involved, shadowing Seitz to gain teaching experience.

The plan is to conduct classes in multiple U.S. cities. There may be a virtual learning component, but Farrell said “that’s not our preference. There are lots of webinars out there. We feel learning in-person will be best.”

Farrell would not divulge the university with which Fox has had conversations, but he mentioned a possible partnership with the Society of Collegiate Travel and Expense Management.

“We haven’t spoken to GBTA yet about this program,” he added, “but would not be opposed to having our classes be part of their certification process.”

GBTA offers the Global Travel Professional certification, the Global Leadership Professional designation (via the University of Virginia Darden School of Business) and the Certificate in Meeting Management (in conjunction with Meeting Professionals International).

ACTE’s Around the World also includes a program for travel pros looking to learn more. The Institute of Travel Management for the United Kingdom and Ireland has workshops for buyers and administers the GTP exam for partner GBTA. The Institute for Supply Management has certification programs for purchasing pros.

Beyond The Classroom

The educational work with Fox is one component of Seitz’s new venture. He called his company Agilis, Latin for “agile.” It is “built on the premise that travel programs need to be more agile in what they do,” Seitz said.

Another pillar of his plan is a consulting service, taking on specific projects or designing outsourced travel management functions. Seitz agreed that there is no shortage of consultants in corporate travel and acknowledged the challenge. “It would be at a high level,” Seitz said, “not the minutiae.” Before Topaz, Seitz spent 10 years managing travel at Xerox. In between he worked for Carlson Wagonlit Travel and Rosenbluth International. From 2005 to 2009, Seitz volunteered as ACTE’s treasurer.

A first step for the new company will be building a community of travel buyers. Within it, members will exchange information and hear Seitz’s industry observations and product reviews.

Seitz anticipates collecting subscription fees that are tiered based on the number of participants from a given company. He declined to specify pricing.

Independent research would enrich a travel manager’s membership. Access to it will be part of the subscription fee. There will be no sponsors. Seitz said the needs and wants of the community will determine research topics. One that has “nagged” at him for 10 years is an examination of the financial benefits of online booking versus agent-assisted booking. It would get into the costs associated with each, as well as time and productivity studies.

Additional info: Distinct from the new Fox Travel Manager Institute, the TMC also runs the Business Travel Institute. It is one of several schools designed to train travel agents.

GBTA Ladders is coming to the local chapter level. The Silicon Valley BTA, for example, “will find the industry veterans from our membership as mentors and then form a group of mentees,” according to SVBTA vice president Makiko Barrett.

At Topaz, current vice president and part-owner Tricia Wischmann will take the reins.

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International SOS Covers Emotional Rescue

Caring for a traveler who gets sick, injured or kidnapped is a visible side of travel risk and medical services. Residual trauma also can occur even if an employee is physically unscathed by a car wreck or security incident. Frequent long-distance travel itself can weigh heavily. Culture shock is real for expats and their families.

Emotional support services generally are the province of human resources departments and employee assistance programs. Recognizing a need to loop in travel risk management, International SOS partnered with EAP provider Workplace Options to offer “rapid response psychological support” around the globe.

“While we provide ongoing, regular EAP services, we are frequently asked by our clients to assist them in fleshing out duty of care services,” said Workplace Options SVP Mary Ellen Gornick. “In our current business, we still work a lot with HR as the main contact but increasingly we are seeing the travel team become more interested and involved in making successful overseas assignments.”

Anxiety, stress or depression can affect productivity and performance. Long-term assignments can and do fail. When they do, it’s costly. Gornick said expats or assignees may need help acclimating to new environments, adjusting to day-to-day living there or mitigating reverse culture shock when returning.

International SOS VP of global alliances and partnerships Sally Wang said the joint service is part of a proactive approach embedded within the company’s core medical and security offering.

Client employees get one number to call for medical, security or emotional assistance. This includes counseling for employees and their families. It is available in 60 languages by phone, video call or face to face. Specifics vary by client type, be it an oil and gas company, NGO or academic institution.

International SOS

Image: Thinkstock

Robert Mintz is a former travel agency owner, a long-time travel manager and current member of the Global Business Travel Association’s risk committee. He said every traveling employee is unique when it comes to handling stressful situations.

“You can’t judge people,” Mintz said. “You need a system to accommodate the broad spectrum.” He said the new service addresses that while playing to the International SOS strength in global medical services.

Health and travel assistance company On Call International said it also provides emotional and psychological support around the globe. According to president Tom Davidson, it does so through a partnership with an unnamed behavioral health crisis and disaster management company. He said the most common issue addressed by the service is pre-existing mental health disorders exacerbated in unfamiliar cultures.

While On Call typically works with HR, Davidson said travel, risk and corporate security departments also get involved.

Davidson said organizations may bring in a counselor to talk with employees after a terrorist attack. “Does the employer need to do this?” he asked. “Not necessarily, but organizations are learning that the investment in their employees’ well-being is a smart move on many fronts – from workplace culture to reputational risk to employee retention and productivity, just to name a few.”

Some traditional U.S. employee assistance programs also extend beyond borders. Chestnut Global Partners, for example, uses a network of local providers for its expatriate assistance program. It includes pre-departure support, “outreach check-ins and cultural adjustment coaching,” and help upon repatriation, according to its materials.

Chestnut managing director Matt Mollenhauer said tackling these issues early is critical. “In general, if you sit back and wait for expats to call for help, they won’t,” he said. Maybe it’s a high-profile assignment and they don’t want to draw attention.

Mollenhauer said employers also tend to take a more passive approach. They focus on the logistics of the travel or relocation, and then become reactive. He said exceptions come from academia, where schools establish emotional support programs before placing students in foreign countries.

For expats and long-term business assignees, “adjusting to the move always is the number one presenting issue,” Mollenhauer said. One misconception is that an assignment for an American worker in the United Kingdom or Europe won’t be as tough as one in Asia, Africa or South America. “People don’t ramp up coping the way they should,” he said. “They underestimate the adjustment.”

Employee awareness is a top challenge. “In this space, we are frequently an afterthought in the benefits world,” Mollenhauer said.

Mintz said training is paramount. Some “best-in-class” companies make it a prerequisite for travel.

“Just because you have a traveler tracker and you checked that box, don’t think you are done,” he said. “That’s baby steps. Everyone has to know the number to call, what the communications capability is and who is at the other end.”

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Air Canada Moves To Blunt Rising Commissions

Air Canada reduced travel agency compensation on certain fares, effective April 1. The change followed increases in the airline’s sales and distribution costs as a percentage of passenger revenue in each of the past three years.

A spokesperson confirmed that the carrier reduced commissions paid on some international airfare types, including interline and business-class fares. The moves, which impact only “Canadian” agencies, came despite an international expansion plan that includes more intercontinental flying and a bunch of new U.S. transborder routes.

Air Canada also bumped up agency compensation on certain fare types, the official said. “In some cases other changes will increase overall compensation for agents,” according to a written statement.

It’s not unusual for airlines to modify the methods or amounts of agency compensation. Industry consolidation offers leverage to reduce payouts. Air Canada dominates its home market, though rival WestJet has made significant gains over the years.

In 2009, WestJet and Air Canada went back and forth in announcing new or revised commission levels for certain fare types. After a few weeks of activity, both settled on 7 percent for affected fares. For Air Canada, these were its lowest, or Tango, rates. In 2015, Air Canada reversed this decision.

One agency source speaking on the condition of anonymity said Air Canada replaced that 7 percent program with a “monthly guarantee on Tango. This way the payment is ‘hidden’ from the other carriers.” Now, the source said, the airline is “foolishly” going to zero.

The Air Canada official confirmed the change for North America Tango fares as well as a commission reduction on international Tango fares.

Air-Canada-commissions

Image: Air Canada

Another TMC executive said that regarding the commission change on Tango fares, Air Canada tells agencies they should instead sell higher-priced Flex or Latitude fares. “The view in the market is that if you don’t want us to sell these fares, then don’t put them out there, and understand you are not competitive,” the source said.

For travel agencies, commission cuts on premium-class international fares hurt the most. When the front-end commission is knocked down by four or five percentage points, that can mean hundreds of dollars for a single booking.

“Air Canada says they have very aggressive global expansion plans and they need the travel agency community to support them,” said one TMC leader. “Then they cut back our commissions on high-yield international travel. There is a lot of mistrust in the travel agency community.”

The executive noted that back-end override programs also took a hit. This source indicated that all the changes, on balance, mean lower overall compensation.

Competition has been pushing commission expenses northward, according to the airline’s financial reports.

Air Canada in 2016 incurred CA$845 million in sales and distribution costs (including regional operations). That was up 15 percent from 2015. The airline’s annual report indicated the increase reflected “higher commission expenses” partly due to more tickets sold and “new and enhanced competitive incentive programs.” Air Canada also sold a higher proportion of tickets outside Canada, driving up “transaction costs.”

As it had in years past, Air Canada noted that its competitors “continue to pursue commissions/incentive actions and, in many cases, increase these payments.” A decision to match “competitive actions,” it added, could “have a material adverse effect.” At the same time, also according to the 2016 annual report, Air Canada continued “to undertake sales and distribution initiatives in an effort to increase revenues and reduce overall costs of sales.”

Asked why Air Canada made the latest changes, the spokesperson wrote:

Air Canada continually refines its agency compensation structure for a variety of reasons, including market conditions, for competitive reasons and due to strategic considerations. The overall aim is provide a structure that balances the ever changing interests of our agency partners and those of the airline and our customers. We expect this evolution to continue, but that agencies will remain a valued partner for our company long into the future.

Within Canada, WestJet is Air Canada’s only sizable competitor. In December it announced updates to fares and change fees but kept base commissions unchanged. The lowest fares generate no commissions with the rest ranging from 4 percent to 8 percent. WestJet in March also announced a renewed travel agent portal, including a booking tool.

According to its 2016 annual report, WestJet’s sales and marketing costs increased nearly 10 percent from 2015. This increase outpaced revenue, which grew 2.3 percent. The carrier cited higher ancillary revenue partially offset by downward pressure on fares resulting from the depressed energy sector. Revenue from “managed corporate business,” though, jumped 15 percent.

Canada’s No. 2 airline last year began seasonal service from six Canadian airports to London Gatwick. Air Canada’s leisure-oriented Rouge brand competes on a few of those routes. Mainline Air Canada serves London Heathrow from six cities in Canada.

More Costs Of Sales

According to its annual reports, Air Canada’s sales and distribution costs — including commissions, GDS fees and credit card fees — amounted to 6.4 percent of its total 2016 passenger revenue. That was up from 5.9 percent in 2015, 5.7 percent in 2014 and 5.6 percent in the two previous years.

For the year 2015, the carrier noted those costs increased partly due to “a higher volume of ticket sales generated through global distribution system providers.” But some of that was “offset by the impact of more favorable distribution rates negotiated in 2015.”

The airline had announced new deals with Amadeus (in 2015) and Travelport (in 2014, renewed in February 2017).

Air Canada’s relationship with Sabre is complicated. Last fall, the companies marked progress in selling the carrier’s paid seats. At that time, a Sabre announcement said the development “solidifies both companies’ collaboration” on personalizing offers. A Sabre official said the company “is distributing Air Canada’s full content to its subscribers.”

However, collaboration was not a theme in Air Canada’s February 2017 court filing related to the US Airways v. Sabre antitrust case. It said the parties were no longer using a “full content” agreement. Air Canada claimed to have “endured substantial year-over-year price increases imposed by Sabre, making Sabre’s booking fees almost twice what Air Canada pays to other GDSs.” Its current Sabre deal, Air Canada added, prohibits expanded work with “other, lower-cost GDSs.”

In both 2013 and 2012, Air Canada reported lower commission expenses, offset somewhat by “higher transaction fees paid to global distribution service providers.”

Additional info: Air Canada in 2016 began 12 new transborder and 15 other international routes. This year it started or announced eight more to the United States. “On routes between Canada and the U.S., [Air Canada] now accounts for 45 percent of seat capacity with WestJet its nearest rival [at] 19 percent,” according to Airline Network News & Analysis. “Both Delta Air Lines and United Airlines have just over 9 percent of capacity.”

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