Big Three TMCs On Evolution Of The Model, Airline Distribution, Airbnb, Concur, Synxis Breach

By | July 17, 2017

You generally will not see interviews published here, but an opportunity that came up last week made an exception worthwhile. What follows are excerpts of separate interviews with top executives at the three largest travel management companies. We spoke by phone with American Express Global Business Travel president Philippe Chérèque last Monday, Carlson Wagonlit Travel president and CEO Kurt Ekert on Wednesday and BCD Travel president and CEO John Snyder Thursday during our Teleconference. They answered many of the same questions. Click on questions indicated with plus signs for followup exchanges with the identified individuals. Questions and answers were lightly edited for readability and proper context. It should be noted that prior to their current roles, Chérèque and Ekert were executives for many years with Amadeus and Travelport, respectively.

The Company Dime: What was your reaction to the AA NDC news?

Chérèque: We need to make clear to the industry that NDC is not a tool for distribution. It’s a way to connect. It’s the description of messages for availability, bookings and everything to fulfillment. So it’s a series of messages which is a one-to-one definition between the point of sale and the content provider. From the TMC point of view, for 99 percent of our business we have to propose multiple airlines. A lot is interline. I do believe NDC could make sense for ancillaries or merchandizing, but for the basic booking process there’s no way we can develop a multi-access system. I know what it is to build fare search among several airlines. That’s what the GDS is doing today. If the GDS doesn’t offer wireless or a special seat with extra room, we have the technology in our supplier management platform to connect to them. AA’s system works only if you have already decided to book AA. What happens if I want to change the booking? I can’t put in a hotel segment, a car segment, Delta. So for me, the cost of rebuilding a box on top of the box will be double digits per transaction. Definitely not $2. We need to sit down with AA.

What about the new features and data that AA talked about making available this way?

Ekert: It’s an interesting approach and a different one by AA compared with the battles they had with GDSs going back six or seven years. It’s refreshing to see Cory [Garner, AA VP of sales and distribution strategy] taking a better partnership approach with the industry. We have had conversations with AA. At this point it’s a bit unclear what content will be available through the NDC channel that will not be available in current channels that we use. It’s a bit challenging when a carrier says, “Go figure out the tech partner” and there’s not full clarity in terms of how it works in our environment. So I think we’re open-minded about it. We want to make sure we provide to clients the most complete content possible. We’ll explore how we can do that. I do believe the GDSs are generally very well positioned to solve this technically in cooperation with the airlines. GDSs and airlines have different commercial objectives. My hope is that in time, similar to what we saw with web-only fares and full-content agreements, you’ll see a new equilibrium reached. In the meantime, we may have to seek out ad hoc solutions that are less efficient. And that may impose a cost that was not there before.

Snyder: I want to applaud AA for taking a bit of a different approach than some of their competitors. The history has shown the stick approach seems to be the preferred approach from some of the other airlines and suppliers that have gone down this road and I applaud the more carrot approach — you know, “If this solution works for you and your customers, and you want to receive a little extra incentive for doing it, we’ll offer that to you.” I think it will produce better results in the long run for the folks they want to lure into that new solution.

Will BCD participate?
If an airline is willing to distribute through the GDS but wants you to pay for it, is that something you're open to?
What's the legacy of the move by the Lufthansa Group?
Is there anything unique you would observe about the IAG announcement?

The Company Dime: If you need to add to client fees to cover additional costs of distribution, how would they be different from similar fee programs from the past?

American Express Global Business Travel president Philippe Chérèque

Chérèque: It would be completely different from our high-cost booking program. You can put it in the same basket if content moves out of the GDS. I don’t know what AA or BA will do.

Ekert: We have many pricing structures with many clients. Those are confidential. To the extent that we have an established course of business dealing with clients and supplier partners, and one party chooses to change the terms of that business dealing unilaterally and, for example, retracts content and adds inefficiency in terms of our ability to access, book and service, we will need to charge for that. We don’t have a high-margin business. We’re trying to strike a fair balance.

Snyder: We have tried to take more of a customer-by-customer approach. With more airlines showing an interest in going down this path, we’re looking closer at whether we need to implement some sort of across-the-board charge [for non-standard reservations processes]. We’re sort of being forced into that. We don’t like taking an across-the-board approach on any topic. I like having more of a one-on-one customer interaction on things like this.

The Company Dime: Last year you announced integration with Airbnb for data capture. Are you making bookings on it yet?

Chérèque: Corporations are asking us for data and duty of care. We don’t have Airbnb on our [booking] screens. It’s more in the back office. We don’t have a huge attraction for it but it will come. There are some corporations that would like to go further.

Ekert: We have piloted Airbnb with several customers. Adoption has been relatively light. There are some things to work through. They’re competing against hoteliers who are offering very competitive products. It’s a high standard to meet.

When you say piloting, do you mean for data capture or also bookings?

Snyder: Right now we’re bringing in that booking data. As of now we do not have a plan to bring Airbnb into our hotel platform — not to say we won’t ever do it. I don’t think we have a ton of corporate customers clamoring for us to bring that into our hotel proposition. Right now it’s a very different booking and travel experience than with a hotel. There’s added complication to using Airbnb in the corporate space. We do have a few that have embraced it and utilized it. For now, they can book that directly.

The Company Dime: What’s your relationship like with Concur?

Chérèque: We are close to [renegotiating] our reseller agreement. [American Express GBT on Friday announced the agreement was signed.] A lot of customers are using Concur. It’s a big player. We don’t pretend that we’ll replace Concur or whatever. We’re OBT-agnostic and content-agnostic. You could use Concur in the United States and KDS in Europe. I don’t believe any OBT has all the bells and whistles in each country.

Carlson Wagonlit Travel president and CEO Kurt Ekert

Ekert: We have a strong strategic partnership with Concur. They’re a very good partner. They have a solid position with expense and booking. It’s important that we collaborate with them.

Snyder: We have a really solid relationship. Out of the three major TMCs we are the only ones who have a close, tight-knit relationship and we have had that consistently. We have some unique offerings through BCD and Concur that some of the competition does not have. We see them as a very good partner.

The Company Dime: Concur first announced its open booking plan, now called TripLink, more than five years ago. Do you support it?

Chérèque: The problem with TripLink is, if you book on Hilton.com, and feed it to TripLink, and you want to change the trip and call GBT, how do we access it? We don’t. So that’s why when you get this kind of data, we have created our Digital Travel Record. For customers who want a consistent offering online and offline, TripLink is not the solution. They don’t need to use it.

Ekert: People are booking content elsewhere. It’s important to capture that data so you can provide safety and security for the traveler, which is the most important thing to a travel manager. If you don’t have that data real time, you can’t go and do that. If your TMC doesn’t have ownership of the data, the solution is to get the data, figure out why someone is going outside and offer products and solutions to compel them to come in. It’s an important step. It’s about fulsome data collection. It has value as a mechanism to import.

What about servicing TripLink bookings?

Snyder: It’s a good tool to bring rogue bookings into the process, similar to our TripSource platform. From conversations we have had with Concur, it’s clear the plan is not to make that a booking or direct-connect platform. They have a few direct connects in place today and they realize the challenge and complexity of maintaining those and don’t really have, from what we understand, a very strong desire to further that. Yeah, it’s a good tool for bringing in rogue bookings but there are quite a few other tools in the market that do that as well. I think a lot of corporate customers are using agency tools to do that today, and maybe that’s why TripLink hasn’t gotten quite as much uptick as they maybe would have liked.

The Company Dime: How is the TMC going to evolve?

Chérèque: TMCs have to propose more multi-channel solutions, rather than only being offline services companies. That won’t make us a tech company, because we do deliver a lot of service. There are still thousands of people on the phone. But you need to differentiate with a tech offering which is completely integrated. We’re investing in KDS in the U.S. I cannot talk about the amount, but we’re developing KDS to integrate with U.S. content which is not in Europe — ground, U.S. carriers, back-office ways to manage in the U.S. which are not the same. But at the same time, I want to be clear: the core is traveler data, content, the global trip record — a database where you have everything which is booked GDS or non-GDS in place with all customers. They have this global trip record, a kind of passenger name record. The core being in place, of course we integrate KDS better but we have APIs for customers using Concur, Serko, Cytric. We develop more on top of KDS because we believe the online booking tool will become a user interface like any other one. It’s about consistency, online versus offline.

Ekert: We’re moving from a service to an experience model. User experience is No. 1. Corporate booking tools can consume our hotel API, offering the same content and the same display. While we have done well with air, there’s a massive opportunity to up our game with hotel. And for data and personalization, we have a new data science team. We will be building that data science business going forward. Coupled with that is personalization.

BCD Travel president and CEO John Snyder

Snyder: I see the role of the TMC being very similar [to what it has been], but how we deliver that will be very different. The biggest evolution comes in the realm of the mobile platform. Originally it was an itinerary management tool and it has really migrated beyond that. Our goal is for it to be a full-service delivery, sales and communication platform with our customer. As that continues to grab traction it will allow us to create a new service delivery platform that crosses borders and offers above-market service configurations that may not be available today. That will drive change and a more engaged traveler. To me that’s a huge part of what we need to do — keep those travelers engaged and focused on the core program. There’s a burgeoning desire to move beyond travel management to more of an end-to-end program management which is deeper and broader than what we have historically done. And another change is the omni-channel approach. Customers don’t just want to phone or email us. They want to be able to chat, do mobile, do online. So embracing that will be critical. One other factor we’re looking at and investing in is using big data as a tool to drive better business decisions. We refer to this as the Amazon effect. It’s scary what they know about you and your purchasing patterns. It helps you make better purchasing decisions. Our focus is to collect those preferences and patterns, and tailor a cleaner solution for a better experience and better purchasing decisions.

The Company Dime: Is the relative importance of supplier versus buyer revenues changing in today’s model?

Chérèque: There are opportunities on both sides. We’re selling more solutions. We have developed products like Premier Insights — a sophisticated product to help you understand the data, the KPIs, etc. We have air re-shop, hotel re-shop. So if you ask me if transaction fees will increase, the answer is no because of the shift to online. But will we offer more solutions? Yes. Is there more opportunity to get more revenue from suppliers? Of course as we get bigger we get better at negotiating, and we’re getting bigger.

Ekert: Over time, we’ll see supplier revenue grow as a proportion of our overall revenue pool. Most fundamentally, that’s because of the hotel product mix. We’ll have higher-yielding hotel content. There’s more income there. So I’d expect the ratio to change a bit over time, but there will still be a dual revenue model.

Snyder: Not significantly. We’ll put more focus on extracting more out of the relationships with both customers and suppliers. We’ll put more emphasis on selling ancillary services and other things we don’t sell today that may drive additional revenue opportunities. We’ll soon be launching the ability to purchase ancillary services via our TripSource platform. Things like paid seats and upgrades. Not all suppliers want to offer an API that allows us to easily consume their ancillary services. But the ones that do we’re talking with and we have plans to offer those through our mobile platform today.

The Company Dime: Where are there still opportunities for cost efficiency in the model?

Chérèque: I don’t know a lot of countries where the cost of labor is going down. We’re trying to compensate through the shift to online. The technology is more sophisticated, so maybe we spend more in technology but provide more. I hope the providers won’t take actions that make us spend more money. GDSs have invested a ton to make it more efficient.

Ekert: There are great opportunities to offer a more digital user experience, which requires better software and technology for the client and also travel counselors. We’re making large investments there. We’re also in a world where half of transactions are digital, and globally we’re seeing three percentage points of growth per year from offline to digital.

Snyder: Personnel is our biggest cost and there have been some drivers over the years pushing that cost up. The direct connect phenomenon is one driver. Another one is customers wanting to extend service hours beyond the traditional eight or nine hours of servicing. That has driven costs up. Regulatory changes have driven costs up — having to [adjust systems to] identify code shares, for example. But we have also been able to counterbalance a lot of that with innovation and productivity improvements. The last two or three years we have managed to keep up by increasing overall productivity.

The Company Dime: Do you see more opportunities in offering outsourced travel management?

Chérèque: We have just signed another big company, in Germany, for business process outsourcing, or business travel outsourcing. We’re really making a product out of it — to work with them the whole time, when they want to negotiate fares and rates, to work on travel policy. It takes more time because of course it means taking over the job of some people in the corporations.

Ekert: We have all gradations of that, from acting as the travel manager to only offering certain services. Generally we’re at least a high-value-added, trusted partner. There is opportunity there especially in meetings and events, which traditionally is more fragmented and more in-house. More of that is beginning to be outsourced.

Snyder: That’s a service we offer through Advito. I wouldn’t say there’s a general trend one way or the other. Every year we have maybe one customer drop off and another come on. It’s not something we aggressively push. Our competition does push that model pretty hard. I think that’s a decision the customers need to make without influence from us. It needs to be the right decision for them, not for BCD.

The Company Dime: What can your TMC do about the recent breach of data in the Synxis hotel systems owned by Sabre?

Chérèque: We’re still talking to Sabre. We have no contract with Synxis, only with Sabre. We know some data have been affected. We’re waiting to learn from Sabre who and what has been affected. We haven’t seen full information yet. We rely on Sabre on this issue.

Ekert: We have had extensive conversations with partners on that, trying to make sure there’s good transparency. I can’t comment beyond that.

Snyder: The big thing to stress and what has been a bit of a misconception is that it was a Sabre data breach. It was a breach in the Synxis platform which is owned by Sabre. We’re tight partners with Sabre. They are a highly respected company. This is unfortunate. But as people are starting to realize, this is not just a Sabre issue. That booking platform is also used by the other GDSs. We are trying to be our customer’s advocate. The information has been challenging to come by. We have no legal responsibility but want to help customers figure out where which travelers have been impacted. It’s really the responsibility of the individual hotels to notify impacted travelers. I think we have taken a more proactive approach than our competition.

Is it really just a matter of informing the right people?
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