With cost savings from NDC “not turning out to be what it was meant to be,” Air France’s chief commercial officer last week lambasted American Airlines‘ distribution plan.
“American Airlines is leading the way — they think they’re leading the way — in new distribution strategies,” said Angus Clarke during an Air France-KLM Group investor meeting on Dec. 14. “The reality for us is NDC is nice to have, but it’s attracting very low-yielding traffic right now. It’s also nice to have from a cost point of view, but the cost of servicing isn’t perfect, either. The yields you get from the high-end corporate travel managers, the high-end agents that are coming still via global distribution systems, are so far superior to any cost associated with that that we can’t turn our back on that and walk away.
“The large corporate travel managers like Amex GBT are just so negative on moving away from the GDS environment,” said Clarke. “It’s certainly not something where we’re going to flick a switch like American has tried to do, and just say, ‘This is magic.’ It’s not magic.” Clarke claimed United and Delta were winning share, “certainly” from American, so Delta partner Air France-KLM benefits from that.
It appears American Express Global Business Travel CEO Paul Abbott would agree with much of Clarke’s commentary.
Noting plans for international premium capacity growth in the coming years by each of the Big Three U.S. network carriers, Abbott this month at The Beat Live said, “If I were making those kinds of investments, I’d be thinking hard about doubling down on a segment of the market that has $500 billion of managed premium travel spending with very high yields. We see a lot of suppliers thinking that way, saying that [spending by] the American consumer has started to cool a bit and economic conditions are a little bit more uncertain.
“I see far more suppliers doubling down on their relationship with us, doubling down on partnering with us, doubling down on wanting to grow share in the corporate travel industry, than I do the opposite,” he said. “Not even close.”
A debt restructuring announced Dec. 4 should help Travelport stay afloat but isn’t a sure thing, Moody’s noted last week when downgrading the GDS provider’s credit rating. [UPDATE, Jan. 3, 2024: Travelport announced completion of the financing.] “At launch of the restructuring, the company had already received consent from 80 percent of its senior lenders and 85 percent of its junior lenders,” Moody’s wrote. “If Travelport does not receive 100 percent consent from its lenders on the proposed out-of-court restructuring, it will commence the proposed transactions through a prepackaged Chapter 11 process in the U.S., which also constitutes an event of default under Moody’s definitions.”
A Travelport spokesperson on Tuesday declined to offer updated information. As planned, the restructuring represents a loss to lenders, a default and a “distressed exchange,” according to statements last week from both Moody’s and S&P Global.
For the first time, International SOS published info on climate change risks in its annual outlook, including in the interactive Risk Map. Compiled by the Euro-Mediterranean Center on Climate Change and the Joint Research Centre of the European Commission, the tool estimates the impacts of climate change on future risks of humanitarian crises and disasters.
“International SOS is seeing a rising trend in the number of climate-related alerts being issued to clients as rising global temperatures are increasing health risks around the world,” according to the company. “There were 80 percent more medical alerts issued by International SOS relating to climate change factors in 2023 compared to 2022.”
Meanwhile, responding to Everbridge survey results published this summer in Risk Management Magazine, McIndoe Risk Advisory’s Bruce McIndoe, a GBTA board member, this week wrote on LinkedIn about his disillusionment with the state of risk management. McIndoe was “appalled” that organizations are “oblivious to the need to understand their risk profile, be prepared to respond to the loss of people, locations, supply and/or information, and don’t have basic processes to communicate risk management policies and procedures.” One in four C-suite execs responding to the survey said their organization had “strong” travel risk management programs as defined by ISO31030. McIndoe wondered “how many actually knew what ISO 31030 is?”
Reaction: Chris Kroeger’s Nov. 30 Op Ed on airline distribution prompted several comments both at thecompanydime.com and on LinkedIn. Thanks to Suzanne Boyan, Nicole Del Sesto, Andrew Henry, Elliott McNamee, Paul Tilstone and others for weighing in — and to Chris for coming back with some capping thoughts and elaborating here.
What To Think About In 2024, According To GoldSpring Consulting
The brain trust at GoldSpring Consulting distilled their views on the state of travel management during a Dec. 11 webinar featuring eclectic references to thinkers, authors and artists. Based partly on input from travel buyers, the presentation opened with a big question generated by these times of significant change in travel distribution and procurement: Why manage travel? Answer: Controlling costs through negotiations or demand management; sustainability; regulatory compliance (think travel and meetings guardrails in life sciences and financial services); accounting and tax needs; data security/GDPR; duty of care; and traveler satisfaction, e.g., making expense or payment processes more efficient.
GoldSpring considered the key areas to watch:
Artificial intelligence. It’s early days for AI, and the most promising opportunities are in expense management, fraud detection, the airport experience, meetings management (supported by augmented virtual reality) and TMC chat. Are we seeing the beginning of the end of searching by online booking tools, where AI parses all your data and knows what to plan based on your preferences and company policies?
NDC. “What’s going to happen in 2024?” asked GoldSpring partner Neil Hammond. “Airlines and suppliers essentially fund the whole value chain, top to bottom, and so when those funds are diminished, and when the budgets are tightened in what the airline is pumping into the value chain, I would say transaction fees will necessarily rise for the buyer.”
The traveler experience. Corporate travelers have leisure booking experience envy and are losing trust due to fare differentials from NDC programs. Program managers should create great, personalized experiences and “innovate for stickiness” or go another way and put the stick in policy through non-reimbursement or allowing bookings anywhere but with hard budget limits like Google did. By building credibility and travel’s role as a service for business leaders, travel managers may avail themselves of additional funding for program innovation, suggested GoldSpring partner Will Tate.
Integrated solutions. Combined solutions from online booking tool builders, TMCs, expense management software firms, corporate card providers and travel risk management companies are most attractive to the smaller end of the market.
Labor challenges. Simple service issues are getting solved; what’s left is more demanding and expensive.
Integrated meetings and transient. There’s “ferocious” growth in small/simple meetings, but their management is as “siloed” as ever. Yes, said Tate, this has been the “next big thing” for many years, “but we’re getting asked to include it more regularly in sourcing exercises.”
Trip ROI Isn’t For Travel Managers To Determine
Further to the misunderstood notion that travel managers control T&E purse strings or should push travelers to demonstrate a trip’s return on dollars spent, two buyers speaking during a Business Travel Executive Town Hall conducted on Dec. 12 via LinkedIn Audio said such considerations were beyond their purview.
“We truly look to the business units to work with their team members to quantify the value of travel,” said Tyson Foods senior manager of global travel and meetings Craig Banikowski. “I don’t believe it’s my place to question a trip. It’s just not within my wheelhouse. I work with business unit leaders to ensure we’re meeting the needs of their travelers, but it’s up to them to manage their budget. The valuation occurs at the business unit level, in my opinion.”
“I don’t know that it’s our place” to ask questions about value and ROI, said head of flight operations and global travel services Yukari Tortorich.
Senior leadership encouraged face-to-face meetings after Discovery and WarnerMedia merged in 2022 “to get to know each other,” according to Tortorich, and “from a sales perspective, from a revenue-generating perspective, [business units] would all say that in-person meetings are probably most effective,” she said.
Around The Web
• Click here for our coverage in Business Travel Executive of our October Town Hall event with three program managers discussing what’s new with travel policy.
• Here’s Harvard Business Review with “3 Ways Men Can Advance Gender Equity at Work.”
• Payments Dive landed an interview with American Express EVP and fraud expert Tina Eide, highlighting the fraud fight‘s ongoing “vicious circle.”
• Some interesting future of work coverage: HBR’s “Generative AI Will Transform Virtual Meetings”; business experts tell ZDNET in this long read, “The future of work is more human than you’d think”; and there’s this one by The Washington Post: ” ‘Zoom fatigue’ may take toll on the brain and the heart, researchers say.”
• According to this November Financial Times scoop, data privacy concerns have firms like Deloitte and KPMG advising U.S.-based executives to use burner phones when they visit Hong Kong, traditionally a common practice for Westerners going to mainland China. Some are even refusing to go to the financial hub on those grounds.
Tripbam data shows a normalizing delta on rates for lodging bought by corporates versus the wider market. After rates plummeted due to Covid, hotels and accounts rolled over negotiated rates for 2021, and many did so again for 2022 before diving back into negotiations for this year’s rates. Rates have risen all year as owners and operators deal with increasing labor and other costs.
For 2024, proposals from U.S. hoteliers mostly call for single-digit percentage increases, with 5 percent to 8 percent a typical range cited by buyers. Some succeeded in securing more modest increases by pushing back.