VideoCorporate travelers have many stories to share about the exorbitant premiums they've paid when making a reservation fewer than seven business days before departure. One example: Last June, a reporter for eCFO booked a round-trip flight from New York to Los Angeles — hardly wilderness outposts. The ticket was purchased three days before the departure date. With 21 days notice and a Saturday stay, such a ticket would have cost the customer around $400. The last-minute price? $2,100. As a bonus, the traveler was charged $4 to watch the in-flight movie.
Gayla O'Neal knows all about it. O'Neal, the travel coordinator at CEI Engineering Associates, says that the Bentonville, Arkansas-based company booked flights through the same local travel agency for years. There were, she says, few alternatives. But with the coming of the Internet, O'Neal recounts, "we started going to online travel sites to match what the agent was coming up with." O'Neal was not pleased with what she found: "We discovered we weren't getting quoted the lowest fares."
So, almost two years ago, the 120-employee CEI signed on with a members-only Web site specializing in corporate travel. That site, iTravel, recently ceased operations and has since transferred its customers to a traditional travel agency that has an online presence. Even after the closure of iTravel, however, O'Neal says she's sticking with virtual booking of airline tickets. Before the advent of the Internet and Web travel sites, CEI typically paid about $1,200 for a ticket purchased within seven days of travel. "Now," notes O'Neal, "the average price for a last-minute ticket is around $450, depending on where you're going."
Where many corporate managers are going these days is into cyberspace. Web-enabled purchasing of airline tickets — once seen strictly as a consumer pursuit — is now beginning to attract the attention of corporate buyers. Currently, only about 6 percent of all business travel plans are arranged over the Net. But research firm Jupiter Communications predicts the figure will jump to 9 percent next year. By 2005, Jupiter analysts believe fully a quarter of all company travel will be booked online.
Jam Figures
This blossoming corporate interest in virtual trip management is not surprising. As company earnings shrivel, CFOs have issued department heads strict marching orders: Slash T&E budgets. Mostly, the slashing will come from policies that require employees to purchase tickets from authorized vendors. Web-enabled booking engines make it a whole lot easier for employees to follow — and for employers to oversee — such policies. In fact, Forrester Research predicts that by 2004, corporate travel policies will be the driving force behind 77 percent of all business travel booked online.
In addition, online agencies offer some appealing perks — things like volume discounts and round-the-clock service. "The nice thing about working with an online agency is they're all built around technology, and using technology to its fullest advantage," notes Henry Harteveldt, a senior analyst at Forrester. "They'll be pushing the technology envelope more than an offline agency ever will because it's their core differentiator."
Part of that envelope pushing involves making sizable investments in customer relationship software. These programs enable travel site operators to create detailed client profiles, making it easier for them to tailor services for specific users. Some online bookers, such as companytrip.com, notify individual corporate clients if a cheaper fare for a flight becomes available. "These are things that, typically, a travel agent wouldn't do for you," asserts Lorraine Sileo, an analyst at PhoCusWright, a research and strategy company for the online travel industry. And why not? "Because," she says, "it's time- consuming and wouldn't be profitable for them."
During the past few years, the major carriers have made their unsold seats available to Web consolidators such as Lowestfare.com, Hotwire, and Priceline.com, as well as to travel sites such as Travelocity and Expedia. But many of the airlines prohibit consolidators from selling these cut-rate tickets to anyone other than leisure travelers. Says Harteveldt: "These seats are not being sold to the business traveler, because that's the airlines' bread and butter."
If the economy continues to slide, however, airline heads could find themselves in a jam. The number of passengers on domestic flights dropped in February — the first nonstrike-related decrease in the United States in eight years. Furthermore, some airlines are already witnessing a decline in last-minute bookings by corporate travelers. Officials at US Airways, for one, reportedly noted that the "decline in close-in business bookings" was one reason the airline lost more money in the first quarter than analysts had predicted.
With shrinking corporate T&E budgets, and with improvements in virtual conferencing, the major carriers may have little choice but to offer reduced fares on last-minute business bookings. In addition, the five largest U.S. airlines (United, American, Delta, Northwest, and Continental) have launched a consortium Web site of their own, dubbed Orbitz. Whether Orbitz caters to business travelers remains to be seen.
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