Travelin’ On(line)

As online travel companies mature, they've turned their attention to the corporate market. Low prices are nice, but service counts for more.
John McPartlinDecember 14, 2004

At the peak of the dot-com boom, network-equipment vendor Extreme Networks became frustrated with the high booking fees and inflexibility of its travel-management company and began to explore online alternatives. Initial experiences with a new service from Sabre called GetThere worked out so well that when Sabre launched Travelocity Business last year, Extreme ditched its offline travel company altogether and has never looked back.” We’ve been able to cut our costs by more than half,” says Nancy Garner, global travel procurement officer at the Santa Clara, California-based company. “Now Travelocity’s fulfillment center works hand in hand with our booking software. People can call anytime day or night to get help with no additional fees. It just made sense and saved us money.”

Such stories were supposed to be commonplace by now. Online travel was widely posited as a sure bet to survive the dot-com crash and “disintermediate” corporate-travel services, with Web-savvy employees showing their companies that the do-it-yourself approach was both cheaper and more convenient.

It hasn’t quite played out that way. Online travel has proved to be a volatile market space as a raft of players struggle to fine-tune their messages for the consumer audience, business customer, or both. While cost-cutting remains their primary appeal, they now realize that they must wrap a layer of service around their basic offerings. For that reason, many of the online firms now target businesses in general and the CFO specifically. “For many online travel companies, CFOs are the primary audience,” says Cindy Morse, chairperson of the technology committee of the National Business Travel Association (NBTA) and a corporate travel manager at Shell Oil Co., a Royal Dutch/Shell Group company. “They are getting bombarded with direct marketing, and all they hear about is the $5 transaction fee versus the $30, $40, or $50 fees associated with traditional travel-management companies.” CFOs looking to cut costs, she says, often direct their companies to at least investigate the feasibility of online booking for a portion of corporate-travel needs.

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Some go further. In a recent NBTA survey of 220 corporate-travel buyers, 21 percent of the respondents said their companies were considering exclusively using a corporate online travel-management offering from such firms as Travelocity (owned by Sabre Holdings), Orbitz (just acquired by Cendant, owners of Days Inn, Avis, Budget Rent A Car, and the Galileo reservation system), and Expedia Corporate Travel (owned by Barry Diller’s IAC/Interactive Corp., which also owns, LendingTree, and While the new players have built substantial name recognition in a short period, old-line companies are now seeing that what began as a consumer-oriented service is now moving into the corporate market they once considered their own, and they aren’t about to let it go without a fight.

In addition to lower transaction fees, companies may be motivated to embrace online booking technology because little or no user training is required. Many employees have been booking personal trips using the consumer-oriented Web portals of online travel companies for years. An Orbitz for Business travel survey from March 2004 found that business travelers preferred using online tools to book their travel rather than using a traditional travel agency by a margin of 2 to 1. In addition, 35 percent of business travelers said they plan to use an online agency to book business travel in 2004, while only 19 percent said they would use their in-house corporate-travel agency. Once exposed to the convenience of changing your flight from a laptop in your hotel room in the middle of the night, it’s hard to go back to filling out a form and waiting for the corporate-travel department to process your request.

Analysts say that since most employees are comfortable using online booking tools, it’s probably best to offer such options in some capacity to help avoid the anarchy of people going outside corporate policy and booking their travel using consumer Websites. “Today, with all the online offerings, the average business traveler is much more familiar with travel booking than they were five years ago,” says Diane Clarkson, a travel-industry analyst at Jupiter Research. “Some people can even refer to airports by city codes. But their time can be better spent doing their jobs than searching the Web for hours looking for the best airfares.”

The success of online travel firms in making inroads into Corporate America has caused the traditional service-oriented travel-management companies, such Carlson Wagonlit Travel and American Express Travel, to tinker with their product lines to offer cheaper online alternatives. Increasingly, online and traditional travel-management companies are starting to look an awful lot alike, striving to provide convenience without sacrificing the security, efficiency, and adherence to standards that corporate travel managers demand. It’s not hard to figure out why: both groups want to command a bigger piece of the corporate online travel market, which Jupiter Research estimates to be worth about $12 billion right now and expects to hit $32 billion by 2009.

“The traditional travel-management companies are working to develop online tools that the online travel-management companies have, and the online companies are working to build up their reporting tools and get more corporate customers,” says Carol Devine, director of corporate travel at The Burlington Northern and Santa Fe Railway Co., and president and CEO of the NBTA. “It’s a race to see who can get to the finish line first.”

Executives like Devine really don’t care who wins. “I’ll support one or the other as long as they can provide the required data for aggregation so I can manage my company’s needs and negotiate my company’s policies,” she says.

People Who Need People

Despite success stories and rosy projections, some observers say the online companies still have a way to go if they hope to be taken seriously in most large organizations. “A lot of their services are just not up to snuff compared with traditional travel-management companies, specifically customer service and support,” says Bob Lichtman, a travel-management technology consultant at Corporate Solutions Group in Menlo Park, California. “But the appeal is the significantly lower costs and the ability to move much of the processing through technology rather than human interaction.” The viability of such services, which thus far lack the longevity that puts corporate minds at ease, often hinges on a specific company’s needs. If most travel is done domestically, online services fare well. In a company full of globe-hoppers, online booking becomes much more complicated, and at times, cultural differences get in the way: people based overseas often prefer to deal with a human being.

The NBTA’s Morse also warns that there are pitfalls to the online travel model. First, there is the à la carte pricing used by some sites. The low initial booking fee of $5 may look appealing, she says. But when you consider some of the additional fees for things such as changing your flight time, getting a refund, and upgrades — which range from $10 to $20 — and then add in as much as $30 to $40 for using an agent to make certain kinds of changes, you can easily equal or surpass the fees charged by traditional travel-management companies. Other analysts say some online providers are beginning to offer competitive customer service at no extra cost to increase market share, so it could be a good time to cut a very favorable deal — as long as you ask plenty of questions about what happens in various booking scenarios.

In addition, although the larger online players such as Expedia Corporate Travel and Travelocity now offer more-sophisticated reporting tools to meet corporate needs, they may not be able to customize those reports to your liking or satisfy the legal requirements posed by Sarbanes-Oxley and other regulatory restrictions. Before settling on an online partner, analysts say, you should also verify what kind of data feeds they provide and whether they can automatically import their data into your existing IT systems.

“We want to provide deeper integration,” says Simon Tam, vice president of corporate development at Expedia Corporate Travel. “We also want to improve automatic provisioning [granting new employee privileges], travel profiles, and auditing tools.”

Garner of Extreme Networks says she does get such sophisticated reports, which not only helps with assessing compliance with corporate travel policies but also routes requests for bookings to an employee’s manager for approval within 24 hours, enabling each department to manage its own travel expenses. “Now the managers are looking over the travel statements,” she says, “not some outside travel agent.”

Jupiter Research says online travel-management tools are making inroads at companies of all sizes. However, customers and analysts warn that large companies contemplating a move to an online travel-management platform must compare the transactional savings it offers with the volume discounts a company may enjoy by dealing directly with airlines, hotels, and rental car agencies (although most online corporate travel booking tools will now load any private fares or rates companies may have negotiated on their own behalf). While the big online players say they have secured discounts based on volume, they may not match the kind of rates a large multinational corporation can negotiate on its own.

For such firms, a hybrid solution may be in order, at least for now: forgo an exclusive deal in favor of a mix-and-match approach, in which the company negotiates volume deals with the subset of airlines and hotels it uses most often, while turning to online services when those deals don’t apply. “It’s a very labor-intensive process, issuing [requests for proposals] to hotels around the world,” says Ellen Keszler, president of Sabre Corporate Solutions. “We can handle the bulk of those arrangements while customers focus on cutting deals with a small number of key hotels.”

Most companies will continue to live in both the online and offline worlds for a time at least, but analysts say that corporate travel is one business process ripe for a total solution. The initial focus may have been on meeting the needs of consumers, but as these travel-services vendors get their arms around the complexity of providing the integration, reporting, and customer-service levels that companies demand, the travel agent may join the bank teller on the endangered careers list.

John McPartlin is a New York-based writer and a former editor of NetGuide magazine.