Tools Won't Fix All

Article Published in Business Travel Monthly - September 2003

 

SELF-BOOKING TOOLS USED by corporate travellers come in many packages these days. By definition, self-booking implies that the traveller books his or her own travel itinerary, in lieu of having a traditional travel agent book the trip.


Self-booking tools range from directly accessed, but uncontrolled from a corporate perspective, Internet tools like Zuji, Expedia, Travelocity and Orbitz to airline direct sites such as virgin-blue. com.au, qantas.com.au and airnz.com; from travel management company offerings and the GDS tools like GetThere.com, e-travel.com, GalileoTravel.com and TripManager.com to proprietary tools offered by TIAS and Navitaire. And there are others.


TMCs would have the corporate travel manager believe that self-booking tools are the panacea in today's travel world. In fact, such tools in enhanced forms most certainly represent the future of travel booking – five to seven years in the future. But today, the economic value of self-booking lies more in the corporate travel manager's ability to control travel policy, support given to travel policy enforcement by senior management, and the corporate travel buying culture.


The traditional travel distribution model is changing. Today's self-booking tools are one of the early product offerings of newer "technology" agency solutions. But there are no full-service technology-based agencies in exis-tence yet – none capable of serving corporate travel needs.


At best, self-booking tools represent various service levels of hybrid offerings – essentially "cost-shifting" opportunities for the traditional agencies; or high-speed access to tailored but limited offerings from technology agencies.


For the most part, both types of agencies are burdened to various degrees with the cost structures of the traditional distribution solution.


The core corporate-related costs of today's travel distribution system are:


1. Booking fees charged by the GDS to the airline for each transaction the GDS handles;


2. The cost to the agency of its agents' burdened-labour and related service technology tools to provide the interface between the GDS and the customer;


3. Booking level incentives derived from segment fees paid by GDSs to agencies;


4. Commissions and/or overrides (or sector discounts) paid by airlines to agencies and/or corporations for market share or sector volume levels;


5. The cost of the combined time of the buyer and/or traveller and/or their respective staff to interface with the travel agency, and/or agent and/or self-booking tool; and


6. The cost to the corporation for the agency's services on behalf of the corporation.



Corporate travel managers are often aware that these costs exist, but see them as transparent.


For example, few travel managers understand the cost per segment which the GDSs charge to each airline for each


segment created. These are not travelled segments, but segments booked. The fees vary somewhat, depending on what part of the world the booking is made in, but range roughly from US$3.75 to US$4.25 for each segment in an active PNR eight to 24 hours (depends on the airline/GDS contract) before departure, confirmed or not. These include passive, unconfirmed, changed schedules and cancelled segments, among others – in addition to the confirmed travel segments.


Thus, the average transaction cost for a two-segment travel itinerary ranges from $8.00 to $12.00; $20 to $30 for four segments. For a long-haul flight, those numbers are typically less than 10% of the revenue; but on many short-haul or domestic flights in competitive markets, segment fees can offset the revenue of some competitively priced fares! These are costs which the airline must add to commissions, over-rides, discounts or packaged pricing.


When a self-booking tool is inserted into this mix, it is very important to recognise exactly which costs the self-booking tool is impacting upon! Will self-booking solutions drive segments up (i.e., increase airline costs) or down? Will travellers change itineraries more often (driving segment costs up) or less? Will the self-booking tool bypass the GDS costs with airline-direct bookings? The answers influence both airline and agency negotiations.


Self-booking tools also impact on agency costs. Self-booking tools shift the cost of agency labour back onto their corporate clients. If the self-booking tool merely transfers these agent costs to the corporate employee, the corporation rarely benefits. In the real world, the cost of a corporate executive's time, or that of his administrative assistant, is significantly greater than the cost of a travel consultant's time.


But, of course, this does not really address the whole issue, for it is virtually impossible to track "chat" time induced by one party or the other in the transaction – not to mention the reality of human miscommunication. Thus, it may or may not be cheaper for the executive to self-book instead of relaying travel requirements through one or two others.


Another factor that influences self-booking usage is the degree to which the traveller can "play the itinerary game". If a corporate travel policy is strongly enforced by the traditional agent-on-the-phone but can be "gamed" through self-booking tools, self-booking will generally be more costly. Of course, if greater control is exercised with the self-booking tool, then agency booking will be more costly.


The agency cost mix in providing the fulfilment side is also a critical factor. If self-booking leads to repetitive calls for fulfilment support, then either the agency increases its cost – or the corporation pays additional fees for fulfilment. To the extent that an agent asks the right questions or knows the traveller's needs during the booking process, many post-booking fulfilment calls can be reduced. And, as with the "gaming" of the system above, the degree to which a self-booking tool inhibits or precludes these fulfilment calls will lower the corporation's agency-related costs.


There are clearly many other costs that need to be considered in evaluating self-booking tools. In addressing those costs, a corporate travel manager needs to understand clearly the cost factors outlined earlier – and how they play against each other in the cost decision matrix.


In addition, there are two overriding issues to keep in mind.


First, the airline seat is increasingly a commodity. A commodity, by definition, is a product where choice of an alternative product is driven by price. Accordingly, airlines must further reduce the costs of intermediaries. Therefore, airlines will continue to evolve processes that reduce or eliminate intermediary costs.


Secondly, the industry is making a transition from traditional agency distribution to technology agency processes. Today's corporate travel manager is presented with an opportunity few managers ever see – the opportunity to develop and control a meaningful transformation within the business processes of their company.

 


Richard Eastman is an industry pioneer, having created AQUA (Automated Quality User Assurance), the travel industry forerunner of what has become "third party software". President of the Eastman Group, Inc. (TEG), his previous roles included chief marketing officer for AirLanka, the national carrier of Sri Lanka.