GBT’s Non-GDS Charge Makes Sense

Shopping Cart IconBuyers have a new distribution dilemma.

American Express GBT is phasing in a $10 surcharge for handling airline tickets from carriers who don’t use common industry channels for sales and settlement. (More coverage herehere and here.)

Think of this as the opposite of the €16 surcharge that Lufthansa Group is applying to tickets purchased via the traditional GDS/TMC channel. One happens if you buy in the GDS, the other happens if your LCC airline doesn’t play there.

Both of these surcharges annoy buyers. “What – you’re going to charge me more based on where I buy a ticket, or who I buy it from – that’s outrageous!”

In fact, it makes perfect sense.  Lufthansa and GBT make the same point – their costs to Continue reading

Posted in Airlines, Distribution, Travel Management | 4 Comments

Relationship Advice for Road Warriors

Surely a ton of travel creates unique strains for road warriors and their families.

Fortunately, these problems are fairly predictable, and can be managed with a bit of planning, effort and honest communication.  If you know a road warrior or two, read on, as they may well benefit from the sage advice from Megan Bearce, author, licensed marriage and family therapist, and wife of a road warrior.

I connected with Megan on the issue of traveler friction, something she knows well, especially as it impacts couples and families.  She’s written a terrific book on this subject, and offers the following practical advice.

SuperCommuter CouplesA Guest Post From Megan Bearce:

I am happy to report that whether you are a road warrior or a “super commuter,” (employees who travels 90 miles or more to their job), physical separation doesn’t have to mean emotional distance.  Below are three strategies from my book, Super Commuter Couples: Staying Together When A Job Keeps You Apart, to help your relationship thrive despite being apart.

1) Coming home:

People assume that reuniting after days on the road would be exciting, but in reality this Continue reading

Posted in Traveler Friction | Tagged , | 1 Comment

What’s The Real Goal of a Travel Program?

 

Nine Fall LeavesQuick – name three metrics that travel managers care most about…and no, you can’t say savings, savings and savings.

Savings, for sure, maybe followed by discounts and policy compliance, or average ticket price/room/car rate.    These are time-tested, industry-accepted, common-sense metrics that are the foundation for status-quo management of the travel category.

(Going to GBTA’s Convention? See a related meet-up note at the end of this post)

Before you reject my call to demote these traditional metrics, consider the maxim “Measure what matters”.  Note that it isn’t “Measure what’s laying around, looking like it matters”.  It’s not “Measure what we’ve always measured”.

It’s the “what matters” part that’s the key.  That, and an evolved view of travel management’s mission.

Shouldn’t the goal of managing travel be to create the most value from whatever the travel budget is?  To create the biggest business impact, net of the cost?  Sure…which means we need to think about measuring said impact. Continue reading

Posted in Data, Innovation, Travel Management, Travel Procurement, Traveler Friction | Tagged , | 51 Comments

Two Steps Closer to a 2-Channel Future

Travel managers, you’re gonna need a two-channel booking strategy.  Maybe not this year, but fairly soon in the scheme of corporate travel time.

The second shoe dropped last week, when The Company Dime broke the news (paywall, worth it) about airlines making complex trips (roughly anything not a simple one-way or round-trip) more expensive  – sometimes moderately, sometimes drastically more expensive.

Reliable sources estimate these complex trips to be anywhere from 7% to 16% of a corporate account’s transactions, depending on your definition and travel patterns.  Call it 10%  – that’s a significant chunk of bookings that are now at risk of much higher prices.

The cost-avoiding solution is to book each individual destination within the itinerary as

Continue reading

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4 Services for Reducing Traveler Friction

Reducing Travel Friction

Reducing Travel Friction

Innovation and traveler friction are popular topics for you folks, so here are a few quick profiles of new ways to make life easier for travelers.

DUFL – Allows travelers to travel without luggage.  A mashup of FedEx and your favorite Downton Abbey butler.  DUFL stocks a private closet with your travel clothes, and sends them to your hotel in advance of your arrival.  You leave the DUFL suitcase at the hotel upon checkout, and DUFL retrieves it, cleans and repacks your clothes, ready for your next trip.  Yes, there is an app for that.  More about DUFL here.

Expensify – Automatically, and near- instantly, reimburses travelers for their on-the-road expenses. Snap a photo of the receipt, and the expense reporting tool automatically cues it for payment the next day.  It’s hard to imagine making expense reimbursement any easier.  More about this feature here. Hat tip to BTN for the coverage.

FlyAnotherDay – Helps travelers and planners avoid trips to major cities around the globe during city-wide events.  An easy way to check a destination’s potential for travel congestion.  A new service with affordable pricing that solves a pesky problem.

What3Words – not really a travel app, but keep reading…this app makes finding places really easy, especially those places without a street address.  Imagine your travelers wanting to meet on a campus for a recruiting trip, or at a ferry point, or an oil rig.  This service makes it easy to identify any location on the globe using three words.  Interesting implications for travel risk management, yes?

 I have no commercial ties to any of these firms; just a fan of their efforts.

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Posted in Cool Tools, Innovation, Traveler Friction | Tagged , | 3 Comments

Top 5 Posts in 2015; What should I write about in 2016?

Pencil as a question markLet’s start 2016 off in the right direction..

Please tell me what you’d like me to write about.

To make things quick, easy and anonymous, here’s a 1-question survey of possible topics:

Tell Gillespie what to write about

If you’re not into super-short surveys, you can always drop me a line at scott.gillespie2008@gmail.com, or post a comment or two below.

Here are the five most-read posts during 2015:

#1 Why TMCs Need a Dramatically Different Sales Approach

#2 Hotel RFP Hell: Is The End at Hand?

#3 On Concur’s Future

#4 Lufthansa Accelerates Managed Travel 2.0

#5 A Better Way to Manage Road Warriors and Their Costs

Many thanks for reading, and great good wishes for an interesting 2016!

 

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Hotel RFP Hell: Is the End at Hand?

Let’s agree that all our friends and colleagues who are in the midst of yet another grueling hotel RFP season should have our sympathies.

You’re dealing with big chunks of invisible hotel spend, crappy data on the visible spend, clunky RFP tools, tedious back-and-forth negotiations, last room availability promises that won’t be kept, and disgruntled hoteliers only too happy to poach your travelers with squatter rates that they’ll offer as long as it suits them. Ugh.

Oh, yes – you’re also facing one of the toughest negotiating environments in what, a decade? Ouch.

Speaking of decades, we know you’ve been putting up with this predictably stressful process year after year, for what, two or three decades?  Gag.

Hang in their, friends, for the future is much brighter.  I saw a glimpse of it at the Beat Live conference in D.C. last week.  But fair warning…you’ll need to grit your teeth and open your minds, as it’s not an easy pill to swallow.

Two pills, really.  The first is TRIPBAM; the second is dynamic pricing.  Here’s how they get you out of the hotel RFP desert: Continue reading

Posted in Hotels, Travel Technology | Tagged , , , | 8 Comments

Delta Makes On-time Bet; Leads on Total Cost of Travel

Remember when Delta capped commissions twenty years ago?  It shocked the industry. Transformed corporate travel programs into cost centers.   Re-wrote the buyer-TMC business model. Ushered in professional procurement practices. Overnight.  Wow.

Well, Delta has done it again.  Much less drama here, but with even more long-term  impact on our industry. For airlines, yes, but also hotels, ground transport and TMCs.  We all need to pay attention to this.

Why? Because Delta is forcing the quality question front and center into the travel procurement decision.

This is a big deal.  By guaranteeing that its on-time performance will be better than its two main rivals, Delta is making buyers factor in the quality of its operations as part of Delta’s value proposition.

Delta shows buyers the value of cancelled and delayed flights – and lets buyers set their own values.  The argument is sound and simple.  “Delta saves you this much over our two rivals by completing more flights.  That’s why we should get even more of your business.”

So now buyers also need to factor in the quality of Delta’s rivals.  On a very measurable metric.  That matters a lot to travelers. Which has been “free”, or at least unlinked to price. Or explain to management why this quality stuff  doesn’t matter.

I think this is the first clear and ever-so-practical step taken by a major travel supplier to get buyers to focus on the total cost of travel. Not just the up-front price paid, but a pretty big piece of the whole enchilada.

In effect, Delta is unbundling the price of on-time performance.  In a way that wins them friends, not enemies.  It’s brilliant, and I love it.

Measuring quality in each travel category is possible, but few buyers make much effort.  It’s much easier to assume (or pretend) that “they’re all the same”. That’s a classic procurement play.  It reinforces the commodity nature of the suppliers, leaving them little choice but to compete on price.

Now, the analytics behind any negotiation have to include the value of each airline’s quality.  Today,  the metric is system-wide performance.  Tomorrow, who knows which factors the industry will want to compete on?

Here’s the thing: putting quality into the procurement equation is like bringing a puppy home to your kids.  There is no way you’re ever going to take that puppy back.

That’s why this is such a big deal for the entire corporate travel industry.  Think of the consequences:

United and American now have to compete harder on this dimension of quality, and/or find other important quality factors which favor them.  They too will have to put some money on the line. And then there are Air France/KLM, British Airways and Lufthansa…hmmm.

Hey, what about hotels?  Quality matters there, too, right?  Maybe Marriott puts its average TripAdvisor rating up against Hyatt’s and Hilton’s…you can see how this will unfold.

More money at stake means more buyer bandwidth for linking quality to price.

I spoke about this very concept last week at GBTA’s Advanced Airline Sourcing session.  (NB: I had no advance knowledge about Delta’s on-time guarantee.)  In that session, I showed why buyers need to evaluate trip quality along with price, and how this could be done with the airline category.

Here’s the slide that shows how easy it is to link an airline’s price to quality:

Quality-normalized Prices

The point is that we can readily link price and quality, and we should.  Only by rewarding suppliers who deliver higher value can we expect both buyers and suppliers to win in the long run.

For more information on linking price to quality, see this deck, slides 7-23. You’ll see why the total cost of travel is the key to true travel program optimization, and why these airline  prices are per hour, not per mile or kilometer. (Oh come on, let’s all admit it –  price per hour is a way better metric for non-airline folks.)

Delta, thank you for putting quality squarely into the procurement decision. That’s the kind of innovation we can all appreciate.

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Posted in Airlines, Innovation, Metrics and KPIs, Travel Procurement | Tagged , , | 3 Comments

Why Lufthansa Will Change Our Industry for the Better

Lufthansa Group announced a bold move to charge 16 euros for each ticket issued through a GDS.  Like any other unilateral cost increase,  it’s unwelcome. Travel managers are fuming; many of you seem really angry.

It reminds me of the withering challenges Continental took on back in the day when they forced corporate accounts to accept Prism’s contract monitoring as a condition for getting corporate discounts.

Today, contract monitoring is widely used because it benefits those buyers who meet their market share commitments.

So, deep breaths everyone.  Let’s consider the longer-term implications of Lufthansa’s unbundling the distribution value of the GDS channel.

First, this is another form of ancillary revenue for the airlines.  It just happens to be aimed at the travel manager, rather than the travelers.  Like travelers facing choices about fare families and other forms of bundled benefits, you travel managers have to decide if the GDS-bundled price is worth the value.

No doubt, there is real value in booking via the GDS/TMC channel.  Easy comparison shopping, immediate itinerary support from your TMC partner, and full data integration come right to mind.  The good news is that you still  have this well-oiled, high-value channel available to you.

Whether the GDS channel is worth 16 euros is your call. What used to be “free” is now out in the sunshine, where free markets can more easily decide its true value.  The debate needs to be about the price, and not Lufthansa’s right to charge it.

Now let’s imagine what may happen if other airlines adopt this same unbundling strategy, enough so that most travelers – leisure and business – have the same choice every time they want to buy a ticket on most any airline.

Will the leisure traveler place the same value on easy comparison shopping, TMC support, and data integration?  Of course not.  So all those leisure transactions will move to the lower cost, lower value channel of airline-direct booking, which is where most of them are anyway.

Guess what?  A big chunk of business travelers book just like leisure travelers.  They are price sensitive.  They book in advance.  They don’t change their travel plans.  And they don’t worry about needing a dedicated agent if something goes wrong.

Call these the commodity travelers of the business world.  They will naturally gravitate to the cheaper booking channel, removing a not-insignificant volume of transactions from the GDS engines.

All you travel managers in low-cost cultures will feel pressure to help them do this.  You’ll shift some of that pressure to the airlines, your TMC partners and other parties to bring you back the data you need from all those airline-direct bookings.

Those pipes will grow.  Maybe not great pipes, but good enough for the essential job of providing duty of care data and some purchase/policy information.  You’ll get by, and you’ll save some money by swimming in this cheaper distribution channel.

But with the GDSs losing notable volumes of their bread-and-butter transactions – the basic trips, no itinerary changes, no refunds or exchanges – their profit margins will take a hit.

The GDSs are left to handle the complex ticketing jobs on smaller volumes, and so will raise their fees to the airlines.  The airlines will respond by adjusting their GDS channel surcharge, until the market stabilizes in favor of the airlines.

Why will the airlines win?  Because GDSs set their prices to airlines in multi-year contracts, while the airlines can change their channel surcharge prices overnight.

But here’s the magic of free markets.  When all the airlines are charging GDS surcharges and reducing their distribution costs, they have to decide what to do with their new profits.

Well, we’re seeing this movie play out with traditional ancillary revenues.  Airlines are using those profits to fund new terminals, buy new planes, invest in the traveler experience…all good things for an industry criticized for treating passengers as an afterthought.

On an even more optimistic note, assume that the airline industry gets its fill of new terminals, new planes and happy travelers.  What then?  Will they be able to keep their fatter profit margins, or will the typical airline revenue management models takeover, and seek more volume by reducing fares?

I think that’s what will happen.  In the long run, these GDS surcharge revenues will get competed away in the form of lower airfares, until the airline profit margins are back to where they are now.

And don’t think this is all bad news for the GDSs.  This surcharge shock will give them every incentive to prove  – and improve – the value of their channel.  Look for significant upgrades in the way they commercialize their shopping assets, and  sell and service travel bookings. Amadeus’s new Exchange Relief product is a good example of this type of value-creating innovation.

On an even more optimistic note, what if this surcharge shock transformed the daisy chain of money being passed around this industry?  Wouldn’t it be great if everyone knew the costs of each step in the channel?  Even better, if they had choices about which steps to pay for?

Silver linings, folks…this will eventually be good for our industry.

Posted in Airlines, Distribution, Travel Management | Tagged , , | 2 Comments

GDS Surcharges: What’s A Fair Price?

Now that Lufthansa Group has announced its €16 surcharge for bookings made in the GDS channel, let’s tackle the fundamental issue it raises.

If the GDS channel offers a better value to corporate buyers, then what is  a fair price for using that channel?

GDS Surcharge - Fair Value?

Asked the other way, if booking directly on an airline’s website offers less value than the GDS channel, how much of a price incentive does the airline need to offer its customers?

Lufthansa has set that price at €16.  If the price were €1, the corporate travel industry would still be having a tizzy fit, but only on principle.  You couldn’t credibly claim that the benefits of booking in the GDS-TMC channel are not worth such a small amount.

Just to make this more debatable, assume that instead of setting a surcharge for bookings made in the GDS channel, an airline offered its corporate customers a €100 discount on all tickets booked directly via its website.

Of course the airline would see a huge take-up on that offer, because at that price, the disadvantages of the direct booking have been more than offset by the direct-channel incentive.

The point is that there must be a price at which the benefits of booking via the GDS channel matches the value received.

It is unfair to both the GDSs and the airlines to pretend otherwise.

So why shouldn’t an airline set a price and see what happens?  How else will the market really know what the true value is?

More coverage on this issue here, here, here and here.

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Posted in Airlines, Distribution, Travel Procurement | Tagged | 8 Comments