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

separate tickets. The airfares are much lower that way.  I don’t understand the airlines’ business logic here, but will assume they have a good reason for this new wrinkle.

It means more work for my travel manager friends.  More communication to travelers, more tinkering with the online booking tools, more channeling of travelers to travel agents, all to be sure of getting the best prices.  Even though it means more tickets to track and more live transactions to pay for.

The lesson from that shoe-drop number two?

Move your complex bookings to a live travel agent, or deal with a messier online booking experience, or keep it simple and book one ticket online for the whole itinerary and a whole lot of pretty pennies. (Note that booking on airline.com doesn’t help – you get the same high prices for a complex, single-ticket itinerary.)

Now about that first shoe. It dropped a few weeks ago when Lufthansa posted its financial results.

That’s when we saw that the highly contentious Distribution Cost Charge (DCC) did no harm to Lufthansa’s bottom line. (The DCC is a surtax of 16 euros on most any booking made through the GDS/TMC channel; prices on Lufthansa.de are therefore 16 euros cheaper.)

That’s a really big shoe-drop, folks. As poorly managed as that change was, Lufthansa got what it wanted – proof that a strong price differential between the two booking channels could be forced into the market, and live to tell the tale.

You have to expect similar actions from other major airlines.  Why wouldn’t they go that route, especially with benefit of better planning and stronger data links?

So this second shoe-drop sounds like the first one, lesson-wise.  Keep the complex bookings in the TMC/GDS channel, preferably with a live agent until the self-booking tools smarten up. Pay the GDS/TMC channel tax for the extra value you get – a no-brainer.

It’s the simple trips that will soon-ish be in play.  If you can save ~ $20 by selecting the airline’s website, and another ~$10 by avoiding the corporate self-booking tool, and you get the traveler’s booking data….you see where this goes.

That’s roughly a 5% savings on a lot of domestic air spend…making it way more than just catnip to many a procurement professional.

If this happens, the GDSs risk becoming dictionary examples of the death spiral.  Imagine losing over  80% of ticket transactions that are simple trips, and being stuck with living on the remaining 20% that are complex itineraries.

Prices for GDS booking fees will go through the roof, or there will be new commercial models, or maybe even whole new ways of doing what looks today like GDS processing.

In any case, you, dear travel manager, should be thinking about a two-channel booking strategy.

What types of trips do you want booked where, and why?

If you want an assessment of your account’s exposure to complex trips, write to me at scott@tclara.com

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3 Responses to Two Steps Closer to a 2-Channel Future

  1. Jeff says:

    ominous but well stated. Thanks!

  2. David Kilduff says:

    Good advice! Dave Kilduff CEO DK Consulting Group Ground Sourcing and Consulting 1120 Georgetown Way Vernon Hills il 60061 +1 847.955.1955-Phone +1 847.638.1955-Mobile +1 847.955.1955-Facsimile dkilduff123@comcast.net

    >

  3. Yossi Zukerman says:

    the solution for the Lufthansa issue is to direct connect your corporate online booking tool to the airlines using their web services… cytric ( the new Amadeus system) does it with several airlines saving the clients the additional cost and exploring the airlines privet fares to the users… this saves the 2 channels idea and saves LOTS of money…and they can handle complicated trips online..

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