blog posting

In the Eye of the Storm?

July 17, 2006.As I attended today’s “Perfect Storm” panel discussion here at the NBTA convention, I couldn’t help but think about how appropriate that title was.  While many people here are saying that the recent airline and GDS announcements signal eventual calm waters ahead (even if they are costlier calm waters), I fear that the calm some are feeling is only the eye of the storm.

In fact, I’ve become even more convinced in the last 24 hours – talking with people here – that American clearly has demanded loopholes in its GDS contracts.  This makes the yet-to-be-completed negotiations between American and Sabre all the more critical. And it means that corporate travel managers must act to ensure they don’t find themselves in the storm of a fragmented marketplace once again. Questions and comments from the floor of the “Perfect Storm” session underscored the disbelief travel buyers feel that their airline partners would knowingly heap extra fragmentation, complexity and costs upon them.

Why is fragmentation a bad thing for corporate travel managers?  It comes down to the three C’s: Credibility, Control and Costs.

If airlines are able to offer fares and send special promotions to travelers – including your corporate travelers – and those offers aren’t available through the corporate travel program, the program loses its Credibility.  The recent action by Air Canada, pulling its lowest fares out of GDSs, is hurting corporate travel programs north of the border.  It’s this kind of action that I trust Sabre is trying to fend off in its negotiations with American.

With your program’s Credibility eroding, travelers feel justified in – in fact they feel good about – “saving their company money” by using other means to secure lower fares.  That cuts into your ability to Control a corporate travel program.  What was an integrated program – with clear insight into what suppliers are doing and where travelers are going – is now fragmented and unmanageable.  You no longer know all of your travelers who are in a location when terror strikes or a tunnel implodes.

And ironically, those travelers trying to “save the company money” by using outside channels are now driving higher Costs.  They have hurt your ability to negotiate with suppliers.  You have less leverage because the travel spend through your program is less.  And now the airlines can extract exactly what they want: higher prices – in the form of reduced discounts.

Alternatively, if you try to build work-arounds and other tools to bring these offers into your system, or capture these out-of-system bookings, you’ve also increased your Costs.

We need to avoid this storm.  We need to take advantage of our access to airlines and GDSs this week to make absolutely sure they know where we stand.  We won’t stand for another fragmented marketplace, with no Credibility, no Control and higher Costs.   We expect that full content means full content…that protection from discrimination means real protection.