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The Travel Managers Abandon the Agent

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Toward a World That Works for Everyone
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BTN itself was leading the pack, rather than following the leader, in promoting the "dream of automating the travel process." (1)

Imagine a business world where inner- and outer-office networking, communication and information dissemination [are] conducted predominantly via computer networks, instantly, via the Internet and intranets, where employees are reliant on the Internet within their work environment, as well as during their leisure time, for news, business intelligence, entertainment and consumer purchasing; where commercial and social interaction is facilitated by an immensely adaptable, entertaining and easy-to-use medium -- the Internet -- by everyone and everybody. Is this picture still a futurist's vision? In fact, it's starting to look like a fine description of the way things are today. ...

Accessible with little more than a laptop, an Internet or intranet connection and a Web browser, [ATSs] offer managers and travelers a wealth of functionality and flexibility in a computing environment that has already gained widespread acceptance and usage, without the closed circuit and high cost that accompanies distributed systems. Companywide distribution of travel policies can be facilitated via the corporate intranet with ease, while implementation and tracking will occur with reservations filters and electronic queuing. (2)

BTN called the demand for automation "hotter than Dallas in August." (3) Regardless of the fact that "no one has the perfect end-to-end technology solution," the travel buyers that BTN interviewed at the 1996 National Business Travel Associationís annual conference demonstrated "how real the demand is for these products." (4) It polled travel managers and reported "a greater eagerness for technology than even most vendors had been predicting ... despite the fact that many promising products are not yet ready for harvest." (5) BTN chastised those who remained on the sidelines.

The components for travel systems from booking through expense reporting that business travel buyers will see on the NBTA show floor this week demonstrate that a new era has arrived. New software and more secure online connections are making it possible to automate the entire business travel process, and those travel suppliers and buyers who are not getting ready to change the way they do business accordingly are already behind. (6)

According to BTNís version, the travel managers were not being pulled by automation; they were actively pushing it.

As with most industries facing the growth and widespread use of the Internet as an important and powerful business tool, corporate travel managers are adapting to the Net's maturity in leaps and bounds. They are not only validating the potential of this much-hyped medium, but pushing it forward to new heights and changing the landscape of travel management and technology forever. (7)

In 1997 the magazine cautioned "travel managers who have not yet jumped into the pool ... [should] quickly get their feet wet, and those that have tested the water [should] consider accelerating their plans." (8) It quoted people from all over the industry marveling at the new technology. Colleen Guhuin, corporate travel manager for Texas Instruments, for example, sent out a survey to her "road warriors" that showed they "wanted automation and they wanted it now." She declared:

There isn't any one product that has it all right now. But we aren't going to wait until we find the perfect one. We can't. There's too much money going down the drain by not going with an automated product. The difference in a transaction fee to the agencies versus a transaction fee on an automated system is quite substantial. (9)

The corporate travel agency now having been marginalized, onetime friends and colleagues of corporate travel agents had reached the point of representing using them as pouring money down the drain.

According to BTN, automation became one of the industry's "best practices.Ē

A number of the changes [in recommended best practices] reflect the increasing use of automation in every aspect of travel, from booking and ticketing through expense reporting. For example, a best-practice travel policy should now include policy support through electronic bookings. Included in the best practices for selecting an agency are offering alternative methods to book reservations and supporting integration of automated systems. And for communicating travel policy, a best practice is one that uses an intranet or Internet site to assist travelers. (10)

What drove automation was cost-savings. Declared General Motors' corporate travel manager Kevin Killeen in the face of airline commission cuts, "we are all trying to reduce costs." (11) Echoed travel industry consultant Harold Seligman: "Everybody is looking at cost containment. If you eliminate a middle man, you reduce costs." (12) Corporate travel agents were now middlemen who must be bypassed. BTN saw ATSs as the answer to bypassing them and thus lowering costs: "Businesses are looking to buy booking through expense reporting systems because senior management and frequent travelers are demanding them, the potential savings are huge and the return on investment will cover the cost of implementation probably within 12 months and certainly within 24." (13) Studies Unisys conducted with American Express indicated that ATSs would lower company booking costs by as much 30 percent. (14) Travel-management consultants ran other tests that showed that the process of selecting an airline fare through electronic booking was 18 percent cheaper than through telephone booking. (15)

Thus, the corporate travel agent had become the middleman to eliminate. Managing director of Global Airline Associates Jon Ash declared in relation to airline mergers: "The guy in the middle is potentially in trouble. ... It will be interesting to see who gets left out." (16) Texas Instruments's Guhuin applied the argument to travel: "The fewer middlemen involved in the travel transaction, the more efficient it is going to be." (17) Some travel managers wanted ATSs, not only to circumvent the travel agency, but also to shrink their own reservations staff. One pharmaceuticals giant expected a 30 to 40 percent efficiency gain in processing reservations within two years "that will tie back to a reduction in headcount with our onsite [booking office]." (18) Their own travel-management office was now the middleman, as the idea of eliminating needless staff spread.

BTN lined up industry insiders to show that travel agents were no longer needed. Kelly Renner of Via World Network, whose ATS product would benefit from an increase in corporate online booking, declared that for "simple point-to-point itineraries, you don't need the services of an intermediary." She listed the benefits of online booking with a technology vendor: It "saves the airline the cost of CRS booking fees, ARC processing fees, travel agency commissions and overrides -- all numbers that can be added up and placed squarely on the negotiating table between the travel manager and the preferred vendor." (19) When the airlines upped online booking fees, they spared their own CRSs and ATSs from the increase, showing that the move was directed against the new technology vendors, rather than being cost-driven. An ATS not owned by an airline during this period seemed to enjoy a brief window of opportunity before it too was driven under in the atmosphere of cutthroat competition.

In 1997, BTN quoted Else Becher, chairwoman of the Norwegian Travel Managers Association as saying: "I think soon we will not need travel agents." BTN summarized the rest of her words: "Electronic travel management systems will enable corporates to handle many travel agency functions in-house in the near future." (20) Jim Kimball, director of corporate travel for Huntsman Chemical, was equally blunt: "Why should we pay a commission to the travel agent? Many of us are planning to take agency services in-house anyway." (21) Austrian Airlines business travel manager Gerhard Aigner rejected the agency link. "The service we cover through the travel agents now is no longer worth 9 percent. The system does not work anymore." (22)

From the supply side, the airlines were not immune to giving the travel agent a push whenever they could. In designing its ATS, United Airlines reported it had dropped a feature that would have linked the company to the agency for ticketing because "in our research, the need for a travel agency didn't hit the radar screen." (23) British Airways tried once again to do the double dance -- preserving travel-agent goodwill while distancing itself from them. Said Dale Moss, their U.S. sales and marketing vice president: "For years, our relationship with many corporate customers [has] been through the travel agency.... My view going forward is to have a great relationship with the travel agent and a great relationship with the corporation, but not one through the other. The travel agent is a very important part of the chain, but he's not the customer." (24) The "great relationship" he has with the agent will probably be in vacation travel; the great relationship with the travel manager will be in corporate. His distinction thus promotes disintermediation in corporate while trying to preserve agent goodwill in vacation.

A process comes to life for us when it has a name. A technology vendor introduced a name for the process by which travel agents were being eliminated from the loop. IBMís worldwide corporate travel solutions manager Declan Borland called the process "disintermediation." (25) He seemed to suggest that the concept was already well-known in certain circles. Here is his statement: "We looked into providing direct links, and though the concept does have the elements of classic disintermediation, our travel procurement folks said it wouldn't give us the consolidated data they need from the corporate travel perspective." (26) Presumably, if their data-capture technology had been more advanced, IBM too would have joined the feeding frenzy.

Three months later, BTN showed that the term "disintermediation" had entered the language when it offered its sympathies to the corporate travel manager involved in the process.

While it seems everything is up for grabs in these new digital relationships, there's no such thing as a free lunch. Both sides are quickly discovering the challenges disintermediation presents for travel management. Linking directly may provide one of the greatest opportunities for cost savings, but it also creates the largest headaches -- disruptions in policy compliance, data integration and management reporting, not to mention all those delicate agency financial arrangements. (27)

By 1998, the first extranets or secure direct links with the airlines had been established, eliminating the middleman. BTN showcased corporate travel managers, like Chevronís global travel manager Nancy Godfrey, embracing extranets.

Agreed [Godfrey], "Yes, we are looking at direct links with airline, hotel and car rental suppliers.... I expect to have a direct link to an airline by the end of 1998 -- and maybe we'll be lucky and have more than one." (28)

At around the same time, BTN spotlighted the "'more than five' corporate customers [who] already have or are building direct links to airlines, all under 'very strict non-disclosure agreements.'" (29) Thomson Consumer Electronics told BTN a few months later the history of its establishment of direct links to the airline. We may want to listen to that account in detail to get a picture of the everyday details of the process travel managers went through to win acceptance for agency bypassing.

For Thomson Consumer Electronics, the choice of the Worldspan system comes almost three years after [its travel manager] first began looking into travel booking systems, begun after [Sabre] first announced it would be developing a system at the 1995 NBTA conference. Intrigued, [she] approached Worldspan and signed on for Travel Shopper, an e-mail based, off-the-shelf system developed by the CRS in the '80s. A year later, Worldspan "started seriously looking at building a product and putting programmers to work on it," [she] said. By November 1995, thanks to an incentive program that rewarded users with free hotel room nights and other prizes, [she] had moved 105 travel arrangers -- and 10-15 percent of Thomsonís domestic travel -- off the phones and onto e-mail.

"I wanted to test the waters and see if we would even be interested in automated booking," [she] said. And, added [the domestic corporate travel manager], the early start helped identify travelers and travel arrangers interested in and accustomed to technology, who now will serve as the first testers of Trip Manager.

The success of the early system convinced not only the travel department, but senior management as well. "Once it was in place and the commission cuts continued to come, the executive committee, which is made up of the heads of all the departments, said okay, this is good. Now let's improve on it," [she] said. ...

In internal beta testing at Thomson since September, Trip Manager this week will be rolled out to about 300 travelers and travel arrangers in the United States and Mexico. ... Thomson again plans an incentive program to encourage change in travelers' behavior. [She] will ask her airline partners for free tickets to offer as raffle prizes for online bookers in return for linking the Thomson booking site to the airline Web site. With the raffle as a carrot and the mandate as a stick, she expects to move 30-35 percent of Thomsonís $40 million domestic air volume onto Trip Manager. (30)

A chorus of voices could be found to agree with Texas Instruments's Guhuin that "direct links definitely are going to be the way of the future." (31) When British travel agents fought back against the process of disintermediation, BTN commented that "Americans who already have been through the same pain may regard this as Luddite inability to accept inevitable change." (32) That depended on where the Americans sat. By this time, the discussion had reached a level of sophistication and the outcome had been sufficiently sold to travel managers that little more thought was given to the fate of the travel agent.

Footnotes

(1) Cheryl Rosen, "Worldspan Debuts Business Travel System at TTW," BTN, 9 June 1997, 1.
(2) Joe Witherspoon, "Net Recasts Corporate Travel," BTN, 14 Oct. 1996, 11.
(3) Cheryl Rosen, "Industry Goes Intranet," BTN, 19 Aug. 1996, 1.
(4) Cheryl Rosen, "Buyers Eye Tech," Business Travel News, 19 Aug. 1996, 1.
(5) Cheryl Rosen, "Industry Goes Intranet," BTN, 19 Aug. 1996, 26.
(6) David Meyer, "New Tools Trim Costs and Add to Job," BTN, 5 Aug. 1996, 16.
(7) Joe Witherspoon, "Net Recasts Corporate Travel," BTN, 14 Oct. 1996, 11.
(8) John Heilner, "Cuts Recast Agency, Airline and Buyer Roles," BTN, 27 Oct. 1997, 12.
(9) "Travel Buyers Assess New Automated Solutions," BTN, 19 Aug. 1996, 25.
(10) Mary Ann McNulty, "Benchmark Software updated," BTN. 28 Oct. 1996, 4.
(11) Killeen in Cheryl Rosen, "Buyers Look to Extranets to Cut Costs," BTN, 10 Nov. 1997, 48.
(12) Cheryl Rosen, "Enter Microsoft," BTN, 29 July 1996, 22.
(13) Cheryl Rosen, "Buyers Eye Tech," BTN, 19 Aug. 1996, 1.
(14) Mary Ann McNulty, "Tech Outsourcers Target Travel," BTN. 8 Dec. 1997, 47.
(15) Travel management consultant Ralph D. Brown, "Benchmarks for Buyers Considering the Cuts," BTN, 3 Nov. 1997, 10.
(16) Jay Campbell, "Carriers are Dancing Closer to the World Beat," BTN, 19 Aug. 1996, 16.
(17) Cheryl Rosen, "Buyers Look to Extranets to Cut Costs," BTN, 10 Nov. 1997, 50.
(18) Sarah Welt, "Res Centers Rise as Rev. Falls," BTN, 3 Nov. 1997, 30.
(19) Cheryl Rosen, "Buyers Look to Extranets to Cut Costs," BTN, 10 Nov. 1997, 50.
(20) Jay Campbell and Amon Cohen, "BA, SAS Cut Commissions," BTN, 8 Dec, 1997, 44.
(21) Kimball in Jay Campbell, "Group Buying Appears Ready for Takeoff," BTN, 19 Aug. 1996, 7.
(22) Aigner in Paul Needham, "Austrian Airlines Offers Net Fares to Cut Costs," BTN, 25 Nov. 1996, 35.
(23) Cheryl Rosen, "United Shifts Booking to Web," BTN, 8 Dec. 1997, 8.
(24) Jay Campbell and Amon Cohen, "BA, SAS Cut Commissions," BTN, 8 Dec, 1997, 44.
(25) Cheryl Rosen, "Buyers Look to Extranets to Cut Costs," BTN, 10 Nov. 1997, 48.
(26) Ibid., 48 + 50.
(27) Laurie Berger, "Electronic Links to Corporate Intranets Loom Larger," BTN, 26 Jan. 1998, 20.
(28) Cheryl Rosen, "Buyers Look to Extranets to Cut Costs," BTN, 10 Nov. 1997, 48.
(29) Loc. Cit.
(30) Cheryl Rosen, "Thomson Mandates Tech," BTN, 26 Jan. 1998, 50.
(31) Cheryl Rosen, "Buyers Look to Extranets to Cut Costs," BTN, 10 Nov. 1997, 50.
(32) Jay Campbell and Amon Cohen, "BA, SAS Cut Commissions," BTN, 8 Dec, 1997, 44.

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Toward a World That Works for Everyone
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