The travel industry has endured a downturn brought on by the Persian Gulf war and a broader recessionary economic environment. Coming off the volatility of airline pricing and on-the-brink financials, the industry is looking for stability, and it appears that buyers, agencies and suppliers are proceeding with more discipline when it comes to strategy, commercial structures and negotiations.
Agencies want to look at transaction-based fees, rather than the slushy world of revenue sharing. Airlines and car rental companies are doubling down on corporate volume commitments when companies want to negotiate directly—which is happening more and more often now. Buyers are becoming more disciplined with cost scrutiny and some companies are adding “expense” to travel managers’ titles, giving them more accountability to finance teams and moving them away from generalized central services or human resources teams.
All that said, business travel overall is sensing opportunity in 1993. The globalizing economy is driving travel; technology is advancing, on the one hand, agency capabilities and services and, on the other hand, efficiencies. Travel suppliers, take a look at British Airways’ move in May, are eyeing opportunities around designing global—not just domestic or regional—contracts direct with corporations. Merger and acquisition activity in the agency space is squarely focused on international expansion—check out the two major swipes at Rosenbluth’s alliance members, also in May. American Express invested in its largest purchase to date in 1993 to capture Sweden’s Nyman & Schultz AB, while Thomas Cook snapped up Canada’s largest travel agency Marlin Travel Group.
It’s an era of globalization economically, politically, industrially—and certainly for travel management. This week, BTN Weekend features an archive article on how travel managers are looking at globalization and what they hoped to achieve with it for their programs
Thanks to BTN 1993 executive editor Mary Brisson for the following coverage from ACTE Munich from that year, which is provided below unabridged. Many dynamics have changed since this article was written in 1993. Of particular note is the discussion of data at the close of the article. With revenue management technology and sophisticated customer relationship management systems and loyalty data giving suppliers more insights than ever before, corporates and agencies, today, often are the ones needing to keep up.
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Same Goal, New Reasons
Impetus to globalize shifts as corps. grow more disciplined
By Mary Brisson
Globalization isn’t what it used to be in the “old days,” back around 1990. Corporations still want to manage their travel around the world—but in many cases, their motivation for doing so has changed in teh last two or three years, according to attendees at the Association of Corporate Travel Executives’ recent ACTE Global conference.
A few years ago, companies were spurred on by the success of domestic consolidation programs, and by the hope that impending airline deregulation in Europe would let them save money the way they did at home after the U.S. industry was deregulated.
But airliens and other suppliers never have come around to providing “global” programs, and the years have proven that a successful U.S. program isn’t enough of a reason to export travel management abroad.
Today when a company contemplates global travel management, the effort often is based on some fundamental principle that is common to the company’s operations worldwide. Many travel management agendas have been reshaped by the rigorous sefl-scrutiny corporations have undertaken during the last few years of recession and repositioning.
In some cases, there has been a commitment to a complete overhaul of business processes., including travel purchasing. In some cases, there is a quality initiative that calls for key supplier relationships.
Saving money is still part of the objective, but the approach is more toward long-term gains and less toward short-term tactical opportunities.
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At Parker Hannafin Corp., a new set of company principles being rolled out worldwide is dovetailing with a broad-based organizational restructuring, allowing travel administrator Elaine Triggs to expand travel management to Europe starting this July.
The Cleveland-based company for the past year and a half has been centralizing multinational responsibility for product lines. “We had to follow suit with the multinational consolidation of travel,” said Triggs.
At the same time, Parker Hannafin is introducing a slate of productivity, quality and service principles to its international operations, and the company’s chief executive-designate has made it known that customer service is at the top of the list. The travel department “really didn’t have any choice but to try to do something along those lines,” Triggs added.
Parker Hannafin’s solution will be to use Business Travel international, allowing each local operation to use a familiar and respected agency within the framework of a unified program, according to Triggs.
Other corporations, such as Texas Instruments Inc and Halliburton Co., believe the key to qulaity is using a single travel management company as widely as possible.
Still others, equally committed to traveler service, think differently. With consistent responsiveness as a primary goal, Digital Equipment Corp. is putting a portion of its European business out to bid and hoping—but not insisting—that other countries will join the program once it’s awarded.
And at DuPont de Nemours (Deutschland) GmbH, Juergen Lepel, a member of purchasing management for Europe, the Near/Middle East and Africa, flatly warned against assuming that a single agency guarantees consistent quality. “Don’t try to sell your U.S. travel agency in Europe and think you’re successful,” he said.
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Just as globalization doesn’t automatically mean worldwide corporate accounts for travel agencies, neither does it very often mean all-encompassing contracts between corporations and airlines.
U.K.-based chemical company ICI has a deal with British Airways that includes routes throughout the world and covers about two-thirds of the company’s needs. But Roger Glenwright, busienss services manager in teh headquarters contract purchasing group, encourages managers in the 120 countries where ICI operates to make their own deals where they can find them.
The bimodal approach helps keep BA competitive , and also helps secure support from field managers for the overall travel management objective. “I spell global L-O-C-A-L,” said Glenwright.
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For many travel managers who recognize that travel satisfaction is indispensible to the success of a vendor program, global airline deals aren’t a realistic goal.
Even with their international alliances—and maybe sometimes because of them—airlines doen’t yet offer travel managers the necessary worldwide service consistency. “I see the world as four different service standards,” said Maria Capone Goodwin, contract services manager for The Gillette Co. in Boston. “Until things come up to speed in all regions of the world, I’m going to wait and see.”
For their part, European airlines protest that restrictions on their access to U.S. markets and ownership of U.S. carriers prevent them from establishing this uniformity of service. “The world is a restrictive place,” said Chris Allen, BA’s manager of competition policy. He called on consumers to press their governments to liberalize aviation policy and open up markets to service improvements.
***
Airlines own organizational foibles are another obstacle to comprehensive agreements with corporations, and they cause service problems to boot.
Triggs said that when an employee of hers was having a problem in the United Kingdom, her U.S. sales representative would not provide any assistance, deferring the request to a U.K.-based colleague.
“I felt like I was dealing with two totally separate companies because of the geographical separation,” Triggs said. “This airline’s local sales rep didn’t know diddly about international travel.”
Rolf Hoehn, vice president for Lufthansa German Airlines’ western U.S. division, agreed that traditional airline structures are detrimental to some corporations’ needs.
Another critical deficiency is information systems, Hoehn said. The carriers are not as advanced in linking reservation data as travel agencies and corporations are, so the carriers frequently depend almost completely on corporations when they enter into ticket-price discussions.
But sometimes corporations should seek to deal with their local reps when initiating discussions on a global deal. Virgin Atlantic Airways corporate accounts manager Jill Chait said. “It’s unfair for me to negotiate 100 percent with you, because it is your local rep who knows your company, its travel policy and the individual market dynamics there that I may not.”
Tom Yates, manager of the supplier relations group at American Express, reminded the audience that corporations are far from perfect in their global data abilities. He pointed out, for example, the lack of sophisticated data collection in Asia, where CRS system links are still developing and PC applications to collect PNRs and support management reporting are new.
Even in Europe, travel management companies are waiting for Amadeus and Galileo to cover the entire continent.
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[Editor’s Note: Business Travel News Archives are missing Q1 of 1993, as well as September and October. Editors made efforts to recover relevant information for those months; information was limited. We filled some highlights for September and October, but January through March was not possible. If we are able to locate these issues somewhere in storage, we will update this timeline.]
Clinton Administration secretary of transportation Frederico
Pena intervenes in “predatory” pricing and scheduling practices by Northwest
Airlines to compete with new service into Minneapolis by low-cost carrier Reno
Air. The move signals growing federal interest in airline practices 15
years after deregulation.
Major agencies American Express, Carlson Travel Network,
Thomas Cook and Maritz Travel all upgrade their back-office accounting systems
to improve management information.
Continental Airlines exits Chapter 11 bankruptcy protection after two years and with a newfound Air Canada partnership, which has a 28% equity share in Continental. Air Canada CEO said they share a goal: “We are both going global.”
First quarter financials for major U.S. airlines take a turn
for the better after pricing and capacity discipline. Industry traffic was up
4.1 percent while capacity rose only 2.6 percent, setting the stage for comparative
airline stability in 1993.
British Airways, as step ahead of other carriers in
developing its global route map, set internal guidelines for negotiating global
agreements and discounts directly with corporations
Clinton Administration forms “blue-ribbon” commission
to study the airline industry as a step toward a turn-around; with just one
active airline executive—Southwest’s Herb Kelleher—it is met with
industry skepticism.
InterContinental Hotels debuts a marketing alliance
program that includes hotels that it neither owns, nor manages. It includes
only five hotels at the time, but could it be a first move toward asset-light
strategy?
Major agencies American Express, Carlson Travel Network,
Thoms Cook, Rosenbluth International, IVI Travel and Wagon-lits Travel say
they have begun development work on systems that would allow them to complete policy-compliant
reservations before the traveler or arranger hangs up the phone.
Amex and Cook Travel each acquire members of Rosenbluth’s
Alliance. Amex bought Sweden-based Nyman & Schultz AB in its
largest acquisition to date up to 1993. Cook bought Toronto-based Marlin
Travel Group, Canada’s largest agency. Both positioned their buyers as
major players in new international markets.
Sabre debuts two products that enable travel agencies
to offer corporate clients bookings via fax and email: SabreMail Res andSabreFax Res. They handle hotel and car rental as well as airline
bookings. The move comes after some agencies have develop their own such tech
or adopted another third party.
E.J. Hewitt, travel administration manager for Libbey-Owens-Ford
Co. runs unopposed for National Business Travel Association president role.
Delta Air Lines forms a 20-person headquarters sales
staff in a quiet bid to transform itself into a corporate travel leader. American’s
headquarters sales staff, at the time, numbered 15. United’s 17.
NBTA hotel committee rolls out the first standardized
hotel RFP and RFI templates. “If adopted on a wide scale, the effort could
produce efficiencies for both hotels and corporations,” a BTN article read.
Southwest announces its first East Coast service,
flying to Baltimore from both Chicago and Cleveland.
The National Commission to Ensure a Strong
Competitive Airline Industry—the pithy name of the blue-ribbon commission
set up in May—calls for a rollback in airline taxes. It declined to return the
industry to federal regulation but did set limits on bankruptcy for airlines
and proposed longer-term financial review authority.
Industry observers cautious about downstream effects of Clinton
Administration $496 billion budget-reduction plan, which they say would put
new taxes on businesses that would stall economic recovery and result in
greater pressure to limit travel.
Federal jury exonerates American Airlines in suit
brought by Continental and Northwest airlines that AA’s failed
1992 Value Pricing initiative had been an attempt to eliminate competition.
Trans World Airlines gets approval to exit Chapter 11
bankruptcy. It plans to emerge as 45% labor owned with the rest owned by
creditors.
National Commission to Ensure a Strong Competitive
Airline Industry issues final report with 60 recommendations. Industry notes
what it did not do, which was not to re-regulate the industry. Some, however,
felt the recommendations were “totally inadequate” and pointed to special
government and corporate fares as well as agency commission and override
structures that should have been limited to ensure airline industry health.
Continental introduces “Peanuts Fares”—a low-frills
service—mainly on southeastern routes. However, the airline expanded that map
in December to include stops on the East Coast. Delta Air Lines also was
studying a low-cost carrier strategy.
Business Travel News chief editor Jim Alkon departs.David Meyer takes over the role. Meyer continues with the brand to this
day, having served as chief editor, editorial director and now as executive
director of conference content and strategy.
Labor talks break off between American Airlines and
the Association of Professional Flight Attendants. At an impasse, union
members struck on Nov. 18, just 5 days before Thanksgiving.
Major U.S. carriers reported nearly $1B in operating profit
for the third quarter, only the second time in the industry’s history that that
it had approached that sum in a single quarter. American led the
improvements with $326M in operating profit; United was second at $288M;Northwest third at $270M; Southwest at $87M; Delta at
$79M.
Sabre is
the last CRS to eliminate restrictive liquidation clauses from agency contracts;
such clauses not only included equipment but also a formula by which the agency
would be required to pay for the projected bookings fees Sabre would lose from early
termination of a contract..
Wagonlit acquires Total Travel Management in
its first bid to join the roster of U.S. mega agencies. Parent company Wagon-lits
Group is the largest travel company in Europe, including agencies, hotels, restaurants,
railroads and catering facilities. It will continue to its search for U.S. partners
and will make a much bigger move in Q1 1994.
Secretary of transportation Frederico Pena issues
tough rhetoric to IATA annual meeting about scrutiny of airline
competition dynamics and how the government will and will not intervene to preserve
the health of the airline industry.
Companies like North American Philips, Turner Broadcasting
and Dr Pepper/7Up leverage deeper purchasing partnerships with hotel and airline
companies by preferencing suppliers that in the RFP process will make commitments
to purchasing the corporate’s products, e.g. serving 7Up on the airline.
Florida-based Phoenix Information Systems says it is
developing a computer reservation system for China’s domestic airlines and
hotels. It says it will allow seats and rooms to be booked directly by mid-1994.
U.S. President Bill Clinton steps in to quell AA’s
flight attendant labor strike before Thanksgiving, delivering what most chalked
up as a win to flight attendants.
World Bank, International MonetaryFund cut
all first-class travel to rein in costs and address concerns about lavish
T&E costs.
Southwest buys Salt Lake City-based Morris Air
USAir plans entry into low-cost war, planning a major
rescheduling of hubs that will facilitate better connectivity for short-haul
flights and lower fares.
Citibank, Thomas Cook sue one another in a revenue-sharing
dispute; Citi sought $428,000 in unpaid rebates; Cook responded with a suit
accusing Citi of negligently misrepresenting its travel volume, seeking
$247,000 in operational costs.
Visa makes a new alliance with two bank organizations
to roll out new cards and improve management reports.
Sabre and Apollo vow support for electronic ticket
delivery networks, reversing long-held positions; Sabre commits to operating an
ETDN of its own. However, ETDNs were short lived, eclipsed by paperless tickets
delivered via email.
CMP Publications Inc. sells Business Travel News and its portfolio mate Tour and Travel News to Miller Freeman. The
sale includes all of CMP’s travel brands.
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Elizabeth West is the editorial director of the
BTN Group. She has reported on the business travel and meetings industries for
24 years. Beth was editor-in-chief of Meeting News from 2006 to 2008 and
director of content solutions for ProMedia Travel from 2008 to 2011, when
ProMedia was acquired by Northstar Travel Media and merged with BTN. She became
editor-in-chief of BTN in 2015 and editorial director of the BTN Group in
2019.
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