IPhone Hits the Enterprise

With eWeek reporting that 70% of the Fortune 500 are evaluating iPhone for the enterprise, the corporate travel industry needs to take note. From my view the debate is over regarding download verses mobile Web. Transcoding your Web page for the mobile browser is still important, but the value of a downloadable app for a company's brand and the ability to personalize the interaction with the customer is unmatched. The phone is becoming more and more of a sensor (accelerometer, compass, temperature, etc..) . The penetration of the iPhone in the corporate market is making a downloadable iPhone app for travel companies a priority. Apple has announced record profits and the iPhone is a big part of this. Apple's success in the corporate market is directly due to the consumer acceptance of the device.

Middle East Travel Market

I am currently back in Middle East. This is my sixth trip since July 08. Rapid growth is still the norm here despite the economic downturn, though the market is showing some signs of a slowing down. Even hot markets such as Dubai are showing signs of a slowdown as many construction projects have been slowed or put on hold.

The following chart describes the maturity of global market based on travel technology adoption:



The Middle East is an emerging market where online travel itself has not yet taken off. Corporate travel agencies are still primarily transaction processors rather travel management consultants.

There are both structural and cultural barriers to adoption of corporate booking tools. Most of the agency staff is actually Indian. Rates for agency staff are still much lower than in Europe or the US. Service is viewed as an essential component of corporate travel.

Despite these obstacles I do believe we are on the cusp of a major change in corporate/agency relationships here in the Middle East. High net worth individuals will continue to demand personal service, but many Middle East residents in my age group (baby boomers) were actually educated in the US or Europe and thus are implementing Western business techniques. With places such as Dubai now facing a drop in occupancy, online travel companies such as Expedia are poised to launch Middle East operations in 2009.


As this chart (developed in conjunction with Market Designs) indicates the evolution of a market first begins with basic infrastructure and online activity. Travel search follows with the adoption of online booking. Corporate booking tools are at the last stage of market development.

I believe the current economic downturn combined with the rapid growth of online travel will dramatically change the lansdcape for corporate travel mangement in the region over the next 12 months.

American Express' Social Networking Initiative

At the NBTA conference American Express announced "plans to launch a business-to-business online networking community for the corporate travel industry." There are a couple of interesting aspects of this announcement. Social networking is finally being embraced (though only a limited short "hug") by the corporate travel community. I moderated two sessions at the conference on social networking and both were well attended. BusinessTravelConnexion.com is being promoted as a way for corporate travel executives, suppliers and other providers to connect with each other in an online community. No one knows how successful this effort will be, but I applaud Amex for launching the initiative. A concern I have was actually part of my presentation during one of the NBTA sessions where I stated that communities naturally exist and cannot be created. Will the Amex Business Travel Connexion tap into existing communities? Will travel managers and suppliers find a forum hosted by the top TMC a proper avenue to connect? Time will tell if the Amex initiative will be successful in tapping existing communities. The other interesting aspect was that I received a call from Amex last week asking whether I would be blogging about the new service. At least Amex is recognizing the power of the Blogisphere.
I also had my first experience moderating a panel at NBTA during an earthquake. I have lived in California for 23 years, but I still have not become accustomed to earthquakes, even though I was at the World Series for the big Loma Prieta earthquake in 1989. Unfortunately we lost about 70% of our audience who fled the session. This is shame as the panelists from Sabre Cubeless and Cisco were excellent. Next year NBTA is in San Diego affording us all another opportunity to experience the earth shake beneath our feet.

Farelogix and ITA software: An update on GNEs

A news release late last month announced a new relationship between Farelogix and ITA Software. First a bit of disclosure, Farelogix has been a Travel Tech Consulting Inc. (TTCI) client and I have known the founder of ITA Software since 1997 when I participated in a presentation at Sun Microsystems (another TTCI client) where Jeremy Wertheimer first presented the ITA faring solution as part of a visit by a major TMC. Many in the corporate travel world may falsely believe that the concept of a GNE (GDS New Entrant a term coined by a former UA executive back in 2005) is old news and is no longer relevant based on the 5 year agreements signed last year between the major airlines and GDS. How are the GNEs continuing to survive and why have the three original GNEs embraced each other? It is important to note that G2Swithworks the other major GNE who received lots of press in 2005 already has a relationship with ITA Software as well as sharing a funding relationship with Texas Pacific Group who now also owns Sabre). In 2006, ITA shifted their focus away from GDS bypass to building a next generation CRS (Central Reservation System) for their "beachhead client" Air Canada. Farelogix has successfully continued to sign direct connection agreements with major airlines and was selected to provide the plumbing for BCD Travel's Renaissance Project. There are four major trends that continue to provide opportunity for these so-called GNEs

1. Unbundling of Air Pricing- The move by the airlines to provide a menu approach to pricing that charges different fares for different levels of services (e.g. a different price if you don't check bags or change your ticket) is being implemented or considered by all the major airlines. Whether the traditional mainframe-based platform of the GDS can accommodate this new pricing strategy is still an open question.
   
2. Leverage to Negotiate lower GDS Fees - Another key issue keeping the GNE activity alive is whether GDS fees can be further reduced beyond current agreements. The fixed costs in operating a GDS may limit how low their fees can go in the next round of negotiations. Even though we are about 3-4 years away from the renegotiation, airlines continue to support alternative distribution as a way to provide leverage for future negotiations.
   
3. Flexibility to Control Distribution - In 2006, Farelogix released its Distribution Manager software which enables " TMCs to effectively control the sourcing for each supplier's inventory through preferred booking sources, while maintaining contractual commitments to the various Global Distribution Systems (GDS) and direct supplier relationships." This control over distribution may be used by the TMC or corporation to gain further leverage in airline negotiations
   
4. Shifting the Aggregation point to the TMC - The reality of travel distribution is that content continues to remain fragmented. For example, corporate buyers continue to push hotel reservations through the GDS (either through self-booking or call center activity) but a good portion of hotels are still booked via the telephone. In Europe, where travel inventory has always been fragmented, a need to integrate boutique hotels, rail, ferry and other components into a super PNR is still required. BTN highlighted this in a recent article regarding HRG and BCD super PNR efforts.
   

So back to the issue at hand, why a partnership with ITA and Farelogix? The answer is simple, ITA has proven over the past 8-9 years to have the best 3rd party shopping and faring application. Farelogix has taken a more agnostic approach to faring offering SITA faring application, accessing the GDS faring models or now with this agreement offing ITA Software as an alternative.
Please don't misinterpret my comments here as I am NOT voicing the old hackney message that "The GDS are dinosaurs and are history" These companies still are at the heart of travel distribution both online and off. The ongoing viability of GNEs due to the factors above will continue to push the market to provide a more flexible distribution solution that ultimately allows suppliers to better segment their clients and target their best customers with special offers (a basic tenant of CRM). As the ultimate purchases of business travel, the corporate buying community needs to pay attention to this trends to insure that total supply is offered and that the corporation in conjunction with their TMC controls the distribution choices allowing additional leverage in supplier negotiations.

Why Corporate Self-Booking continues to be stuck in Travel Management 101

I am listening to a BTN/Concur sponsored Webinar regarding corporate self-booking tools. Perhaps I have a bit of a jaded view on the subject as I have been involved with corporate self-booking since the early 1990s. This presentation contained no new information. The reason the corporate travel industry seems stuck in a loop of discussion of adoption and expense integration, I believe, is due to the very nature of the "corporate buyer". Managing travel at a company is rarely a career (though there are some exceptions). As a result, the person at the company who is tasked with managing travel costs changes every 3-4 years. Often these individuals come from non-travel backgrounds (finance, procurement, admin services). In 2008, it is amazing to listen to a Webinar which so dated and doesn't seem to address current online issues such social networking (blogs, user vendor ratings). The corporate travel industry needs to wake up and recognize how consumer online travel and general tech trends will impact the industry.

Corporate Travel Technology: Today and Tomorrow

I am pleased to announce the release of my new study: "Corporate Travel Technology: Today and Tomorrow". The study is now available for immediate download at the Travel Tech Consulting online store: http://traveltechnology.stores.yahoo.net/cotrtetoandt.html