The Travel Agent Bosses Love
NATE COY AND Jeff Jones are of two minds over their company's switch to an online travel agency last year. Jones, the controller of Ogden, Utah-based marketing consultancy MarketStar, loves the savings he got when MarketStar moved its account to Web agency Orbitz. Coy is a sales manager who now books his trips himself and misses the in-house travel manager who used to juggle fares and schedules in emergencies. "It has worked fairly decently," says Coy, but "there's something to be said for the personal touch."
Ready or not, this is the future for business travelers. The Big Three of the Web -- Expedia, Travelocity.com, and Orbitz -- have all launched services aimed at businesses during the past year, slashing standard processing fees of $30 per booking to as little as $5. Pressure from insurgents -- and customers -- is pushing giant corporate-travel agencies online, too. The largest, American Express, says e-bookings now account for 25% of its transactions. Says Danny Hood, president of Atlanta-based WorldTravel BTI, the nation's No. 5 business-travel agent: "We're at 20%. We think it'll be 30% next year and 50% in three years."
For now, online booking is a trade-off: You save money in exchange for doing more of your own work. Corporate travel managers say it's fine for the basic there-and-back trips that account for 80% to 90% of travel at most companies. But it's not developed enough to deliver meeting-planning, concierge-level services for executives, and international travel over the Net. Expedia, Orbitz, and Travelocity say they all offer meeting-planning services or will soon -- but they offer them over the phone or in person, rather than online. Clients of the online agents can also buy special coddling for top execs -- after they negotiate the fee.
Companies make the trade because the savings can be substantial. Travelocity claims it can shave $142, or about 26%, off the average business trip. That's because online service charges are lower and the big Web agencies use their bargaining power to get low airfares. The biggest change is that employees who see two fares online are much more likely to buy the cheaper one, even if it's less convenient, than are those who book over the phone. "The visual guilt is huge," says Orbitz for Business General Manager David Cerino.
Travelocity's numbers also don't count hotel savings, which can be just as large. Why? Because online agencies, especially Expedia, control so many customers that hotels sell them rooms wholesale that they mark up, rather than selling standard-priced rooms for a commission. Some of this savings gets passed along to travelers: A CIBC World Markets study of U.S. business hotels found that travel sites that use the wholesale model charge up to $50 a night less than negotiated corporate rates, and about $100 -- or 40% -- below rack rates.
The other reason bosses love online travel: Using Web software to track every transaction gives managers a lot more control over costs. Instead of receiving weekly or monthly reports on travel spending, companies now get them instantly. That helps them direct business to specific suppliers, negotiate discounts, and identify who has been flying first class without permission. Says MarketStar's Jones: "I get reports on what's going on and who are the biggest offenders, so I can follow up."
Over time, online business travel will save time too. Marc Benioff, CEO of San Francisco-based Salesforce.com Inc. and an Expedia client, says software companies will soon integrate with Expedia. His example: A sales professional who books an out-of-town appointment might type the visit into a calendar. The software would then forward the information to the online agency, which would automatically book the trip and add the bill to an expense report. "To maximize profits, you have to manage travel," says Salesforce e-business manager Bill Kammerer.
For now, companies are juggling how much self-service to impose on workers. As the online travel sites search for the right formula, the winners are business travelers who make the same trip often and can store flight and hotel preferences online. The dogged business traveler logging six cities a week will pine for the days when Alice in the travel department took care of everything. But increasingly, Alice doesn't work here anymore.
By Timothy J. Mullaney