Have You Heard?
- Sabre, American Airlines, and Southwest are going at it again in court over content and distribution disputes
- United Airlines is proactively working toward minimizing corporate discounts
- TripActions just raised another $150 million
- Industry consolidation is forcing legacy suppliers to re-think their business models
- 3 recently formed SPAC’s valued at close to $1 billion for the sole purpose of public investment in corporate travel have emerged
- Our largest traveling population (Millennials) demand easy to use technology, intuitive business process, and love to travel for work
Corporate Travel Will Never Be the Same
What we are hearing in the corporate travel industry is the sound of inevitability – a fundamental change in the way the corporate travel industry functions. The pandemic may be helping us move along at a faster clip, but this change has been happening for a while. Is it all that surprising? Consider two fundamentally different approaches to the corporate travel process and judge for yourself:
Today’s Process: A traveler books through a travel agent or through a corporate online booking tool. Air, car, and hotel inventory is taken from a centralized source called the Global Distribution System (GDS), a technology created in 1971. In some cases, inventory isn’t available in this system so we have devised ways to access inventory outside of the GDS in the form of “direct connects” and “NDC”. But because of the way these tools work, we still must figure out a way to get reservations that don’t come from the GDS into the GDS (that was not a typo). The problem with the aforementioned is cost. The other problem with the aforementioned is process – in many cases this broken process means that the travel agent doesn’t have the ability to help a traveler with a problem because she doesn’t have access to the reservation.
For all of this, suppliers pay travel agencies incentives based on market share volume commitments and clients and TMC’s share funds in the form of rebates or incentives that can’t be reliably audited by anyone. And, not all of these systems work together so if you use a certain booking tool, it may not work with a certain TMC which may not work with a certain automated expense system. If you talk to clients (particularly Millennials who now make up our largest traveler demographic), they tell us these solutions tend to be clunky, not overly user friendly, and don’t provide a comprehensive view of purchasing options. Procurement or finance driven professionals (and most people in the industry) look at this model and shake their head. Amongst this web of solutions is stored tons of personally identifiable information (PII) which creates a data privacy issue that organizations have historically accepted as part of doing business. This description only scratches the surface.
A New Path: Talk of industry disruption and the “disintermediation” of our traditional supply chain has been a topic for at least as long as I’ve been in the business. But, most of the efforts around industry progress have amounted to nothing more than temporary fixes, Band-Aids for a broken system that once implemented still present significant challenges for the TMC and the client. The process results in confusion, an inability for the TMC to make changes to a reservation, and a complete breakdown in risk management as these reservations cannot be automatically provided to third party risk management solutions. These fixes also don’t help anyone’s cost structure – all of which is ultimately paid by the client.
“Today’s Process” focuses on a series of tangled technology integrations that rely on an antiquated financial structure that have exhausted both corporate clients and industry suppliers. Booking tools, quality control, GDS, suppliers, expense, corporate card, risk management, rate assurance – all technology that must be integrated correctly to arrive at a solution that by most accounts will realize only a 50% adoption across a client’s user base.
The challenges posed by “Today’s Process” have opened the floodgates to venture investments aimed to completely re-imagine how the corporate travel supply chain works. We see this investment come in the form of slicker front end booking interfaces, integrated end to end solutions that incorporate booking, support, expense, and purchasing functionality in modern, customer friendly solutions.
New Industry Entrants are Changing the Game
New technologies have put millions on the line, betting that a better user experience and one that is vertically integrated will not only disrupt the status quo but also attract a portion of the $1 trillion global corporate travel industry which is largely underserved. With more booking options than ever before and a changing workplace demographic the deck seems to be stacked in favor of game changing technology and thinking.
This isn’t to say that our traditional model is dead; rather, the argument is that there is a place at the table for everyone. Today, less than 10% of the $1 trillion industry is formally managed by a TMC. A good portion of that requires the skill set provided by trained travel agents, the structure enabled by a strict corporate travel policy, and the business type that requires close watch to help in the event of an emergency. But like other industries, the corporate travel business will develop products and solutions that meet the need of the customer and it is clear that our current solutions don’t work for a broader audience.
Of course, technology has a played a huge role. Likewise, the TMC community will continue to play a huge role. At CapTrav, we believe our role ties both together and ups the ante. Our solution enables the use of any booking tool, any TMC, or no booking tool at all. We capture all bookings no matter the source and can report on these bookings, send to risk management providers, populate any expense report, provide access for agent support, and can be used to leverage supplier deals and discounts.
Corporate travel will never be the same. But given the changes we are seeing in the industry, I think the tent will only expand, broadening the reach of TMC’s and new technology. Access to more comprehensive corporate data will help air, car, and hotel suppliers over the long term make better decisions about their businesses in terms of capacity, forecasting, and yield management.
While the pandemic has most certainly been a curse on our professional and personal lives, I believe it will be remembered as a watershed moment of great opportunity.