Posted September 16, 2014

THE BEAT SHEET: Sabre Defends The Middle; TMC Execs Give DOT An Earful; Chrome River Grabs At Least One Former IBM Expense Customer

The Beat Sheet is an occasional collection of notes, quotes, musings, tips, reader comments and other tidbits from The Beat's writers.

—— Distributors like Sabre spend lots of time defending their model and the indirect marketplace. The company did so again last week during a Deutsche Bank conference. In a nutshell, why is indirect distribution valuable? Because travel purchasing can be complex, choice is important "and the lack of service that's available from the direct channel is quite stunning," said Sabre CEO Tom Klein. And the proof? The GDS business continues to expand, and the growth—albeit modest—in booking fees paid by suppliers continues to outpace that of incentives paid to agencies, added CFO Rick Simonson.

In terms of customer service, Klein said airlines simply aren't set up to look after everyone, "and they certainly are not set up to serve their most difficult customers." By that he meant the higher-yielding high-touch and corporate travelers who may change plans several times after purchase. "An airline can't take a phone call and not go upside-down on a direct booking unless they are charging quite a bit for that phone call. They don't have competitive labor costs, and they are just not set up to service their most demanding customers."

Discussing online advertising in the travel business, he added that "from a cost of acquisition perspective, it is not increasing in the low single digits like our price point. ... Those costs are increasing in a significant way, and that will come home to roost on direct distribution over time."

All that must be considered when assessing "this equilibrium for the suppliers between the cost of distribution to their highest-value customers—the ability to get to those customers through the GDS—versus the direct channels."

According to Simonson, the "typical cost for the supplier to go through the GDS is less than 2 percent of the booking cost of a ticket."

"Over the last five or 10 years, our booking fee has gone up single digits, our incentives that we pay to agencies has gone up single digits but at or lower than the booking fee," Simonson explained. "So we have had a net increase in our booking fee over that period; that shows you we are adding value sitting in the middle."

—— The U.S. Department of Transportation continues to solicit public comments on its proposed rules related to the disclosure by airlines of ancillary fees. In their current draft form, those rules would require airlines to disclose "basic ancillary service fees" in the distribution channels in which they participate, but would not require airlines to enable actual sales of ancillary services (i.e. transactability).

Joining a chorus of consumer advocacy groups, a few TMC execs recently added their voices by submitting comments. They gave DOT an earful. Here are some excerpts:

Balboa Travel chairman Joe da Rosa: "The DOT must require airlines to allow consumers to pay for their basic ancillary services at the time of ticket purchase through any distribution channels airlines use. Even if there is some cumbersome way for the consumer (and particularly the business traveler) to calculate these extra charges separately, having to separate them from the air ticket itself creates a terrible accounting hassle for the traveler and for his company's accounting department.

"Requiring airlines to push out this vital price information to travel agencies via the GDSs that issue airlines tickets is the only workable solution.

"Ancillary services must be expanded to include priority boarding and change/cancellation fees as well as any bundles that include the basic ancillary services under the rule.

"REQUIRING THAT AIRLINES MAKE IT CLEAR FROM THE OUTSET EXACTLY HOW MUCH A TRIP IS GOING TO COST IS SOMETHING EVERY TRAVELER SHOULD BE ABLE TO RELY ON. [Da Rosa's emphasis.] And it is the duty of the DOT to see that this is a reality."

• Redfern Travel COO Neil Hopwood: "It is vital that airlines show all charges associated with a booking to allow all TMCs booking for business consumers to make a valid judgment and to be able to directly compare like with like when intending to book travel. Anything but absolute clarity exacerbates the current confusing situation [for] everyone. As far as I can see the only entity to benefit from underhand or hidden fees and charges are the people who wish to purposefully maintain this position of subterfuge to their own gain at the total expense of the most important people in this equation—the travel bookers and travelers. It is true that the consumer always pays in the end, but it would be nice for them to know exactly what they are paying to be able to make an informed decision at the point of sale and not when the booking is almost complete (known as drip pricing), when it may to too late to do anything but be sucked into the transaction and make the booking."

According to DOT, as requested by "a number of airline associations," the public comment was extended and now is scheduled to run to Sept. 22.

—— In July we reported that PricewaterhouseCoopers discontinued a pilot program with mobile ground transport tech platform Whisk. Whisk co-founder and CEO Michael Ibrahim subsequently sent in this statement: "We are pleased with the market share Whisk gained at PwC in just one-third the lifetime of Uber. While PwC's official marketing of the Whisk app has come to an end, Whisk is as an open platform, so anyone who chooses to can still use the app. Whisk continues to be the chosen on-demand platform for over a third of the New York black car providers, including all of those serving PwC. We are delighted to be the only platform helping corporate riders benefit from on-demand access to their corporation's preferred providers."

—— In the wake of an IBM decision to leave the expense management automation space and refer clients to Concur, Concur CEO Steve Singh last month said that his company expects "we'll get the super majority of prior GERS customers to switch," and that 10 unidentified customers had done so. Audio equipment maker Harman International was not among them.

Expense management system provider Chrome River announced that Harman chose its product to replace IBM GERS. Chrome River added that Harman had conducted an RFP and that "requirements included global capabilities and support, ease of use for end users, confidence in the implementation team and integration with other systems including SAP, Carlson Wagonlit and GetThere." Expecting to pick up additional business from IBM's pre-existing customers, Chrome noted that it hired "two leading IBM GERS implementation experts."

I asked Concur if they'd like to update the number of IBM GERS customers they have since secured and/or identify any. Here's the response, attributed to Concur VP of business development Jonathan Meister: "We have been partnering with IBM as their preferred company in accordance with our agreement and continue to sign a large number of GERS customers, including some of the most respected brands and companies in the world including the Reno-Sparks Convention [and] Visitors Authority. We have a great solution for IBM GERS clients and continue to collaborate extensively with IBM to make the conversion experience as seamless as possible. We expect the interest in Concur will continue to grow as we count up more success stories."

Ask a question, offer some insight or hurl a virtual shoe at djonas@thebtngroup.com

Posted by: David Jonas | More by David Jonas

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