Automation Captures Corporate Travel (1998)

Corporate Travel Becomes a Struggle for Survival

If automation goes on in the background, then the ATS is the main background factor in corporate travel. It consists of a collection of software and hardware technologies which captured one erstwhile-reservationist function after another. In its early years, it offered corporate travelers a system of information on travel-related matters, accessible from their desktop. Fares could be investigated and background information found. But this only whetted the corporate traveler’s appetite. By the end of the period, it came to be considered an “end-to-end” or “total” system, handling fare research, reservation bookings, data capture, expense reporting, electronic ticketing, etc. Some ATS versions seemed scarcely to be mentioned in the pages of BTN before they were replaced. Desktop databases were overtaken by Internet services, which were hardly off the drawing boards before they were nudged by intranets, which were eclipsed in turn by extranets.

Representative was Unisys’s 1997 offering, the Unisys Travel Alliance Services or UTAS system. BTN described it as “an end-to-end solution for agencies and corporate travel departments that includes automated booking, data warehousing and reporting, back office accounting and expense reporting processing.” (1) A CRS company, TravelOne, touted a new and similar package: “an end-to-end corporate travel solution” with “a real-time, electronic reservations program for air, hotel and car rental.” (2) In the midst of describing his ATS, the CEO of TravelOne Jeff Harrow, was asked what would become of the corporate travel agent as a result of its advent.. Disarmingly, he answered: “We do not think of this as an agentless system, where all you have to do is make a reservation and you never have to speak to a travel agent again. It’s not a replacement [for] the call center; it’s an additional tool to add value for customers.” (3) However, to bill it as an “automated booking system” and then argue that the user will not use it that way seems to me disingenuous.

By 1998, the ATS offered the corporation all the functions needed for easy, accountable travel. It was conveniently installed on the desktop computers of both travel manager and corporate traveler. Business Travel Services president and general manager Sam Gilliland reviewed in BTN just how quickly the intranet ATS had won the hearts of the business traveler: “The idea of offering automated booking systems over internal, private Internet sites accessible only to corporate employees began to capture the interest of corporate travel managers this year and, six months later, 40 percent of potential customers are considering such a solution.” (4) Said Lee Turner, BTI Americas exec VP: “I’d say that 25 percent of our biggest customers, the Fortune 500 customers, have intranets, and every single one of them is talking about putting a booking product on it.” (5)

Even though the ATS eventually brought the airlines and the travel managers into a direct buyer-seller relationship, the airlines continued to use the services of travel agencies for vacation bookings and so could not afford to antagonize them outright.

We shall watch them here do a double dance characteristic of shifting loyalties, soothing the travel agency and then warning it of the impending demise of the corporate booking function. Here the dance is done by British Airways’ regional head of sales, Dan Brewin. Brewin confessed that his airline had not wanted to take radical action in the corporate travel market, eliminating airline commissions altogether, because it might put travel agents out of business. Whatever reassurance he thus offered travel agents, he quickly took away when he confessed that he would still be “happy to see a business-to-business relationship develop between [British Airways] and corporate clients, and for them to be recompensing [travel] agents.” (6) BA was publicly showing interest in what travel agents came to call “agency bypassing.” The choice between losing commissions and being bypassed must have seemed like a no-win proposition to the travel agent.

Another demonstration of shifting loyalties was given by a marketing executive for an airline-owned CRS. Referring to travel agents, Amadeus’ vice president David Jones asked a seminar in 1996: “Crisis — what crisis?” (7)Travel agents still booked many forms of travel with Amadeus and its competitors, Sabre and Apollo, so the VP, like Brewin before him, needed to pacify travel agents while sounding the warning bell. He began by addressing agents’ fears. Despite doubts about their future, he said, they had “won hands down” the battle with the airlines to distribute tickets to corporate travel managers and corporate travelers. As proof of this assertion, he cited the fact that, in 1980, 53 percent of air sales in the United States were handled by agents while in 1996, the figure was up to 80 percent. Then came the warning. “In the future,” he said, “the winner will be whoever offers the best means of electronic distribution.” (8)

The attitude of Amadeus’ VP illuminates the business-Darwinist tendency to sees things in terms of a zero-sum game where the winner gains at the loser’s expense. Implicit in his warning to the travel agent is the suggestion that the outcome of events will be inexorable and inescapable. And, when it occurs, it will not reflect the actions of culpable individuals and corporations, but instead some unavoidable law of life, whereby the weakest went to the wall. Of course, all of this is false reasoning, masking callousness and greed. Human life is not a struggle for existence. Business becomes a struggle because we make it be that way, through business philosophies and the wayb they are covered in the trade press. But human life itself is a peaceful process and most humans desire peace. Nonetheless, the present business leaders see it as a struggle and we see the results in this article.

The technological frontier did not stop with the development of the ATS. Included among “the better means of electronic distribution” that Amadeus’ VP referred to was the “e-ticket,” a development that seemed destined itself to be overtaken in the hyperchange of the period. “E-ticketing” or “paperless ticketing” was the practice of dispensing with the ticket issued by the agency or the airlines. Instead, the transaction was electronically recorded and a boarding pass was issued at the airline gate after proper card identification.

When the airlines instituted e-tickets, the innovation had a dramatic effect on the future of agency and airline personnel. E-tickets eliminated the need for them to issue tickets. On the books with American was “a test of curbside and terminal checkin using wireless technology.” (9) This was a second function performed by airline reservationists. If it succeeded, the two combined would eliminate the need for the corporate traveler to stop at the airline’s airport desk for any reason. The two innovations thus greatly threatened their livelihood. The question Business Week asked about e-ticket machines in 1993 was undoubtedly on many a booking agent’s mind at this time: “Will Travel Agents Get Bumped by These Gizmos?” (10)

BTN confirmed these effects in 1996: “The new American Airlines ticketless travel program will allow passengers to bypass ticketing stations at the airport by inserting a credit card or [corporate] card into an electronic reader, which prints out a seat assignment.” (11) This statement implies that the airport reservationist has all but been circumvented. Commented American Airlines senior vice president of marketing Mike Gunn: “To keep a paper document just to feel comfortable is ludicrous.” (12) There is no expression of regret here that an entire section of his own company was about to be displaced.

Corporate travelers found e-tickets “convenient and flexible, [and] cheaper…. They are limited for now…, but they are no less than overwhelming in potential.” (13) Again, the consensus built among the people BTN interviewed and “e-tickets” were proclaimed an unstoppable trend. Said Ely Lilly travel manager George Odom: E-ticketing “is the wave of the future, and our road warriors are using it already.” (14) Mega-travel-services agency American Express surveyed 1000 frequent flyers who found it better and faster “when checking in with an airport machine than with an airport agent.” (15) Agreed Sunbelt Motivation and Travel’s information technology director Tom Levine:

I love e-ticketing, and in the Southwest market, where we are, our travelers are certainly in tune with the concept. It should add to the convenience factor for travelers, allow them to walk right up to the gate without having to remember to bring anything. I think it’s the wave of the future. (16)

Technology seems to run in one speed and direction only — fast-forward. As quickly as one innovation comes, it is superseded. The notion of e-tickets overtook that of paper tickets and was itself overtaken within a year by the concept of “smart cards.” A “smart card” is a card with a computer chip capable of holding the corporate traveler’s reservations, expenses, computer files, money, and identification. Predicted BTN’s editor-in-chief David Myers in mid-1997: “Smart card applications … promise to quickly supplant e-ticketing.” (17)

The development of amenable technology went hand-in-hand with financial moves the airlines made that reduced the living travel agents made from bookings. The airlines, which had capped all commissions paid to travel agents for travel bookings in 1995, now lowered those commissions again for online bookings in 1996-97. In July 1996, Northwest and KLM airlines jointly announced they were lowering their commission on online bookings to 5 percent, capped at $25 on domestic tickets and $40 on international ones. Continental Airlines later joined them. (18)

Waiting some time before entering the fray, American Airlines upped the stakes in 1997 by announcing it would offer just a flat $15 agency commission for both domestic and international tickets booked through an online service — a figure far below the previous standard of 5 percent. Just days after American’s announcement, United Airways matched their flat-fee structure and lowered the commission even further to $10 per booking.

A British Airways sales exec confirmed that the airlines were using commission cuts to impact the balance of the travel equation. Said British Airways’ U.S. sales and marketing vice president Dale Moss: “[British Airways’] commission restructuring was driven in part by the carrier’s desire to get closer to the corporate customer.” (19) Moss admits that, through commission cuts, the airlines were actively manipulating events, to the extent that they could, in the direction of eliminating the middleman. Travel managers knew this. The travel manager for the Musicland Group, for instance, pointed out to her peers that “airlines are setting themselves up to work directly with the traveler, eliminating the need for agencies.” (20) Direct links between traveler and airline, between customer and supplier, were the magic bullet that would get rid of the now-unwanted corporate travel agency.

BTN also knew: “The U.S. airline industry is moving away from its reliance on travel agencies for sales and distribution to large corporate buyers.” (21) It wrote up every move in the drama. The latest commission reductions will “force travel managers to solidify relationships with Footnotes airlines, and rethink how and why they work with travel agencies.” (22) Agreed a technology vendor, TravelNet chairman John Shoolery: The airlines’ commission cut “sends a warning signal to those still planning on commission income as a viable revenue model for the future.” (23) Consultant Samir Andraos, president of Ain International Management, predicted: “In the next few years, I see no commission at all. We’re still advising corporations to move toward fees.” (24) The airlines, which wanted direct links, were helping the process by reducing the travel agents’ revenues. Travel agents saw the drift. New recruits were reported not coming into travel training programs in 1998. Corporate travel agencies saw that they could no longer run on commission revenue alone. They must find another way of making their living. They had been automated.

Meanwhile, the circle of old friends abandoning corporate travel agents rapidly grew. In BTN, Richard Eastman, president of the Eastman Group, a travel technology vendor, predicted the breakup of the old order. “The industry is finally beginning to experience the evolution of the travel distribution paradigm that many have been long projecting,” he said. “In 1997, expect to see the emergence of a new path dependence to replace or supplement the CRS/agent structure.” A beneficiary of his own predictions, he concluded that a “new buyer-driven era demands the speed of digital solutions.” (25)

Footnotes

(1) Mary Ann McNulty, “Tech Outsourcers Target Travel,” Business Travel News, 8 Dec. 1997, 3.

(2) Stefani O’Connor, “TravelOne Teams with E-Travel for Full System,” BTN, 5 Aug. 1996,

(3) Loc.Cit.

(4) Cheryl Rosen, “Industry Goes Intranet,” BTN, 19 Aug. 1996, 26.

(5) Loc. Cit.

(6) Jay Campbell and Amon Cohen, “BA, SAS Cut Commissions,” BTN, 8 Dec, 1997, 44.

(7) Amon Cohen, “Amadeus, Amex Show Int’l Buyers New MIS Software,” BTN, 9 June 1996, 8.

(8) Loc. Cit.

(9) (Jay Campbell, “AA Testing Smart Cards,” BTN, 29 July 1996, 2.).

(10) Keith Alexander, “Will Travel Agents Get Bumped by These Gizmos?” Business Week, 28 June 1993, 72.)

(11) Jay Campbell, “AA Testing Smart Cards,” BTN, 29 July 1996, 2.