• Strategy
  • CFO IT

Travelin’ On(line)

As online travel companies mature, they've turned their attention to the corporate market. Low prices are nice, but service counts for more.

At the peak of the dot-com boom, network-equipment vendor Extreme Networks became frustrated with the high booking fees and inflexibility of its travel-management company and began to explore online alternatives. Initial experiences with a new service from Sabre called GetThere worked out so well that when Sabre launched Travelocity Business last year, Extreme ditched its offline travel company altogether and has never looked back.” We’ve been able to cut our costs by more than half,” says Nancy Garner, global travel procurement officer at the Santa Clara, California-based company. “Now Travelocity’s fulfillment center works hand in hand with our booking software. People can call anytime day or night to get help with no additional fees. It just made sense and saved us money.”

Such stories were supposed to be commonplace by now. Online travel was widely posited as a sure bet to survive the dot-com crash and “disintermediate” corporate-travel services, with Web-savvy employees showing their companies that the do-it-yourself approach was both cheaper and more convenient.

It hasn’t quite played out that way. Online travel has proved to be a volatile market space as a raft of players struggle to fine-tune their messages for the consumer audience, business customer, or both. While cost-cutting remains their primary appeal, they now realize that they must wrap a layer of service around their basic offerings. For that reason, many of the online firms now target businesses in general and the CFO specifically. “For many online travel companies, CFOs are the primary audience,” says Cindy Morse, chairperson of the technology committee of the National Business Travel Association (NBTA) and a corporate travel manager at Shell Oil Co., a Royal Dutch/Shell Group company. “They are getting bombarded with direct marketing, and all they hear about is the $5 transaction fee versus the $30, $40, or $50 fees associated with traditional travel-management companies.” CFOs looking to cut costs, she says, often direct their companies to at least investigate the feasibility of online booking for a portion of corporate-travel needs.

Some go further. In a recent NBTA survey of 220 corporate-travel buyers, 21 percent of the respondents said their companies were considering exclusively using a corporate online travel-management offering from such firms as Travelocity (owned by Sabre Holdings), Orbitz (just acquired by Cendant, owners of Days Inn, Avis, Budget Rent A Car, and the Galileo reservation system), and Expedia Corporate Travel (owned by Barry Diller’s IAC/Interactive Corp., which also owns Match.com, LendingTree, and Hotels.com). While the new players have built substantial name recognition in a short period, old-line companies are now seeing that what began as a consumer-oriented service is now moving into the corporate market they once considered their own, and they aren’t about to let it go without a fight.

In addition to lower transaction fees, companies may be motivated to embrace online booking technology because little or no user training is required. Many employees have been booking personal trips using the consumer-oriented Web portals of online travel companies for years. An Orbitz for Business travel survey from March 2004 found that business travelers preferred using online tools to book their travel rather than using a traditional travel agency by a margin of 2 to 1. In addition, 35 percent of business travelers said they plan to use an online agency to book business travel in 2004, while only 19 percent said they would use their in-house corporate-travel agency. Once exposed to the convenience of changing your flight from a laptop in your hotel room in the middle of the night, it’s hard to go back to filling out a form and waiting for the corporate-travel department to process your request.


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