High-end travel management companies (TMC) like Hogg Robinson and American Express, as well as mid-range ones like Travel & Transport, Inc., dominate the corporate TM industry. They book planes, hotels, and rental cars for corporate clients that spend millions each year in supporting employee travel. Most also do meeting scheduling and consulting–say, getting the best group rates from hotels and airlines, analyzing travel spend, and suggesting cost-saving measures.
A few years back, they were the only game in town. Then along came online booking services like Expedia. Originally, booking services directed their efforts to single consumers, not corporations. Today that’s changed.
According to Henry Harteveldt, Vice President, Principal Analyst, Travel, Forrester Research, online companies have launched corporate services like Expedia Corporate Travel to go upmarket. Traditional procurement companies like IBM Global Services have also started offering TM services, says Norm Rose, President, Travel Tech Consulting, Inc. Both nibble at the market share of the incumbents.
In reaction to this new competitive pressure, the incumbents are spinning out hosted TM-related services to go downmarket. Independent ASPs are also jumping into the game and may represent the new paradigm for almost-full-service TM at very affordable rates.
These ASP TM service providers offer hosted services that exceed the capabilities of online consumer booking services but usually deemphasize the complex consultative services of traditional TMCs. According to Rose, hosted TM-related applications fall into three classes:
- Self-booking tools. These reservation applications run on corporate intranets that let employees book their own reservations; they also filter reservation information so employees conform to corporate travel policy
- Expense-management systems that employees use to do expense reports and managers use to process and approve them
- MIS reporting tools for financial analysis and reporting so executives can analyze, say, costs between departments or divisions to improve overall travel expense savings
Rose lists the leaders in self-booking as GetThere (a SABRE company), Clickbook (now part of Concur), eTravel (owned by Amadeus), Resex (owned by TRX), and Trip Manager (owned by Worldspan). According to Rose, the leading companies in expense-management systems are Concur, Necho Systems, SpendVision (owned by Hogg Robinson) and the major ERP vendors, Oracle and SAP. MIS reporting tools come from platform players like SAP and business intelligence ones like Business Objects but are so common as to be unrankable.
As this list suggests, few TM ASPs are independent. Rose explains that, because TM is so multi-faceted and ASPs so focused, the predominant strategy is for bigger TM companies to spin out ASPs that focus on one aspect of their overall service portfolio, like self-booking. The scattered independents, however, are prospering nonetheless.
Benefits for SMBs
Harteveldt claims the big TMCs target corporate customers who spend at least $10 million in airfare annually, so the small-to-medium (SMB) market is wide open for ASPs. SMBs benefit from the hosted model because, obviously, says Rose, they pay small up-front setup fees, a per-seat (usually for expense management) or per-transaction (for self-booking) leasing fee, get to market much faster than with installed solutions, and avoid upgrade and maintenance headaches.
Hosted solutions also insulate customers from “functionality creep,” as Rose puts it. “All these installed applications are constantly enhancing their features to one-up their competition,” he says. “If you have an installed application, you have to update it; and that becomes problematic.” Harteveldt adds that enhancing hosted TM-related applications is easier than with installed ones, too. Installed corporate applications include company employee databases that are constantly changing as people come and go. The application has to synch up that information with profiles that may reside with the vendor for tools like expense management, travel reservations, etc,” he explains.
Some ASPs also feature functionality previously common only to the big TM players, like alerts to in-house travel managers. These alerts announce if a company has booked too many employees on one flight for the company insurance policy to cover, for example.
Any technology that automates any aspect of the TM process also expedites compliance because it eliminates manual research and paperwork. With ASPs, customers can access any booking, says Harteveldt, and find out from the provider when, for instance, information relevant to a transaction was exported and archived as an official record.
That said, ASPs in the near future will not displace big TMCs when customers have multinational accounts and complex travel needs. Harteveldt says no ASP has sufficient value-added services, application partnerships, AND global presence to expertly manage very complicated trips with many stops in different countries. “The tariffs are so complex and you need specialists that are aware of ticketing deals, promotions etc.,” he explains.
How TM ASPs work
Concur is a best-of-breed TM ASP. According to Chris Juno, Senior Director of Product Marketing, Concur’s travel-and-expense reporting “lets employees use their corporate credit card when traveling–transactions are pre-populated in the system automatically, and users then add appropriate information and out-of-pocket expenses and submit the report for approval.” On the other hand, he says the analysis service “helps companies determine who’s spending what money where” by slicing and dicing expense data using business intelligence (BI) tools to perform role-based reporting for executives. Value-added tools include expense-report auditing and receipt substantiation.
Applera Corporation, a provider of bioscience equipment, software and services, has used Concur since 2003 to ensure that employees more uniformly comply with corporate travel policy across its five business units. For instance, Applera mandates that employees use their corporate credit cards for all major expenses. Concur tracks card expenses by vendor, date, and location, according to Bob Mendence, Finance Manager. He says this capability has proven valuable in earning the company appropriate discounts with its bank as well as airlines and hotels with which it does business.
For instance, he says, last year a global hotel chain reduced Applera’s group discount because, according to the chain’s records, Applera had not booked enough rooms for the year. Mendence ran a report on the appropriate data in Concur that proved Applera had booked 9,000 rooms, not 900 as the hotel’s records indicated. The report also calculated that the hotel was getting 40 percent of Applera’s hotel business. Because Applera would likely pull its business if the hotel decreased the discount based on inaccurate figures, the chain instead increased Applera’s discount.
Concur Finance has also defined over 300 auditing rules to track expense reports for Applera. Mendence explains that “there’s an audit trail of everything that goes on with an expense report–who touched it, who sent it back, and the reason why.” The system automatically processes reports that don’t violate the rules and flags those that do.
For instance, United Airlines offers an upsell option to travelers–“You can buy a coach ticket and pay a fee at the airport to get an upsell to better than coach/economy,” says Mendence. Applera’s travel policy doesn’t permit upsells, but employees still try to take advantage of them and expense them on reports as excess baggage or some other similar cost. Mendence has built rules that flag any charges that might be upsells–“I know how much every upsell is at every location” he says–and Concur Finance checks the employee’s receipts to verify the expense is valid. The system also flags any expense report over $5,000.
Applera leases the system for about $9,000 monthly, and Concur puts no limit on the number of reports processed. Mendence estimates the company paid off the system in the first year of use as a result of its savings on vendor discounts and rebates from its bank for timely payment of outstanding charges alone. Factoring in other savings such as better cost control, he puts ROI each year going forward at 300 to 500 percent.
Lessons from the Outsourcing Journal:
- Travel management-related ASPs may represent the new paradigm for almost-full-service TM at very affordable rates.
- TM ASPs offer hosted services that exceed the online booking capabilities of consumer services but usually de-emphasize the complex consultative services of traditional TMCs.
- The predominant strategy in launching TM ASPs is for bigger TM companies to spin out hosted services that focus on one aspect of their overall service portfolio like self-booking.
- Hosted services’ advantages over installed TM solutions include lower cost, faster speed to market, easier upgrades, maintenance, management, and modification.