U.S. companies spend approximately $185 billion a year on business travel. That is enough to make travel spending the second-largest controllable business expense (after salaries); the scale of this expenditure explains why reducing travel spending via online booking represents so tantalizing a prospect.
Online booking is already familiar to many Internet users through consumer sites like Travelocity.com. But the business version of online booking is significantly different in that businesses, unlike consumers, are motivated by more than simple price considerations. Thus, online booking often complements rather than replaces relationships with travel agencies.
Mike Kabo, director of global travel for IT consultant Computer Sciences Corporation (CSC), recognizes the value of online travel management, which his company obtains from vendor GetThere, which is owned by Travelocity. "We spend $220 million annually on U.S. travel," he says. "Think about it: $220 million. Even a 1 percent reduction there is big bucks."
While CSC does not disclose exactly how much it saves through GetThere, the vendor's research indicates that its enterprise customers save an average of 20 percent annually using the online booking solution. This level of savings means that GetThere customers are moving away from using traditional travel agencies for booking. Customers responded that travel agencies charge an average of 46 percent more in transaction fees and sell airline tickets for an average of 17 percent more than airfares obtained online.
Does this mean that travel agencies are becoming dinosaurs? Not at all, admits GetThere COO Jeff Cooper, who says that travel agencies address issues from which online travel management vendors keep their distance. "If you're in a taxi going to the airport and you need to change your flight, call the agent [to rebook]," Cooper says. "We complement the agency relationship."
Perhaps the ultimate form of complementary services is when travel agencies and providers of online booking work directly with one another. GetThere, for example, provides online capability to agencies, including American Express Travel. By choosing vendor solutions instead of creating their own online booking infrastructure, traditional agencies can focus on other aspects of their value proposition.
For his part, CSC's Kabo will not be giving up on travel agencies anytime soon, despite the migration of its airline bookings to the Internet. In addition to quick response, "We still get back-end reporting, quality control, and customer service from the agency," he says. "We reduce front-end cost by booking online, but the online channel is a subset of the telephonic."
Indeed, a mixture of online services and traditional travel agents could continue to serve companies well for some time to come. The strength of travel agencies, in addition to reporting and analytical capabilities and real-time responsiveness, lies in their ability to procure special savings through relationships with airlines, hotels, and car rental agencies. That, combined with the cost savings associated with booking airline travel online, provides businesses with plenty of incentive to pursue a dual approach.