WASHINGTON -- Rebates, already starting to disappear from the
corporate travel scene, will fade into memory within two years, as
airline commissions dwindle down to nothing.
Net air fares, already fashionable, will become the norm for
corporations that pay their travel agencies on a transaction-fee
basis.
Corporate travel departments no longer will be "revenue centers"
for the corporation. Instead, they will carefully avoid the phrase
"cost center" and call themselves the "travel savings center."
Corporations, not agencies, will be the ones that sign the
contracts with computer reservations system vendors, so they can
capture CRS rebates directly.
The role of the travel agency will be transformed into a
management consultant at the point of sale. And more corporations
will take a hard look at the costs and benefits of getting agency
accreditation from the Airlines Reporting Corp. in their own right,
either by starting from scratch or simply buying their current
agency.
The predictions came from three experts who conducted an
Association of Corporate Travel Executives-sponsored seminar here
for a diverse audience representing agencies, corporate travel
departments, the Defense Department, airlines, hotels, accounting
firms and consulting firms.
Presenting the seminar were Robert Langsfeld and John Fazio of
the consulting firm of Langsfeld, Fazio and Associates, and Fred
Swaffer, Hewlett-Packard's corporate travel manager.
Langsfeld noted that the first two rounds of airline commission
cuts were roughly two years apart, but he said, "It will not take
two years for the next round." He said corporate travel departments
can position themselves for the future by getting into the mode of
transaction fees and net fares.
Fazio said airlines already are coming into corporations and
asking, "Do you have transaction fees with your agency? If so, have
you considered net fares?"
Both men stressed that most airlines will not discuss net
pricing unless the agency is paid by transaction fees and the
corporate travel department has the proper data with which to
negotiate.
Langsfeld said the term "net fare" has various definitions, but
typically is a fare stripped of all commissions and overrides. A
net fare can be stripped of other costs to the airline such as
credit card discount fees and CRS fees, he said.
Langsfeld also said that managing costs and "buying only what
you need" will be essential for corporate travel departments.
Corporations, he suggested, should try to capture all of the
revenue that has historically gone to the travel agency, down to
CRS rebates and back-end incentives or payments for hotel and car
bookings.
Swaffer said Hewlett-Packard has been paying transaction fees to
its agencies for about 10 years. The company spends $825 million on
travel and uses three agencies in North America, 20 agencies
worldwide.
Swaffer estimated that the average transaction fee around the
country is $35 to $40, "fully loaded with labor costs, though
obviously labor costs vary geographically." At Hewlett-Packard, he
said about 80% of air tickets are issued on a net fare basis, "all
our car agreements are net" and "about one-third of our hotel
agreements are net."
After subtracting the transaction fees owed to the agencies,
Hewlett-Packard takes all the commissions and overrides, Swaffer
said. Three years ago, the company got back $11 million, the most
recent statistic that he cited.
When the most recent commission cuts came down,
Hewlett-Packard's agencies didn't feel the pain. "We did, but we
went to the carriers and negotiated what we lost from the cuts,"
Swaffer said.
Turning to other revenue-boosters, Swaffer said his company
sought bids from credit card companies, picked one card for travel
expenditures and makes money every time the card is used. "CRS fees
are another revenue stream that we haven't waded into -- yet," he
said.