Of Burgers…and Buying Travel

How much does yours cost?

Greetings, Cafe Patrons.

Over the past few weeks, much has been made in the global business and economic press regarding a topic normally not infused with passion and rhetoric – currency exchange rates.  Given that one of my friends here in Australia who works for a global investment bank recently proposed a “Parity Party” for when the Aussie dollar matched the US dollar for the first time in nearly 30 years, discussing currencies is seemingly becoming as cool as property prices used to be in terms of discussions amongst friends at dinner parties.

The Economist recently had a special feature on the so-called “currency wars” that some pundits are concerned may break out across the globe.  One of my favourite (and most useful, to layman economists like myself) indices that helps understand the value of world currencies is the “The Big Mac Index” which highlights the relative costs of McDonald’s iconic sandwich across the globe.

So what do currency rates, Big Macs and travel have to do with each other?  Plenty, I might argue.

It may not matter as much if your air, hotel or car deals are localised in a particular market and you’re dealing in local currency.  Your Big Mac costs what your Big Mac costs in your own market, in essence.

However, many GDS / airline contracts, for example, are written in US dollars and with the greenback’s softening lately, this produces an interesting dynamic in the corporate travel space.  Especially with travel management company transaction fees.

TMC transaction fees incorporate a variety of factors to arrive at what a company ends up paying for their services.  And a fair bit of TMC infrastructure and revenue is made possible by the commercial relationships with GDS’s, technology providers and air/car/hotel suppliers.  No reason to begrudge that, as TMC’s are in business to make money after all.

The incessant downward pressure on transaction fees over the past decade has made this dependency on 3rd party commercial relationships vital for TMC’s to continue to provide the services companies are asking for.  However, if you’re a corporate buyer and are out in the market at the moment, or if you’re a TMC seeking a new GDS provider or preferred airline deal – check how much your Big Macs will REALLY cost you.

Many airline-GDS contracts are written in US dollars.  Therefore, with many global currencies performing well against the US dollar at the moment, the ability for GDS’s to negotiate strong local commercial deals is hampered a bit.  OK, maybe a lot, as the US dollar value of the GDS’s airline contracts aren’t worth as much as they used to be when translated into local TMC/agency contracts.

Same with airlines, as if you’re doing your negotiations with an overseas carrier for your local outbound international travel, is the carrier’s home market strong or weak from a currency perspective?  If you’re seeing the fares being offered now to try and attract Brits or Americans to come to Australia, you’ll see that they are trying to distract travellers from the fact that due to the strong Aussie dollar, its no longer cheap to spend money Down Under.  Big Macs are pricey here.

And lastly, if you’re a corporate buyer negotiating a global contract with your TMC, and you want a single price in US dollars, you may find that what used to be cheap transaction fees for markets in Asia Pacific (after converting to USD) aren’t so cheap any more.  Again – a Big Mac is a Big Mac in name only, price on advisement!

So although currency fluctuations may be the provenance of bankers, traders and speculators, the next few months could pose a conundrum for anyone in a commercial role in the travel industry.  Which is: do you know how much you’re currently paying, how much you want to pay, and whether you think you will end up paying what you think you should pay?

Which begs another question: do you want fries with that?

Travel Innovation: A Field of Dreams? Not Quite…

This field will cost me how much??

Good morning, Cafe Patrons.

I may be going a bit “American” today in my references, but perhaps you’ll indulge me a bit so that I might be able to make a salient argument.

An oft-referred to approach in technology, consumer goods, electronics, etc. is the idea of “if you build it, they will come.”  And for fans of American Baseball, you’ll know what movie I’m referring to which originated this now commonly used business buzzphrase.

Over the past few weeks, there have been the annual 3rd/4th quarter flurry of events and conferences within the travel industry – ACTE Berlin, WebInTravel, TheBeat Live, EyeForTravel Distribution Summit – to name a few.  And it seems as though much of the talk from these conferences was focused on what seems to be a growing ennui amongst industry veterans that innovation in travel is stagnant at best and downright disappearing at worst.

The blogosphere and online industry publications are also full of similar rants and exasperated viewpoints; some examples for your “light” reading pleasure: Travel Tech consultant Norm Rose - http://www.tnooz.com/2010/10/19/mobile/the-gap-between-emerging-technologies-and-the-travel-industry/ ; Travel Analytics founder Scott Gillespie - http://gillespie411.wordpress.com/2010/10/14/four-barriers-to-travel-innovation/ ; and a host of GDS, OTA and travel .com leaders sounding off at WIT: http://www.tnooz.com/2010/10/19/tlabs/there-is-no-innovation-in-travel-only-creativity/

Throughout all this debate and dialogue, it’s become apparent to a few, but not to enough of the many, that there is a fundamental issue with respect to driving innovation in travel.  I would go on to argue that this is especially true for corporate travel, which is summed up by a reply to Scott Gillespie’s posting from Michael Boult of hotel technology experts Lanyon: "Innovation is constrained when those whose problems will be solved by new approaches are unwilling to pay to be helped."

Spot on Mike.  All too often in our industry, the expectations of buyers (and I’m including both corporate travel buyers as well as TMC’s and travel agencies here) is that vendors of technological solutions have to completely build out their technology, run it through comprehensive beta and user testing, launch it to some “brave” customers, and then – and only then – might a customer say “OK you can start invoicing me now.”

The problems with this approach are many.  First off is a simple matter of cash flow dynamics.  The expectation is that the technology company has to completely fund the development of their products before earning any revenue from them, putting them deep into a hole which may take years – if ever – to dig out of.

Second is that due to this overwhelming need for the technology to start earning revenue as quickly as possible, the capabilities of many products are either dumbed down to try and attract the broadest customer base possible, or rushed to market relatively incomplete, in the hopes that “if we build it they will come.”  Yes but will they?  And if so, when?  And will you have burned through your capital by then?

The result of this is then that what’s launched to market often doesn’t really meet anyone’s needs, is looked at as being un-innovative, and therefore results in negative impressions about new technologies which stifles innovation and risk taking by the tech companies in the future.

Now I realise I’ve not provided any examples of this, although we all know some from our own experiences and I’d rather not hang out any dirty laundry outside the Cafe.  There are certainly some successes out there too of course, otherwise we’d all still be writing out airline tickets by hand.  And since I’m a guy who likes to look to the future, rather than re-hash the past, I think that’s where this dialogue now needs to go.

On that note, Cafe Patrons – where to from here?  How can we build a mutually beneficial, shared-risk culture in this industry whereby those who will benefit from new innovations are ready to stand shoulder-to-shoulder, technically and commercially, with companies ready to deliver these opportunities to our industry? 

Or – to tie this all back to my “Field of Dreams” analogy – I would argue that the approach cannot continue to be “if you build it, they will come,” but rather “if we build it together we can both be successful.”

Take that, Kevin Costner.

(image courtesy IMDB.com)

Part 2 – Corporate Travel Personalisation...And What To Do (Or Not Do) About It

In case your normal Genie isn’t available, hopefully today’s Cafe will help see your future…!

Greetings, Cafe Patrons. It’s been a fun and interesting couple of weeks since the Cafe “re-opened” with a new look and a new approach, and I think all the travel shots are starting to take effect as the dialogue is moving along fast and furious. Thanks to all the regulars and new Patrons for their participation!

As mentioned last week, based on the predictions contained within a recent Amadeus study on trends in travel over the next 10 years, there may be a significant change in the way travel products are sold and packaged, especially by airlines and perhaps to a lesser extent, hotels. The idea that an entirely new level of personalised choice and flexibility is already taking shape in some instances, as a Cafe Patron rightly commented on the fact that Air New Zealand’s new 4-tier pricing is a live example of this today.

And although I certainly didn’t mean to try and scare anyone with my thoughts last week about getting ready for these changes now rather than waiting for later, I do think that those who sit on their hands may be in a for a rough go of it if they fail to think at least a bit about what the future of corporate travel might look like.
Over the past several months your Barista has consulted with both TMC’s as well as technology companies around future direction and capabilities, and with corporate buyers about how things may evolve for them within their travel programs. As this is travel, there is no shortage of ideas, concepts and technologies all professing to help make things better. Therefore, I’ve summarised what I see are several ways in which travel buyers and suppliers can think through (and in some cases, work together) to tackle head-on the challenges and opportunities the next 10 years in travel could bring:

1. Understand The Present to Better Predict The Future: when it comes to creating a travel program which engages travellers, drives productivity, and pays off through business results, those who fully understand the culture and objectives of their company are more likely to succeed. Similarly, if you don’t know what your company’s strategies are, and don’t apply them to your thinking about how the travel program will compliment those strategies, change will be hard to manage. Is your company shrinking or growing? Are you on an acquisition spree or are you an acquisition target? How long is your company’s horizon in terms of planning – 1 year? 3 years? 10 years? By thinking ahead to understand where your company is going, and in turn what your travellers may be expected to do in terms of travel patterns, expenditure, etc. you’ll have a better chance of anticipating the impact certain trends will have on your travel program.

2. Find Yourself Some Foot Soldiers: Given the various generations that exist across any organisation today, its important that to better gauge how your travellers will react to future program changes and options you get a good cross section of them engaged now. Ask them to be guinea pigs for new technologies, products or suppliers; incentivise them to participate by giving them “preferred access” to programs or ideas that make them feel special; have them first on the list to pilot test the latest and greatest. Then, when you’re ready to take some of your ideas up the food chain to the leadership, you’ve got your “troops” on your side to back up your ideas with their feedback and evidence.

3. Start Managing Upwards Now: to the latter half of point #2, even if you have the best idea in the world, the surest way to get it shot down quickly is to ill-time your engagement with leaders or stakeholders. As in don’t wait until it’s ready to roll to let them in on it! Although it may seem premature, it’s OK to start working some ideas into your current day thinking and presentations to the organisation to start litmus testing their initial reactions and gauge your potential supporters (and detractors, for that matter.) You may even be surprised by getting a green light to move forward sooner or quicker on a future initiative than you may have thought.

4. Engage Your Suppliers – and Disengage from Those That Don’t Engage: this may seem the most obvious, but it’s also the one potentially most important. As the Amadeus report indicates, most if not all suppliers are going to be looking at all sorts of new ways to package, position and sell the value of their products. From experience, I know that most good suppliers will incorporate a future or strategy component to regular business reviews with their partners and clients, so this may be occurring today in some form or another. However, don’t just let them present to you – why not present back to them? Tell them what YOU think your company’s program will look like 2-5-10 years from now, and see how they react. And in turn, if they try to get you overly excited about a new idea because there may not be an alternative for you to consider, challenge the excitement. And if you don’t like what you’re hearing or seeing, be ready to make a move if the supplier’s strategies don’t match with your thinking.

5. Always Be Thinking in Terms of ROI: at the end of the day, travel is an expense and companies like to control expenses. Great ideas in business always need to come down to some sort of bottom line, be it revenue generation, cost reduction, future investment in growth, or a profitable combination of all these factors and then some. No matter how you look at evolving the components of your travel program in the future, the core value of travel management is maximising benefit whilst minimising cost. So even if you think that soon your travellers will be demanding seats on Richard Branson’s Virgin Galactic flights (“our new sales targets are over the moon – literally – so I need to fly there tomorrow!”) if you can’t find a way to justify them financially as a preferred supplier, you’re probably better off keeping things firmly on the ground.

As with all things crystal-ball related, the above list is not all-inclusive nor does it contain all the silver bullets to address the challenges ahead. However, there’s no time like the present to start thinking, experimenting, challenging current norms, and evaluating potential future successes. After all, if you don’t think ahead, do you know who will?

So Cafe Patrons, what do you think – what other angles have I missed in the above list? Let’s hear them all!

Part 1 of 2 - Corporate Travel Gets Personal



Peronalised Cabins?  I'll take this one thanks!
(Image courtesy http://www.elakiri.com/forum/showthread.php?t=611197 - a cool trip through the 8 most luxurious aircraft cabins in the world.)

Greetings, Cafe Patrons.
First of all, I just wanted to thank everyone for reading and commenting on last week's Blogalogue regarding consolidation in global corporate programs. We'll keep that topic alive and well, as just because we have a new topic to tackle this week doesn't mean you can't still weigh in on last week's.

In keeping with the thought-provoking approach in the new look Cafe, I turned my attention this week to a hefty tome just released by Amadeus, in conjunction with Oxford Economics. The report, titled "The Travel Gold Rush 2020" is quite an interesting read, as it attempts to project trends and changes in the travel industry over the coming decade. I always find these reports fascinating to read through, as they invariably fall into a blatant promotion for whatever product/service the sponsoring organisation is fostering, or it's a thoughtful and useful review which just happens to be sponsored by an organisation who has parallel interests. Thankfully this one falls into the latter.

Although more oriented towards leisure and online travel, there was a very interesting theme throughout the report which has potential significant implications for corporate travel. And that is the idea that in the near future, air travel especially will see traditional classes (ie - First, Business, Economy, etc.) be replaced by "virtual classes." According to the report, "The future of the aircraft cabin is set to go through significant changes as customers are able to share their preferences with airlines and the airlines will be expected to meet their individual needs leading to the decline of traditional travel classes." The report later goes on to say that "In reality, what is likely is that traditional airline class structures will break down and there will be a multiplicity of travel classes in the near future."

Although I'm not altogether surprised by this prediction, from a corporate buying perspective it could prove worrisome. On the former, I'm not surprised by it as the individualisation of traveller needs and related product offerings is just a sign of the times. The "I want it now" generation coming up through the ranks demands smart phones with an infinite number of configurations to make it their own, websites and social networks with robust profile tools to allow for maximum individualisation, and an almost daily launch of travel websites devoted to allowing you to "book your travel your way."

On the latter, corporate buyers already faced with ancillary fee charges, travel application download costs, and new pricing schemes like dynamic hotel pricing are now faced with travellers who may (if you believe the Amadeus/Oxford predictions) ask for the airlines to create their own cabin class. How much will THAT privilege cost, I wonder? And will it be in policy?

Regardless of whether you believe this "personal cabin" will be a reality or not, if you are a buyer of corporate travel the message here is that if you're not already thinking about managing the growing personalisation of your company's travellers - you'd better start. And next week I'll have some suggestions on how to do this in Part 2 of this blog.

In the meantime - what do you think? Do you think travellers are headed down a no-going-back road to individual freedom of choice for business travel, or will the company win out as they do today via standardised program design? Not to worry - the Barista still makes all his shots of travel advice to order....