The battlefield lines are being drawn in the evolving online corporate travel arena. Players positioned at the brink of head-to-head combat, as well as those scuffling behind the front lines, are engaged in an intriguing mix of cooperation and competition. Many are devising unconventional strategies -even partnering with opponents- to infiltrate the online corporate travel space and stake a claim on this promising territory.
A new report from PhoCusWright Inc., “Online Corporate Travel Update 2003-2006,” finds that while only about 23 percent of America’s corporate travel gross bookings are now online, this segment is expected to double in the next three years. Online corporate travel sales are expected to grow from US$18.8 billion in 2003 to $36.5 billion in 2006. Channel collaboration, supplier partnerships and outsourcing arrangements are forging end-to-end solutions and direct relationships with corporations and their travelers.
Adoption of online booking tools in the corporate arena has been slower than the consumer market due to the unique characteristics of this segment, including company travel policies, preferred supplier agreements, and agent intervention in the reservation process. But, where there’s a lull, there’s opportunity. Corporate travel is being folded into enterprise procurement, which should translate to a more disciplined and cohesive approach to the entire process. This portends growth among travel sellers looking to diversify revenue streams and expand distribution channels.
And meetings are here to stay as can be seen in the Online Corporate Travel Update 2003-2006 when it examines meeting spend, which accounts for 25-30% of a company’s total travel budget. These costs are difficult to manage and track because 80% of meetings are ad hoc and typically don’t involve standardized reporting or booking procedures. The introduction of online tools integrate the registration component and migrate the whole meetings market to a more low-touch, efficient and cost-effective sales process. Nearly half of companies with a managed travel program are now using an online tool for meetings/group travel reservations, and this is predicted to jump to more than 70 percent by 2005.
But he next big target is a niche market for online travel. The mid-market -companies that spend $5-10 million annually on global travel- presents another significant opportunity since, until now, this niche has been fragmented and difficult to reach. Typically there’s no travel manager, formal travel policy, or agency to manage the company’s travel activities, and only limited supplier relationships, so employees use many suppliers and Web sites to purchase travel. However, once online booking tools are in place in mid-market companies, adoption accelerates since these firms are more nimble and typically recover faster from economic downturns than large corporations. New entrants Orbitz, Expedia and Travelocity, and more traditional travel management companies like American Express, Carson Wagonlit and Cendant, are wooing business and capturing share in this lucrative segment.
Online Corporate Travel 2003-2006 also documents the size of the business travel market, strategic implications on the traditional distribution value chain, and the impact of online adoption on the corporate bottom line.
The report’s findings are based on interviews with more than 75 executives at over 35 technology companies, online travel agencies, travel management companies, suppliers, e-fulfillment centers, GDSs and corporations. Additional data were collected from an online survey conducted in partnership with the National Business Travel Association (NBTA).