Rise of Online Leisure Channel Drives Consumerisation of Corporate Travel
After disrupting the leisure travel competitive environment, the rise of online travel agencies (OTAs) and of other leisure online travel players, such as metasearch engines and aggregators of peer-to-peer tourist services, is also having a significant impact on corporate business travel. In fact, today’s business travellers, when booking their trips through managed programmes, are increasingly looking for the same level of freedom, convenience and service offered by online leisure players, and expecting a seamless travel experience thanks to mobile services. The gap between the offer of OTAs and corporate travel intermediaries results in business travellers turning to booking channels outside their managed travel programme and to open booking platforms such as TripLink by Concur.
The answer of travel management companies (TMCs) to these developments is to embrace online travel innovation, offering their customers the possibility to choose between traditional phone transactions and online self-booking tools, including a growing number of available online platforms and travel services. TMCs are also increasingly assisting their customers during their trips through mobile apps to enhance their travel experience.
Corporate Business vs Leisure Intermediaries Global Travel Sales in 2014
Source: Euromonitor International
A key travel category
Corporate business travel includes all sales of travel products made through specialised travel agencies to corporate accounts held by companies in order to manage in the most efficient way the travel needs of their employees.
Leading travel management companies include American Express Global Business Travel, Carlson Wagonlit Travel, BCD Travel and Hogg Robinson Group. These companies are among the top global travel intermediaries, second in terms of gross bookings only to the two largest OTAs, Expedia and The Priceline Group. Corporate business travel sales accounted for US$167 billion in 2014, about 20% of total travel intermediary sales, that reached US$829 billion in the same year.
Online travel revolution affecting corporate business sales
Corporate business travel was significantly affected by the rise of the online channel. Traditional corporate travel bookings made by phone are gradually being replaced by online bookings, which are more convenient and less expensive. Online corporate business travel bookings accounted for 47% of the total in 2014 and are expected to reach 54% by 2019.
Online vs Offline Global Intermediaries: Corporate Business Travel Sales
Source: Euromonitor International
Moreover, customer service is also migrating to the online and mobile channels. A study on business traveller sentiment published in July 2015 by the Global Business Travel Association (GBTA) reported that today among the top requirements of business travellers are mobile apps, to be used to enhance the travel experience, and online reviews on travel service providers.
The advent of OBTs
The rise of the online and mobile channels in corporate travel has fuelled the growth of online booking tools (OBTs). OBTs offer corporate travellers the opportunity to book their trips by themselves on their online platforms and manage them through mobile apps, at the same time giving companies the option to check and analyse costs and set travel policies.
Major OBTs include Amadeus e-Travel Management (AeTM), a leading player in Europe, Concur and Sabre’s Get There, especially strong in North America, and European players KDS and Cytric. Corporate clients can use OBTs either through travel management companies or through a direct relationship with them.
Open booking major disruptor in corporate travel
However, the ability to book trips by themselves online is not enough for many business travellers, especially amongst the younger generations, as they want to make bookings with their favourite leisure travel providers. This is driving an issue of compliance with companies’ policies, with an increasing number of business travellers not using their company’s corporate travel programme, instead preferring to turn to leisure intermediaries and direct suppliers for their trips. According to a Carlson Wagon Lit report, compliance is currently especially low for hotel bookings, with 50% of global hotel bookings of companies with corporate travel programmes made through other channels.
The need to have more freedom in choosing the booking channel for business trips was behind the introduction of open booking. Open booking allows business travellers to make their bookings through any channel thanks to specialised companies able to capture all travel spend by company employees and report them to travel managers or TMCs.
TripLink by Concur engine of open booking growth
Concur, owned by SAP, is today one of the main disruptors in corporate travel, allowing companies to track bookings made by their employees on any channel through its TripLink platform. Although not popular with travel managers, as it fragments their main corporate travel programme and therefore reduces the possibility to get discounts, and makes it more difficult to track travel spend, open booking is gaining share due to its popularity with business travellers. Among its benefits are increased traveller satisfaction and also the ability to access less expensive rates and travel service providers.
Concur’s TripLink also offers companies the opportunity to include sharing economy travel services providers in their travel management programmes. Corporate business travellers are in fact embracing the sharing economy and generate a significant share of Uber and Lyft sales, while Airbnb business programme sales grew by 700% in 2014.
Leading OTAs target unmanaged business travel
Expedia made an important step in business travel in 2015 through the launch of its Expedia+ Business programme, targeting small businesses. Expedia+ Business allows small companies to track business expenses of their employees and offers rewards to users. The Expedia+ Business programme is currently active only in the US but is expected to expand globally.
In 2015, Booking.com, a subsidiary of The Priceline Group, launched Booking.com For Business, a programme targeting business travellers, and limited to hotel bookings. Also Booking.com For Business targets small companies. It offers reports to keep track of travel spend and the possibility for travel managers to coordinate company bookings. Booking.com will leverage its strong customer service team to also assist business travellers.
These recent moves by the two largest global OTAs do not concern corporate business travel but unmanaged or independent business travel. According to the Global Business Travel Association (GBTA) the total global business travel spend amounted to US$1,178 billion in 2014, seven times larger than intermediaries corporate travel sales, accounting for US$167 billion in the same year. The difference between these two figures is due to business travellers’ spending on non-travel products such as food or shopping, to direct sales by travel suppliers such as hotels and airlines, and to travel products booked through leisure intermediaries.
The two leading OTAs are currently targeting the two latest categories and therefore business travellers booking travel products through direct suppliers and leisure intermediaries. Part of these business travellers are already their customers, but Expedia and Booking.com are now targeting them in a more systematic way to increase their business with them and strengthen their loyalty by enrolling them in a specific business travel programme.
However, while these programmes are mainly targeting independent business travellers, they could also attract a substantial number of business travellers booking so far through managed business programmes, due to the very strong offer and high level of service provided by leading OTAs. The recent entry in business travel by the Booking.com and Expedia brands therefore represents a further threat to TMCs and OBTs.
Corporate vs Unmanaged Global Business Travel Spending in 2014
Expedia, HRS and Orbitz offer consumerised corporate travel services
Expedia Inc. is also active in corporate business travel since 2004 when it bought the travel management company Egencia. Egencia is today the fifth global TMC and it reached sales of US$5.1 billion in 2014, after growing at a sharp 30% CAGR over 2009-2014. Egencia is a TMC which has always been characterised by its focus on the online channel and today its strategy to increase market share is based on the growth of online and mobile services at the expenses of the traditional call centre approach of travel management companies.
Orbitz entered corporate travel in 2002 through the launch of Orbitz for Business, a travel management company designed to mirror the experience of the Orbitz.com leisure travel website. Orbitz for Business aims at delivering a consumerised business travel platform to meet the evolving needs of business travellers.
Another leading OTA, HRS, specialising in hotel bookings, is also active in corporate travel, through a hybrid model offering the flexibility of a leisure travel provider and, at the same time, control of costs and company policies. Apart from its own corporate travel programme, HRS also targets corporate business travellers through travel management companies, thanks to its partnerships with GDS’ Amadeus and Sabre powering TMCs, and through OBTs such as Concur, Sabre’s Get There and Amadeus’AeTM.
TMCs and OBTs adapt their model and offer to new competitive environment
TMCs and OBTs are therefore under threat from both open booking and leisure travel players as the popularity of the online leisure players that business travellers use for their personal trips is such to attract them outside managed travel programmes.
To respond to this threat TMCs and OBTs are currently adapting their business models to the challenges coming from new consumers’ expectations and from the rise of leisure players. As a result they are making their offer more similar to the one of leisure players and providing mobile support, personalised solutions and more flexibility in bookings.
American Express Global Business Travel adopted a customised version of Sabre’s TripCase to provide business travellers with a mobile itinerary management solution offering personalised service and deals while on the move, also through wearable devices.
Carlson Wagonlit Travel launched CWT to Go, an app which automatically integrates itineraries booked through CWT and provides business travellers with the option to manage their trips and get real time information and alerts through their mobile devices.
BCD Travel launched in July 2015 TripSource Hotels allowing its customers to book hotels from a vast offer including GDSes, leisure intermediaries and hotel companies, at the same time tracking all bookings and encouraging travellers to book negotiated corporate rates. Moreover, the TripSource app allows travellers on the go to manage all aspects of their itinerary and get real time alerts.
KDS, an OBT, launched in 2013 the innovative Neo door-to-door (D2D) platform which, on the basis of the place and time of departure and return, instantly produces for business travellers a timed and priced schedule proposal for the entire journey, including lodging and transport. The next version of Neo, which will be launched in September 2015, will be able to learn each traveller’s preferences and previous behaviours to offer personalised itineraries.
The next few years are expected to see further significant developments in the corporate travel environment. TMCs will increasingly adopt leisure channel models and tools to get closer to their customers, will allow them to book from multiple channels, and will strengthen their technological offer especially in terms of mobile channel and personalisation. OTAs and other leisure players are expected to expand their sales to business travellers, targeting in the first place unmanaged business travellers, but also increasingly attracting managed business travellers outside their corporate programmes. The winners of this competition between leisure and corporate travel players will be those companies which will be able to excel in terms of technological innovation and customer service meeting business travellers’ increasingly sophisticated expectations.