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How digitization of business travel delivers value to customers

Posted: 15 August 2018

by Michael Gulmann, Chief Product Officer

Welcome to the most exciting way to deliver business travel to corporations since the internet was invented. To the established travel management companies (TMCs) and the new players starting to do something about the digitalization of business travel, I congratulate you for finally understanding that through great omnichannel customer experience comes incredible customer value-add. When we laid out the vision of our company "to revolutionize business travel through the power of technology," we estimated that in less than 20 years we would be one of the top five travel management companies in the world, and that within 10 years, we would be copied. We were right on the first, and wrong on the second. So, what happened here? In Rob Greyber’s article for PhocusWire, he touched on the different phases of business travel innovation. Let's take a closer look.

Call center travel management companies: the first wave of business travel

First-generation TMCs evolved roughly a few decades ago in parallel to Global Distribution Systems (GDS). As global commerce started to take form, and flying to do business became an economically viable option, travel management companies evolved as the prime integrator of content and travel services. To serve this new demand from businesses, travel management companies created massive call centers with hundreds of phone operators equipped with GDS access. A business would sign a contract for their travelers to be able to call in, get quotes for a trip and have the tickets issued. At the time, the main income source for TMCs was airline commissions. Businesses booking with the TMCs got a cut of those commissions as a kick-back to help incentivize adoption. This led to travel departments becoming profit-generating units within the company. That was the era of call-center travel management companies, or the first wave.

The hybrid TMC: The second wave of business travel

Fast forward to the 2000s. The explosive spread of the internet gave birth to online travel agencies (OTA) like Expedia, Orbitz, and Travelocity. The screen was flipped around. For the first time, consumers could see and compare flight availability and pricing on their screens. This allowed them to book on their own, albeit excluding corporate negotiated rates, without middlemen. At the same time, airlines finally had the means to do direct distribution at scale, and decided to dramatically cut commissions to TMCs. This left TMCs with no other choice than to introduce customer fees in the form of transaction or management fees. Because of these changes, travel departments in businesses went from being profit-generators to cost centers. In response, a flurry of online and self-booking tool solutions appeared to solve these problems such as Cliqbook, ResX, KDS, e-Travel, and GetThere. The latter two were developed by two GDS operators — Amadeus and Sabre. Available as application service providers, those tools connected to the GDS (and other content systems), to provide businesses with the means for their travelers to self-book. Paired with reluctant travel management companies, these tools allowed for a reduction of the total cost of ownership of the travel program. The reluctance of travel management companies gradually gave way to acceptance, and the second generation of travel management companies, evolved to the hybrid TMCs, or the second wave. This is the most frequently encountered model in the market today. However, new problems were created:

  • The user experiences are fragmented. The various tools were plugged into the content sources through different paths than the tools used by TMC staff. That means different profiles systems, different policy engines, and different payment methods. It's not uncommon to see a booking that is made offline and can’t be seen in the online booking tool (OBT).
  • The OBTs never achieved true global coverage. Most global companies need to use several OBTs and several TMCs to serve their travelers.
  • The race for online adoption became the rule of the game. Businesses would mandate usage to their staff, even if the user experience was poor. On the other side, as online adoption grew, the cost of licensing the OBTs exploded while the TMC revenues dwindled and they were forced to lay off redundant staff.
  • The three-party relationships between OBT, TMCs, and business led to a dilution of accountability when it came to resolving issues.
  • The arrival and expectation of a mobile solution made the situation exponentially worse with yet another source of fragmentation.

The digital TMC: The third wave of business travel

A few years after the emergence of OBTs, a few companies (Expedia “corporate travel,” Orbitz “for business” and Egencia, a French start-up) chose a different path. They created what would become the digital TMC, or the third wave. The concept was to provide:

  • One system, built in-house, to serve the online channel, travel agent's desktops, and the mobile channel.
  • One place to manage profiles, policies, and one user interface worldwide.
  • An easy way for travel consultants to provide travel services and software support.

Those three companies eventually merged into Egencia, an Expedia Group company. Egencia is now the fourth largest travel management company in the world, and the leading digital TMC. The model has proven successful as we continue to post growth rates that are three to four times that of the business travel market. The digital TMC category has proven that it's the most viable path to success. Since then, we have seen new players that initially tried incentivisation and/or gamification approaches (and failed because the value-add was too narrow) who ultimately pivoted to the digital TMC model. Similarly, we have seen large hybrid TMCs make acquisitions of OBTs and new investments in technology, very likely in a bid to transform into a digital TMC. Building and operating a digital TMC requires the following:

  • A strong technology team, organized as DevOps. This team needs to be able to produce solid, stable software quickly and be able to push it into production as soon as it is ready.
  • An experienced product management team that can capture customer needs and transform them into useful features. They need to be ruthless in prioritizing, while empathic to customers.
  • An inspired design team, able to create art and break that art into functions that can be coded.
  • An infrastructure team that can manage your cloud hosting for improved response time, resilience and scalability, and with a global perspective.
  • A witty product marketing team that can turn features into compelling stories and showcase value to the market.
  • A seasoned service organization that can make magic happen when you need it the most.
  • An extensive supply team that is always on the hunt for the most relevant content and inventory.
  • A global account management team that ensures you are leveraging this platform to its fullest for your travel program.

It is also a mindset. Here are the things that we don't have at Egencia:

  • We do not have an online department, because online is just one channel among others.
  • We do not have a head of innovation, because innovation is what everyone here does.
  • We do not have a head of digital transformation, because why would we?

What we do have is a strong culture of e-commerce operations and great customer service. We want a great user experience, any way you choose to interact with us, that delights every day as we learn more about our users. Because in e-commerce, your success is directly linked to the engagement of your customers. No engagement, no revenue. That attitude translates into very high adoption from our users, more than 90 percent across the board, whereas average online adoption of hybrid TMCs stagnates at 60 percent[1]. Here's my recipe on how to become a digital TMC. We look forward to competition as this makes our industry better. We welcome this task. *The title of the post was inspired by Apple's ad, "Welcome IBM. Seriously." [1] Based on an extrapolation of HRG’s annual reports.

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