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 and the new players starting to do something about the digitalisation 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 revolutionise 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 centre travel management companies: the first wave of business travel
First generation travel management companies 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-centres with hundreds of phone operators equipped with GDS access.
A business would sign a contract for their travellers to be able to call in, get quotes for a trip and have the tickets issued. At that time, the main income source for travel management companies was airline commissions. Businesses booking with the travel management companies got a cut of those commissions as a kick-back to help incentivise adoption. This led to travel departments becoming profit-generating units within the company. That was the era of call-centre travel management companies or the first wave.
The hybrid travel management company: 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 own 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 travel management companies. This left travel management companies 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 centres.
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 respectively. Available as application service providers, those tools connected to the GDS (and other content systems), to provide businesses with the means for their travellers to self-book. Paired with reluctant travel management companies, these tools allowed for a reduction of the total cost of ownership of the travel programme. The reluctance of travel management companies gradually gave way to acceptance, and the second generation of travel management companies evolved to the hybrid travel management companies, 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 paths different from the tools used by the travel management company staff. That means different profile systems, different policy engines and different payment methods. It is not uncommon to see a booking that is made offline that can’t be seen in the OBT.
- The OBTs never achieved true global coverage. Most global companies need to use several OBTs and several travel management companies to serve their travellers.
- 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 travel management company revenues dwindled and…and they needed to lay off redundant staff.
- The three-party relationships between OBT, travel management companies 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 travel management company: 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 travel management company, or the third wave. The concept was to provide:
- One system, built in-house, to serve the online channel, the travel agent desktops and the mobile channel.
- One place to manage profiles, policies and one user interface worldwide.
- An easy way for the travel consultants to provide travel services and software support.
Those three companies eventually merged into Egencia, an Expedia Group company, as it stands today. Egencia is now the fourth largest travel management company in the world, and the leading digital travel management company. The model has proven successful as we continue to post growth rates that are three-four times that of the business travel market.
The digital travel management company category has proven that it is the most viable path to success. Since then, we have seen new players that initially tried the “incentivisation and/or gamification” approaches (and failed because the value-add was too narrow) and ultimately pivot to the digital travel management company model. Similarly, we have seen large hybrid travel management companies making acquisitions of OBTs and new investments in technology… very probably in a bid to transform into a digital travel management company.
Building and operating a digital travel management company requires the following:
- A strong technology team, organised as DevOps. They need to be able to produce solid, stable software quickly and be able to push it to 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 prioritising, 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, on a global perspective.
- A witty product marketing team that can turn features into compelling stories and showcase value to the market.
- A seasoned service organisation 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 programme.
It is also a mindset. Here are the things that we do not have in 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 everyday 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% across the board, whereas average online adoption of hybrid travel management companies stagnates at 60%
So here is my recipe on how to become a digital travel management company. We look forward to competition as this makes our industry better. Welcome to the task.
*The title of the post was inspired by Apple’s ad, “Welcome IBM. Seriously.”
 Based on an extrapolation of HRG’s annual reports.