hidden costs of fragmentation - sabre · • sbt adoption = 51% tmc • large, full service tmc...

Hidden Costs of Fragmentation

April 20, 2011 PhoCusWright Online Event

Susan SteinbrinkSenior Corporate

Travel AnalystPhoCusWright Inc.

Shelly TerrySenior Director of

Airline MerchandisingSabre Travel Network

Sponsored by

Rick BradberryDirector of Corporate

Segment StrategySabre Travel Network

Agenda

Goals of Webinar

Fragmentation: Definition, Types & Causes

Incidence & Impact of Fragmentation

Next Steps: Identifying & Preventing Fragmentation

A Sabre Perspective

Goals of Webinar




A Sabre Perspective

© 2011 PhoCusWright Inc. All Rights Reserved. 4

Goals of Webinar

Source: PhoCusWright Inc.

f = 5w + h

Fragmentation How+=

Who

What

Where

Why

When

Goals of Webinar




A Sabre Perspective


Definition of Air Fragmentation


Purchases for which shopping, booking and payment are not fully available through company’s optimal booking process

Accessing multiple content sources outside preferred path to complete transaction (may be required by contract/SLAs)

Occurs throughout the lifecycle of a trip

What it is

Non-compliant, out-of-policy or rogue purchases due to lack of awareness or for personal gain

What it is Not

Assumptions:Dominant approach (GDS) = preferred process

Content = priced availability + menu of ancillary services


Types of Air Fragmentation

Note: *Also known as fare families or branded faresSource: PhoCusWright Inc.

Airline Ancillaries (A la carte and Bundled*)

Company travel policy

Traveler behavior

Airline-imposed parameters

Content Outside of the GDS

Technology limitations

Strategic/commercial decision

Partial or Restricted Content

Multi-source comparison

Limited fare buckets

Direct connects or supplier direct

purchasing

Differentiated content


How Travel is Purchased

Travel Agent

CorporateBooking Tool

Mobile

In-person

GDS / CRS

OTA / Aggregator

Airline Website

Airline Counter / Kiosk

In-flight

How Travel Is Made Available

Airline Call Center

How the Fares and Payments are Processed

ARC

BSP

ATPCo

Airline Direct

Internet/Web Portals

SITA

Corporate Air Distribution – A Maze of Complexity


Carrier A

Carrier B

Carrier C

Carrier D


PollingQuestion #1

What do you feel is the top cause of air fragmentation?

a. Advances in technologyb. Lack of standardsc. New distribution/revenue modelsd. Lack of government involvement


Multiple Causes of Fragmentation


Lack of StandardsMarket Conditions

Distribution Models Government

Service as a Commodity

Technology

Goals of Webinar




A Sabre Perspective


Managed Program Continuum


Lightly managed with policy

guidance and limited

technology

Rigorously managed with

program mandate and proprietary

technology

Fragmentation varies by company, but exists across companies and program types


Cost of Fragmentation or Areas of Risk


Operational Inefficiencies

Lost agent productivity

Increased processing time

Increased resources for (re)training

Higher error rates

Higher transaction fees

Program Dilution

Missed opportunities

Lost/delayed/unavailable data mgt.

Risk to other corporate initiatives

Lost negotiated discounts

Duplicate payments

Lost Traveler Productivity

Increased planning time

Increased travel time

Technology Investment

Upfront costs

Per transactions costs

Maintenance fees

Redundant costs across partners/suppliers


Examples of Fragmentation Across Business Travel Value Chain

Note: *Includes settlement and reconciliationSource: PhoCusWright Inc.

Trip PlanningAgent calls airline; traveler searches LCCs and OTAs

Pre-TripApprovalTrip taken vs. preferred conferencing option

POS BookingLost negotiated fare savings when non preferred LCC used vs. SBT

Pre-Trip ArrangementsBaggage check at airport kiosk

Trip and En RouteReturn reservation changed at airport

Expense SubmissionDuplicate charges because negotiated rate not used

ReimbursementLost discount because corporate card not used

Accounting*Offline agent fee for exchanging fragmented booking

Reporting, Auditing, and AnalysisDuty-of-care risk due to lost visibility

Strategic SourcingUnused ticket voucher and refund not applied

Supplier NegotiationsReduced rebate because of missed share hurdles

Policy DevelopmentFare threshold lowered without cost considerations

Pro

cure

Pay

Sou

rce


Impact of Fragmentation: Case Studies


Lightly managed with policy

guidance and limited

technology

Rigorously managed with

program mandate and proprietary

technologyWell-managed with travel policy

enforcement

Modeled impact of fragmentation across five managed program scenarios


• Key activities across shopping, booking, procurement/program management, data management and reconciliation, and customer care

• Includes direct/indirect factors, purchases and cancelled transactions, and hard and soft dollar savings

• Did not include: proprietary override agreements, missed and achieved thresholds, regulatory non-compliance, duty of care responsibilities, lost traveler data, lost commissionable revenue for hotel/car


Impact of Fragmentation: Case Study Analysis

Assumptions


Profile of Company ABC and its TMC


Company ABC

• Comprehensive program management, data consolidation & efficiency-driven

• Lowest fare drives purchase decision

• Policy deviations must satisfy pre-determined threshold

• Travelers validate low fare options vs. Web

• Has not invested heavily in technology

• NORAM-centric with modest international travel

• Preferred airline discounts = 10%

• SBT adoption = 51%

TMC

• Large, full service TMC with efficient automation/processes to handle straightforward transactions

• Provides comprehensive reports and reconciled data

• Partially automated, but relies on agent expertise for data capture

• Bookings tend to be manually audited by Ops and Finance

• Solid AM/agents drive contract renewal

• Incremental investments made in third party solution


Potential Blended* Costs of Fragmentation, Per Transaction

*Reflects per transaction costs across all transactions (fragmented and non-fragmented)Note: Program dilution applies to card, GDS, supplier, and SBT agreement where available.Sources: PhoCusWright Inc., Sabre Inc..

$2.77

$10.23

$0.44

Total Blended* Cost Per Transaction = $13.44

Operational Inefficiencies

Program Dilution

Lost Traveler Productivity

Per Fragmented TransactionCost: $89.00

Savings: $17.30Net Loss: $71.70

Goals of Webinar




A Sabre Perspective


Identifying and Preventing Fragmentation


Corporate Buyer Next Steps• Examine contracts and contract performance

• Gauge the risk

• Use existing metrics to find the money

• Understand costs vs. fees

• Establish strategic TMC partnerships

TMC Next Steps• Know costs by channel and method of booking

• Drive cost transparency

• Evolve supplier partnerships

• Examine visible as well as hidden costs

• Leverage automation

• Reinvent TMC services/processes

Thank You!

Goals of Webinar




A Sabre Perspective

Why Fragmentation Matters

Rick Bradberry – Director, Corporate Segment Strategy

Shelly Terry – Sr. Director, Airline Merchandising

Travel managers and business travelers

have unique challenges

Traveler Security

Expense Reporting

Ethics Compliance

TravelPolicy

Legal Compliance

Regulatory Compliance

Air purchases differ from hotel and car

• Unlike hotel and car, most airfare is paid in advance

• Most hotel and car bookings can be cancelled without penalty

• Hotel and car suppliers provide itemized folio receipts

Business travel needs span across

points of sale

Online Agency Mobile

Shop, Book, Fulfill, Report

Travel Policy

Regulatory and Legal Compliance

TMC feedback regarding one-off airline

connections:

Travel manager feedback regarding one-

off airline connections:

ATPCo

Availability, Seats, FF#

BASE FARESPublic | Private | Fare Rules


AGENCY

WORKSPACE/

BOOKING

TOOL

GDS

SHOPPING

ENGINEHundreds of

Airlines

Millions of

Fares

Billions of

Combinations

Airline Tariff

Publishing

Company

The efficient, proven process of today…


ANCILLARIES Public | Private | Fare Rules

Transactional (or not)

FF Tier Level

Availability, Seats, FF#

ANCILLARIES


ANCILLARIES Public | Private | Fare Rules

Transactional (or not)

FF Tier Level

GDS

SHOPPING

ENGINEHundreds of

Airlines

Millions of

Fares

Billions of

Combinations

Airline Tariff

Publishing

Company

…efficiently addresses tomorrow’s needs

AGENCY

WORKSPACE/

BOOKING

TOOL

How a one-off connection with one

carrier affects this efficient process

…with five carriers

…with numerous carriers

Sabre Red

Value Suite

Sabre Red

Efficiency Suite

Sabre Red

Service Suite

Air

Car

Hotel

Rail

Leisure

Travel Policy Optimization

Customer Profiles

Web and Mobile

Traveler Security

Community

Workflow Management

Post Booking Automation

Private Fare Integration

Business Intelligence

Developer Tools

Consulting

Sabre Red

Revenue Suite

Supplier Optimization

Revenue Integrity

Marketing Services

Drive customer loyalty Power business performance

great value

great service

morerevenue

moreefficiency

Questions?

Susan SteinbrinkSenior Corporate

Travel AnalystPhoCusWright Inc.

Shelly TerrySenior Director of

Airline MerchandisingSabre Travel Network

Rick BradberryDirector of Corporate

Segment StrategySabre Travel Network

Thank You!

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hidden costs of fragmentation - sabre · • sbt adoption = 51% tmc • large, full service tmc...

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