PhocusWright Whitepaper "European managed travel"


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Documento de la consultora PhocusWright y TravelPort sobre la evolución del segmento de viajes corporate en Europa

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PhocusWright Whitepaper "European managed travel"

  1. 1. MARKET RESEARCH • INDUSTRY INTELLIGENCE PhoCusWright PhoCusWright White Paper Written and Researched by Stanislas Feminier, David Juman, John Melchior, Ralph Merten and Norm Rose Sponsored by European Managed Travel: Market Forces Fuel Innovation and Opportunity
  2. 2. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 2 JANUARY 2013 PhoCusWright thanks its sponsor, Travelport for PhoCusWright’s White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity Without their active support, this research would not have been possible. Foreword Arguably business travel has experienced a greater rate of change in recent years than ever before. Economic turmoil has led to increased scrutiny and restrictions whilst the growth of digital natives in the workplace has led to a shift in demands and expectations. With such change come exciting innovations and opportunities, requiring technology solutions and service providers to streamline the processes that drive business travel bookings while enhancing their technology to support the new breed of travelers. It seems likely that the rate of change will only accelerate and it is critical to continue to respond to the challenges this presents now and in the future. Understanding the business travel land- scape in Europe will continue to be essential to a successful response. For this reason, Travelport engaged PhoCusWright to conduct important research on European managed travel and any key differences across countries. The findings in this paper highlight how corporate travel expectations have developed and how companies are faced with the challenge of balancing traveler demands whilst monitoring spend. The companies that succeed will be those that step up to this challenge and offer increased choice whilst simultaneously streamlining process and transparency. In addition the research highlights how business travel is being transformed by developments that put more power in the hands of the consumer and confirms the key role that mobile technology has played in that transformation, changing the way we shop and book our travel as well as keep- ing us informed of any changes during the trip. At Travelport our mission is to inspire the travel industry and lubricate the supply chain by offering everyone freedom of choice. This liberates suppliers and agents to provide, access and retail content how they choose. It fires the imagination of developers, stimulating collaboration and innovation. Most importantly it acts as a catalyst to spark travelers’ desire to discover and experi- ence travel in ways they have yet to imagine. Bryan Conway Chief Marketing Officer Travelport
  3. 3. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 3 About Travelport Travelport is a leading provider of critical transaction processing solutions and data to companies operating in the global travel industry. With a presence in over 170 countries, approximately 3,500 employees and 2012 net revenue of more than $2.0 billion, Travelport is comprised of the global distribution system (“GDS”) business, which includes the Galileo and Worldspan brands, its Airline IT Solutions business and a majority joint venture ownership in eNett. Headquartered in Atlanta, Georgia, Travelport is a privately owned company. Follow Travelport on Twitter at
  4. 4. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 4 About PhoCusWright PhoCusWright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, PhoCusWright fosters smart strategic planning, tactical decision-making and organizational effectiveness. PhoCusWright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives, marketers, strategists and research professionals from all segments of the industry value chain use PhoCusWright research for competitive advantage. To complement its primary research in North and Latin America, Europe and Asia, PhoCusWright produces several high-profile conferences in the United States and Germany, and partners with conferences in China and Singapore. Industry leaders and company analysts bring this intelligence to life by debating issues, sharing ideas and defining the ever-evolving reality of travel commerce. The company is headquartered in the United States with Asia Pacific opera- tions based in India and local analysts on five continents. PhoCusWright is a wholly owned subsidiary of Northstar Travel Media, LLC. PhoCusWright Inc. 116 West 32nd Street, 14th Floor New York, NY 10001 PO Box 760 Sherman, CT 06784 +1 860 350-4084 +1 860 354-3112 fax
  5. 5. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 5 European Managed Travel: Market Forces Fuel Innovation and Opportunity Written and Researched by Stanislas Feminier, David Juman, John Melchior, Ralph Merten and Norm Rose Introduction In the wake of one of the worst economic downturns in recent history, European companies have cast a watchful eye over their travel programs. Never before have corporate travel planning and booking been subject to such intense scrutiny and, in many cases, restrictions and cutbacks. And while the financial crisis that first struck the region in 2008 served as the trigger, many of the austerity measures that com- panies introduced as a result are likely to be long-term, if not permanent fixtures of the European managed travel environment. While economic factors are driving one kind of change, a new breed of business travelers is introducing a variety of new travel-related behaviors, preferences and expectations to the market. Younger travelers – accustomed to doing things online and on the go – are promoting more flexible and (often) more efficient ways to purchase, track and manage their trips. Supporting this shift is a cadre of technol- ogy solutions and service providers that promise to streamline the processes that drive business travel bookings. Consequently, European companies must balance the need to tightly manage their travel programs and budgets against empowered travelers’ expectations, and the potential improvements that new technology may deliver. These dramatic changes are unfolding against the backdrop of a marketplace characterized by highly fragmented inventory sources. A swarm of established and emerging intermediaries have claimed their pieces of the pie. Meanwhile, travel suppliers are refining their strategies and exploring new ways to efficiently distrib- ute their products to corporate customers. The intersection of economic challenges, generational shift, market fragmentation and rapidly advancing technology has created both obstacles and opportunities in Europe’s managed travel marketplace. While these frequently contradictory factors will take some time to play out in the coming years, it is critical for companies to anticipate, understand and leverage them.
  6. 6. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 6 Key Findings n While the specific effects differ from one country to the next, recent economic condi- tions have significantly impacted the European corporate travel market overall. Though these changes were initially triggered by economic distress, some of their repercussions on the market will be long-lasting or even permanent, particularly in terms of corporate traveler behavior. n As Europe continues to rebound from a harsh economic period, there has been moderate growth in the region’s managed travel market, although performance varies widely between countries. n Inventory that drives Europe’s corporate travel market remains highly fragment- ed, with a wide variety of channels and platforms used for shopping and booking different products. To meet this challenge, global distribution systems (GDSs) have made significant strides in aggregating a broad range of content within a single booking platform. n The consumerization of travel – driven in large part by widespread smartphone adoption and growing tablet penetration – is changing the behavior and expec- tations of European managed business travelers. In particular, younger (millennial) travelers are more heavily engaged with mobile devices and social media. n In terms of travel MIS and business intelligence, there is a very strong focus on actual expenses. European companies are aggregating expenses from multiple sources and integrating them with in-house financial and/or ERP (enterprise resource planning) systems. n Online TMCs – which represent all online transactions, including those made via cor- porate booking tools (CBTs), online travel agencies (OTAs), hotel booking aggrega- tors (HBAs) and online travel management companies (OTMCs) – are gaining share at the expense of offline, regional and local TMCs. n While the use of mobile in managed travel has been mostly limited to itinerary man- agement and notifications, mobile bookings will gain traction in 2013 and beyond. Background and Methodology The information in this white paper is based in large part on research conducted for PhoCusWright’s European Corporate Travel: Fragmentation and Technology Special Project. The project featured comprehensive analysis of the European corporate travel marketplace, and was intended to size the market and uncover key trends impacting the industry. At the heart of the project was a series of in-depth interviews conducted with a cross-section of stakeholders connected to corporate travel in Europe: travel suppli- ers (hotels, airlines, rail and car rental companies); intermediaries (TMCs, OTAs, GDSs and other content aggregators); technology suppliers (booking tool providers, expense management companies, mobile solution providers); corporate buyers; travel manag- ers and others. The interviews were well spread across four key markets in Europe (the
  7. 7. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 7 U.K., France, Germany and Italy), in addition to including representatives from numerous pan-European and global enterprises. Frequently, the terms “corporate travel” and “business travel” are used interchangeably. However, because one of the key purposes of this white paper is to explore trends relat- ed to European companies that maintain structured corporate travel policies, we have adopted a narrower approach to and definition of the target market. Specifically, we use the term “managed travel” to refer to companies that enforce specific policies regarding their employees’ business travel. These policies incorporate at least one of the following elements: • Use of preferred suppliers • Use of preferred booking channels • Some level of authorization required for travel • Explicit expense policies Thus, only companies with structured corporate travel policies are included in this analysis. These may include organizations ranging from SMEs to large corporations, provided their policies include one of the elements specified above. Market Sizing Despite continuing economic troubles, Europe’s total and managed travel markets experienced moderate growth in 2012. The total market grew to E218 billion, up 3.9% from a year earlier. At the same time, the managed travel market climbed 4.4% to E38.9 billion. By 2014, Europe’s total travel market is projected to reach E230 billion, while managed travel gross bookings will exceed E41 billion (see Figure 1). Over the next several years, there will be modest growth in each of the four countries that were FIGURE 1: European Total Travel and Managed Travel Market Gross Bookings (EB) and Growth (%), 2010-2014 Note: 2012 - 2014 projected Source: PhoCusWright’s European Corporate Travel, Fragmentation and Technology Special Project © 2013 PhoCusWright Inc. All Rights Reserved. 0 50 100 150 200 250 2010 Total Managed 199 209 218 224 230 35.3 37.2 5.4% 5.0% 3.9% 2.7% 2.9% 4.4% 2.2% 3.7% 38.9 39.8 41.2 2011 2012 2013 2014
  8. 8. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 8 the focus of this research – the U.K., France, Germany and Italy – though the Italian managed travel market is considerably smaller than the other three, and ongoing economic challenges there will slow the recovery. Within the managed travel segment, online bookings are growing more rapidly than offline bookings, and therefore the share of overall gross bookings that occur online is increasing. Online managed travel bookings include those made via supplier web- sites, as well as bookings made through an array of online TMCs such as CBTs, HBAs and OTMCs. Taken together, these online managed travel bookings totaled E16.4 billion in 2012, or 42% of the overall managed travel market. Double-digit growth over the next several years is expected to drive online managed travel bookings to nearly E21 billion by 2014 – E13.1 billion for the full range of online TMCs and E7.7 billion for supplier websites. Half of all managed travel bookings will be made online in 2014 (see Figure 2). Note: 2012 - 2014 projected Source: PhoCusWright’s European Corporate Travel, Fragmentation and Technology Special Project © 2013 PhoCusWright Inc. All Rights Reserved. FIGURE 2: European Managed Travel Market (EB) and Managed Online Growth Rates, 2010-2014 0 5 10 15 20 25 30 35 40 45 2014 50% 2013 47% 2012 42% 2011 39% 2010 37% Online TMC Supplier Website 7.7 5.2 35.3 11.6 7.0 39.8 13.1 7.7 41.2 8.9 5.7 37.2 10.0 6.4 38.9 Total Gross Bookings ManagedOnlinePenetration Online Growth 13% 12% 12% 14% While the online channel as a whole is expected to continue its steady growth, online intermediaries and supplier websites differ greatly in both projected growth rates and the distribution of bookings across travel segments. For online TMCs, bookings in 2013 and 2014 are expected to increase 16% and 13%, respectively. Air bookings (pre- dominantly traditional airlines) account for more than half of all managed online TMC bookings. The hotel segment represents just under a third of online TMC bookings, while rail (11%) and car rental (5%) account for significantly smaller portions. Managed travel bookings for supplier websites, on the other hand, will grow 10% on average over the next several years – slightly slower than for online TMCs. And unlike the intermediaries – who rely heavily on traditional airlines – supplier website book-
  9. 9. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 9 ings are fueled by the rail and LCC segments. Rail supplier websites accounted for half of all online supplier bookings in 2012, though this percentage will decline to 47% by 2014, as airline websites (both LCCs and traditional carriers) gain share. Low-cost carrier sites will attract 22% of supplier website bookings in 2014, while traditional airlines will account for 13%. Car rental and hotel websites will command 10% and 8% of bookings, respectively, in 2014. TMCs as a whole will experience significant growth between 2010 and 2014 – both lo- cal TMCs active in individual country markets, and larger pan-European/global TMCs such as CWT, AmEx, HRG, BCD and Egencia. During this period, gross bookings for local TMCs in Europe are expected to climb 18%. However, the pan-European TMCs combined will grow at 29%. By 2014, pan-European TMCs will control two thirds of all TMC bookings in Europe, compared to one third for local TMCs. Distribution Trends Traditional distribution roles in Europe’s managed travel marketplace are evolving as established players introduce new tools and solutions and alternative models emerge. One of the most significant challenges from a distribution standpoint is the high level of fragmentation in inventory. Content is available both directly from travel suppliers – traditional and low-cost carriers, independent hotels, rail providers and car rental companies – as well as through intermediaries such as GDSs, OTAs and HBAs (for hotels). As a result, travel content is scattered across a multitude of plat- forms and websites, many of which come with their own booking capabilities. In an effort to address the challenge of inventory fragmentation in the European trav- el market, some GDSs have focused on aggregating and integrating a broader range of content into their services. Long established as the primary platform through which TMCs access and book flights (with traditional airlines), hotels and car rentals for their corporate customers, GDSs increasingly seek to streamline the process and provide a single, unified booking environment for all travel products. Some GDSs have been successful in partnering with and integrating content from suppliers such as LCCs and rail providers. In the case of low-cost carriers, for in- stance, establishing distribution agreements with GDSs has enabled them to more efficiently tap into the managed travel market and access a global audience. For example, easyJet, one of the world’s largest LCCs, has opened up its inventory and now distributes content through all the major GDSs. At the same time, a significant portion of the carrier’s bookings continue to come through its website. Similarly, GDSs are incorporating content from a range of other intermediaries in the European market, including various online travel agencies and HBAs. For instance, through its Travelport Rooms and More™ shopping and booking engine, Travelport has incorporated hotel and other travel content from leading OTAs and aggregators such as,,, Expedia Affiliate Network, Ho- and many others. As a result of this integration, smaller, independent
  10. 10. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 10 hotels – many of which do not have well-developed booking tools on their own web- sites – are now available to TMCs worldwide through the global GDS platform. A key part of Travelport’s ability to integrate fragmented content has been enabled through the Travelport Universal Desktop. This booking solution was developed as a single open platform that utilizes Universal APIs to access non-GDS content through its Airline Content Hub (ACH), Rail Content Hub (RCH) and direct connect (e.g., for airline ancillaries). While a broader range of travel content now flows through the GDSs, supplier sites and other intermediaries continue to represent important booking channels. Smaller, independent hotels in particular have been successful in distributing content through HBAs. Meanwhile, larger chains and full-service airlines are exploring ways to reduce their distribution costs. For example, some air carriers are implementing corporate ID programs to attract corporate customers directly to their websites and deliver a more customized booking experience. Lastly, as younger people enter the market – either as corporate travelers or those associated with travel management – they fuel traveler empowerment, which is beginning to impact managed travel distribution. Specifically, this generational shift is driving more frequent use of online tools to book travel. Additionally, rapid smart- phone adoption means that the mobile channel is emerging as a viable distribution platform, even though mobile has been primarily used so far for itinerary manage- ment and notifications. Corporate Travel Trends Trip Optimization and Management On the buy side of the European managed travel marketplace, a heightened focus on travel policy optimization has emerged. The economic downturn has driven companies to exercise much tighter control over their managed travel programs. To boost com- pliance and generate savings, organizations have tightened their travel management policies using various measures, including: • Greater use of preferred suppliers • Restricting travelers to three-star lodging • Less premium-class travel • Greater use of LCCs as opposed to traditional airlines • Increased use of online booking channels This tighter rein over the cost of trips that are taken has benefited low-cost accommo- dations and LCCs, each of which have performed well in spite of economic conditions in the region. While premium air travel has been significantly affected by trip optimiza- tion measures, some corporations have maintained limited premium class travel, espe- cially for long-haul trips. From a lodging perspective, chains that feature both budget and high-end properties may be more attractive to companies than those that cater exclusively to the luxury segment.
  11. 11. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 11 In addition to exercising greater control over trip costs, European companies have become more careful when scrutinizing the need for trips, and have tightened up trip authorization considerably. This focus on trip management takes a variety of forms, such as: • Reduction of internal meetings • Shorter trips • Fewer people on each trip • Greater scrutiny over trip purpose to ensure trips are justified • Tighter trip pre-authorizations • More video conferencing While the level of trip optimization and management varies from one organization to the next – company size and the maturity of the program are key factors – it impacts all levels of the value chain. In addition, many cost-saving measures that were implement- ed in response to poor economic conditions are expected to remain in place even after the economic climate improves. The Role of Procurement Corporate travel managers in some markets tend to be subject matter experts – i.e., individuals with a strong background in the travel industry who possess deep knowl- edge of travel industry practices. With the exception of some major multinational or pan-European companies, European companies have not traditionally employed subject matter experts as travel managers. This is in contrast to the U.S. managed travel market, where expert travel managers with industry experience still exert considerable influence in the corporate setting. In Europe, however, corporate travel is usually handled through the purchasing or general procurement departments. Re- cently this trend has accelerated, and procurement now controls travel management for most European companies. As a result of procurement’s dominance of most European companies’ travel man- agement programs, the programs (and the organizations) have less access to trav- el-specific expertise. Depending on the company, therefore, the dominance of a classic purchasing/buyer mentality may force sensitivity to travel service elements to take a back seat to price and cost reduction. Consequently, most travel management programs promote online adoption as a cost-saving measure. In addition, because European companies do not frequently have in-house travel expertise, the TMCs they work with may have an opportunity to assume a broader role, both in providing travel advice and in negotiating agreements with travel suppliers. Responses to Consumerization Although companies in Europe have responded to the consumerization of corporate travel – and the empowerment of corporate travelers – in myriad ways, most corpo- rate responses fit into one of the following four categories: Capture, Simplify, Prevent and Prohibit.
  12. 12. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 12 Capture. Using itinerary aggregation tools such as Concur’s TripIt, organizations capture itinerary elements that fall outside the normal channels. Hence, traveler ac- tivity on the or HBA sites, for instance, can be efficiently captured and integrated into the overall managed travel process. Simplify. KDS, a provider of both corporate booking tools and expense solutions, takes a wholly different approach to consumerization. With its Neo product, KDS sim- plifies the corporate travel experience and offers business travelers a fully bookable, door-to-door itinerary and cost estimate in a single interface. While this tack gives travelers fewer do-it-yourself options in terms of where and how they can book, it has the potential to drive cost savings and improve compliance. Prevent. Some companies respond to consumerization using more severe measures, including a solution from ProcureApp that alerts travelers when they try to book, for instance, on a site. This type of reminder is intended to promote proac- tive compliance by employees and prevent rogue purchases. Prohibit. The most extreme approach of the four is for a company to completely deny reimbursement for out-of-policy purchases. While such a severe strategy has become less common among European companies, it likely appeals to some seg- ment of the marketplace. Duty of Care Duty of care – the legal and moral responsibility of a corporation to ensure its travel- ers are safe while traveling – is also becoming a key focus for some companies. Duty of care can encompass varying degrees of risk assessment, strategic planning and global support services, and is often dictated by laws in specific countries. In Ger- many and the U.K., duty of care is attracting considerable attention, while it is less of an issue in France and Italy. Fragmentation in the booking process exacerbates the duty of care issue, since it makes it more difficult to locate employees and ensure their safety at any given point in time. While GPS has great potential in this regard, European privacy laws place restrictions on where and how it can be used. Several third-party solutions – including International SOS – have carved out a strong niche for themselves with respect to duty of care and provide not only the ability to locate travelers, but also to help them in the event of an emergency. Travel Segment Trends Lodging In the European accommodations space, budget lodging has benefited from the eco- nomic downturn, while four- and five-star properties have felt the negative impact the most. In addition to placing tighter restrictions on class of hotel, companies are more carefully scrutinizing the need for and purpose of business trips, thereby reducing the length of stay and/or number of hotel guests. The European hotel market is highly fragmented, with a large percentage of indepen- dent hotels. Smaller, independent properties are benefiting from GDS integration and
  13. 13. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 13 from distribution through OTAs and HBAs, which are aggressively establishing deals for corporate accounts. Due to an increase in the volume of net rates, some HBAs may need to introduce fees, which will level the playing field between HBAs and OTAs. On the marketing side, hotels are developing mobile apps for check-in and checkout, for instance, while HBAs are aggressively promoting smartphone and tablet apps. So far, though, mobile bookings have been limited, due in part to a lack of full TMC integration. Corporate clients continue to negotiate for free ancillaries such as Wi-Fi, breakfast, on-site parking and late departures. Full-Service Airlines The premium cabin has suffered considerably for Europe-based, full-service carriers – a direct result of the region’s difficult economic conditions. In addition to companies tightening their policies toward booking premium cabin travel, full-service carriers now face heightened pressure from the LCC and high-speed rail segments. As a result, several national carriers are struggling to survive. Other full-service carriers are focusing heavily on their more profitable transatlantic and other long-haul routes, ceding shorter trips to LCC and rail players or sometimes competing through low-cost subsidiaries of their own. Full-service carriers are pursuing multiple tactics to address some of these issues, in- cluding reducing their distribution costs. In addition, with respect to corporate custom- ers, traditional carriers are expanding their corporate ID programs to facilitate greater customization, as well as providing a broader range of corporate and individual incen- tives. In addition, some full-service carriers are exploring joint venture agreements with other large airlines, which can be an effective way to achieve widespread efficiencies. Despite the fact that some full-service carriers are focused on developing direct busi- ness, at this point TMCs and GDSs still handle the majority of these bookings. Exploit- ing the direct channel may be a goal for some traditional airlines, but the reality of the market today is that most bookings still go through the TMC and GDS channel. Low-Cost Carriers Generally speaking, economic downturn is good for low-cost carriers, and in Europe, LCCs have been expanding their route networks at the same time that some full-ser- vice carriers are contracting theirs. LCCs tend to benefit from lower labor costs relative to traditional carriers. In Europe, however, they face continued competition from high- speed rail operators. As noted, LCCs are more fully integrated with the GDS systems than they were a few years ago. As a result, they have extended their reach into global markets, and TMCs benefit from seamless access to LCC inventory. At the same time, a significant portion of the LCC booking volume for managed travel in Europe goes directly through Sup- sites. With the possible exception of Ryanair, most low-cost carriers active in the European market are eyeing corporate bookings and are working to increase their corporate market share. Efforts toward this goal include offering premium boarding
  14. 14. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 14 and early seat selection for business travelers and creating bundled packages for corporate customers. Rail Like LCCs, rail has benefited from companies’ tighter travel budgets. For business travelers, rail offers the ability to work on the train, along with the convenience of stations located relatively close to the city center. In addition, expanding high- speed networks have made the rail segment increasingly competitive with air on a variety of routes. Rail content has recently made its way into the GDSs. At the same time, supplier web- sites are an important booking channel, and among corporate travelers, self-booking for rail is quite common. Though volumes are still relatively small, mobile rail booking tools are gaining popularity, and a significant portion of the segment is moving to a ticketless environment that enables check-in by smartphone. Some rail companies are beginning to offer ancillary services such as car rental, hotels and activities, as well as the ability to select a specific seat at the time of reservation. Travel Management Companies The role of the TMC continues to evolve in the European managed travel market- place. A significant percentage of travel management companies can still be charac- terized as traditional TMCs. For example, they rely heavily on air transactions and have relatively low online adoption rates. In addition, they tend to offer very limited consult- ing services and have not developed significant mobile strategies. On the other hand, an increasing number of TMCs are diversifying their services in order to remain competitive. Many are driving online adoption and some have turned to mobile as a key strategy going forward. Rather than relying too heavily on air transactions, more progressive TMCs are diversifying to include hotels, rail and the MICE segment, and some are growing the consulting side of their businesses. While not yet a major trend, some TMCs have begun to provide comprehensive expense management solutions. One example of this in the U.K. market is Gray Dawes, which in 2012 rolled out an integrated expense management solution as part of its portfolio of services. Clearly, the service requirements and preferences of companies (and their business travelers) with regard to managed travel are changing. Traditional TMCs that cling to offering only a narrow array of services – without adopting more progressive strategies – will struggle to survive. Global Distribution Systems GDSs, on the other hand, continue their efforts to become a single source for all travel content in light of the fragmenting forces that exist in the European managed travel marketplace. All the major GDSs – Travelport, Amadeus and Sabre – have had
  15. 15. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 15 some success in integrating new content from rail suppliers, LCCs and independent hotels into their systems. And there are clearly some proponents of the one-stop-shop concept, including pan-European TMCs, regional and local TMCs, as well as large multinational buyers. However, challenges posed by network airline merchandising, HBAs, OTAs, LCCs and others have the potential to disrupt GDS aggregation goals. As such, it is imperative for GDSs to be innovative in their approach to the market, given the number of travel booking alternatives that are becoming available. The major GDSs have each leveraged technology to develop and provide tools that expand their capabilities and optimize the travel distribution process. Depending on the particular GDS, efforts have centered on enabling travel agency customization, facilitating innovation through third-party developers, and providing unfettered access to rich content and data. In the case of Travelport, for instance, its Universal API and Universal Desktop products provide access to a broad array of content through a sin- gle API connection, and give travel agents a single platform that delivers multisource content and unifies shopping, selling and merchandising. To the extent that the major GDSs can continue to offer TMCs a compelling experience that drives profitability and enables them to better service their customers, they will remain a preferred channel for managed travel bookings in Europe. Conclusion While some countries face greater difficulties than others, Europe on the whole is continuing to shake off the effects of the economic downturn, and the challenges have altered the region’s managed travel marketplace. Overall, the European man- aged travel market is growing (modestly) and is moving online, particularly as more companies adopt managed travel policies to monitor and curtail expenses. Given the prevalence of restrictions on premium travel and accommodations, suppliers that offer more options are likely to be better positioned. Partly in response to recent economic challenges, Europe’s corporate travel market continues to focus heavily on tracking actual expenses. In light of this trend, robust expense management products and MIS solutions will play increasingly critical roles in the evolution of the European managed travel market. Solutions that are tightly integrated with existing corporate financial or ERP tools will better enable companies to aggregate, monitor and report on their travel expenses and activities. Stakeholders all along Europe’s managed travel value chain are grappling with how best to position themselves in light of persistent economic problems, rapid technolog- ical advances, changing traveler behavior and continued fragmentation in the market- place. Suppliers intent on wooing and retaining loyal corporate customers are pursuing a variety of distribution channels that enable them to extend their reach and customize their offerings, all while trying to rein in their distribution costs. For OTAs and content aggregators, the challenge is to tap into and organize the market’s fragmented inven- tory in a way that is convenient and compelling for corporate travel agents.
  16. 16. PhoCusWright White Paper: European Managed Travel: Market Forces Fuel Innovation and Opportunity May 2013 ©2013 PhoCusWright Inc. All Rights Reserved. Page 16 TMCs themselves are driven to adopt more progressive practices that are quickly becoming the norm, such as offering more diversified services and embracing online tools and technology. Since the travel function in most European companies is usually handled by purchasing and/or procurement, well-positioned TMCs may provide or- ganizations with not only a broader range of services, but some of the travel expertise that is often lacking in-house. Once the only game in town for managed travel distribution, GDSs are leveraging technology to re-invent themselves in order to stave off competition from numerous other players that offer their own booking channels. Efforts of the major GDSs to integrate a variety of new content – LCCs, rail and independent hotels, in particular – have brought them a step closer to becoming a one-stop-shop for all types of travel content. At the same time, GDSs are investing heavily in their offerings to provide TMCs with powerful travel shopping, booking and servicing platforms. European companies are faced with set of sometimes conflicting choices about op- timizing their managed travel programs. On one hand, corporate traveler behavior and expectations have evolved significantly (largely due to the influence of tech- nology), and the managed travel booking landscape has more choices than ever. However, companies continue to operate in an economic climate that requires them to streamline their travel processes and carefully monitor and manage their travel expenses. As such, they must adopt the tools and policies that best enable them to balance their employees’ expectations, fundamental changes in the marketplace, and harsh economic realities. z