"CWT considers content fractionalization to be a critical issue": CWT's Mike

The major development currently affecting CWT in North America, as well as the
entire corporate travel industry at large, is the shifting of airline inventory
distribution costs, says Mike Koetting, executive vice president - North
America, Carlson Wagonlit.

"While predictions have been widespread since 2003 about the consequences of
US GDS deregulation, the real impact has now transpired over the past several
months. In general, in exchange for a $.80/segment fee, each GDS is offering a
new "opt-in" programme that guarantees continued access to all fares and
protection from airline surcharges," says Koetting.
   
"As an alternative to the new GDS opt-in fees, airlines also implemented a new
distribution policy. The policy "encourages" agencies to "opt-in" to their
preferred, "opt-in" distribution channels, in a not so subtle way, by assessing
an airline distribution fee surcharge of $3.50 per segment to those agencies who
choose to "opt-out." Obviously the $3.50 surcharge is much more onerous than the
$.80 opt-in fee, so agencies were left with little choice other than to
"opt-in." The good news for CWT clients processing their air travel spend using
CWT's direct connect technology is that airline reservations processed through
this channel are not subject to GDS opt-in fees or airline surcharges," added
Koetting.
   
When queried about to the prevalent trends and converting them into business
development opportunities, Koetting had this to say:
   
The key to any successful business is anticipating marketplace trends and
responding to them proactively and well. Following are several trends CWT has
identified along with our marketplace response.
   
Trend 1: Content is increasingly becoming fractionalised around the world.
With the approval of Global Distribution System deregulation, carriers are more
likely to narrow their content distribution options. Low-cost carriers,
anticipated to reach 35 percent lift in North America by 2007, will more
aggressively pursue a corporate-direct strategy.
   
The implications of this are:
·          Corporations, with the help of their TMC, need to be prepared with
a strategy to have full access to content in order to ensure lowest fares for
their travelers.
·          Also, as low-cost carriers increase lift in every major world
region, average ticket price (ATP) will decline.
·          In major markets and routes where network and low cost models
intersect, average decline will be 20-30 percent.
·          On international routes where low-cost competition is nominal, cost
will increase to offset reductions above.
   
CWT's Response: CWT is a leader globally. We offer expanded capabilities and
deployment of CWT's GDS independent fulfillment platform, including integration
to third-party online tools. This ensures access to all content options and
providers through utilisation of CWT's existing direct connect technology, with
increased participation by low cost carriers. In EMEA, CWT WebFares currently
books content from 85 carriers. Other markets use local market tools as
appropriate.
   
Trend 2: Corporations are segmenting their thinking around travel spend into
two broad categories:
   
·          Trip (transaction) fulfillment services-applies to five percent of
total T&E spent with travel management firms. 
1.       Commodity (transaction-oriented)-high percentage at low cost;   
2.       White glove (high touch) -low percentage at higher cost. 
   
·          Optimisation and data management services-applies to 95 percent of
total T&E spent with suppliers (air, hotel, car etc). 
1.       Reducing overall spend through effective data aggregation worldwide
applied over best-in-class Program Optimization strategies. 
2.       Managing and analysing risk, such as carrier reaction to Simplifares,
in the ever changing travel industry with real time analysis.   
   
   
CWT Response: Program Optimization conducted by global corporations will lead
to material savings averaging 10-15 percent of total T&E spend. These
strategies encompass air and hotel sourcing and management, as well as enhanced
dynamic metrics for increased usability and actionable data.
   
Trend 3: Small meeting management will become a greater focus for
consolidation and integration with transient travel, with increased emphasis in
Program Optimization.
   
·          37 percent of companies have consolidated small meetings; this is
anticipated to grow to 50 percent within three years.
·          A 25 percent increase in web-based tools for meeting management is
projected. 
   
Implications:
   
·          Corporations will consolidate meetings management to manage not
only their meetings dollars, but to leverage that spend with transient travel
and attain greater discounts.
·          Further integration of technologies between transient and meetings
will be necessary in order to achieve consolidation and optimize spend.
   
CWT Response: Capture of all spend data for enhanced negotiations; build upon
CWT's unique integration between online booking and meetings management tools
for efficient traveler and meeting planning processes; global resources of
sister company, Carlson Marketing Worldwide, for comprehensive program
offerings.
   
(This analysis is an extract from EyeforTravel.com's Ritesh Gupta's interview
with Mike Koetting, executive vice president - North America, Carlson Wagonlit.
Watch out for the full version in the days to come).