Interview with Mike Koetting, executive vice president – North America, Carlson Wagonlit

What challenges does content fractionalisation poses to both travel management companies and travel buyers?

Mike Koetting, executive vice president – North America, Carlson Wagonlit feels with increasing channels of information, it becomes more difficult to ensure full access to content.

“The more difficult it is to access full content; the more companies spend on fares and rates, missing valuable opportunities to save money,” says Koetting.

“CWT led the industry in recognising the fractionalisation trend in the mid-‘90s, when we began investing in the technology and partnerships that would support a “flexible” platform to provide full content access. Today, CWT has the first and only proven and functioning non-GDS direct connect distribution channel, enabling total content access and reducing supplier distribution costs. We have processed more than two million client transactions through this direct connect channel for a variety of CWT clients, and we have direct link access to six major airlines, plus to Regent International Hotels, Radisson Hotels and Resorts, Park Plaza Hotels and Resorts, Country Inns and Suites By Carlson, and Park Inn, Virgin Blue, and TAM,” he says.

In an interview with EyeforTravel.com’s Ritesh Gupta, Koetting shared his viewpoint on some intriguing issues. Excerpts:

More and more, corporate customers are asking for their online booking tools to be integrated with their existing IT processes. How are you working on this?

CWT has current experience in interfacing to Customer ERP systems such as SAP, Ariba, PeopleSoft, Concur, and Oracle. CWT is a strong supporter of the Open Travel Alliance standards group for XML interfaces and we utilize Tibco Corporation’s messaging software, which has pre-built adapters for all the major enterprise resource planning (ERP) software. CWT has also built custom interfaces as needed to client specifications. CWT is able to provide data feeds to all of the major data consolidators, and is also able to provide data extracts that can be used for accounting or general ledger information. In principle, any data created from the travel process could be integrated into a client’s ERP system.

When integrating a general ledger system, we recommend focusing on all transactions. Our profile management and online booking products are designed to encourage exchange of electronic data. We take HR feeds and integration into our systems today for many clients; the feed must be in OTA/XML standards or a bar delimited file. For example, we are able to systemically build traveler profiles and then allow travelers to manage their personal preferences. Our Web-based reporting product can incorporate HR and financial management systems. Furthermore, CWT has created client specific interfaces with various systems to meet their individual needs.

What major changes have you witnessed in the way travel suppliers want to sell to the business traveler?

The most notable change in how travel is sold, not exclusive to suppliers, is the prevalence of the Internet and online transactions. Online booking services allow you to not only to purchase online but to easily and visually comparison shop between carriers, hoteliers, car rental companies, and more. At the same time, online shopping also enables traveler’s easy access to destination information that enables them to plan every last detail of their itinerary. In terms of increasing travel options and efficiency, online has had an amazing and positive affect on every aspect of travel management.
Another distinct change in how travel is sold is simply that travel suppliers, particularly air suppliers, want to sell direct to a corporation and its travelers. In the past, most were satisfied that their inventory was peddled through an intermediary. Today, given tight margins, tight competition, and increased costs, many airlines offer their own Web site for booking air travel and directly advertise to corporate travelers while also negotiating directly with large corporations to create a win-win travel management relationship between the two.

As suppliers have reduced or eliminated travel agent commissions, agents have evolved their business models to survive and have had to seek alternative revenue sources including the sale of additional products & services. What’s your viewpoint on this?

First of all, it’s important to note that clients always have and always will, value good service. At the same time, CWT took a position during the mid-1990s that airline commissions, which by and large were given back to a corporation anyway, would disappear over time and TMCs would indeed be paid differently for transaction services. We also noted that while booking travel for a corporation’s travelers is very important, the true value of a travel management company was and would continue to be in providing products that improved the efficiency of travel, reports that offered corporations data for negotiating and tracked their travelers, as well as consultative services that help a corporation manage their travel spend and maximize their ROI. These were also the items we envisioned corporations would be most willing to pay for long-term. That said, CWT has online booking tools, sophisticated integration and reporting capabilities, and a consulting division worldwide.

The GDS distribution model is more relevant than ever for suppliers and buyers alike as they seek to consolidate all content in “one place”.   

How important is customer loyalty in the corporate travel marketplace? How can you distribution strategy enable you to maintain and grow brand value with your corporate travel clients?

It is very important. CWT’s client retention rate is 99%. This longevity in client relationships enables momentum for account goals and ultimately improves a corporation’s ROI as the program matures. At the same time, for CWT, the key is really a mix of loyal clients and new ones, as new clients may offer new ideas and also may create new demands for process and service improvements, both of which ultimately benefit all clients. Ritesh, what do you mean by distribution strategy—the second part of this question?
What’s your future prediction for corporate travel distribution model? How will your business customer buy their travel in the future?

For both CWT and the industry at large, it is likely we have not seen the last of the distribution cost shifting. TMCs will continue to play an extremely important role in aggregating content ongoing—for air, car and hotel inventory. And while it is likely that the airline/GDS cost shifting could expand to other geographies in the near future, the next big frontier in distribution fee adjustments may be in the credit card industry. After this round of GDS fee reductions is completed, credit card merchant fees will become the largest distribution fee expense for airlines. And, with a 1.00-1.50% gap between merchant fees on some card types, the potential savings for airlines could far outweigh the savings achieved through this round of GDS changes. In addition, as previously stated, CWT already has a direct connection to distribute inventory for Regent International Hotels, Radisson Hotels and Resorts, Park Plaza Hotels and Resorts, Country Inns and Suites By Carlson, and Park Inn, Virgin Blue, and TAM. And, at the same time, other hoteliers are on the record using, or at least pursuing, revised distribution channel plans. Given the complex nature of purchasing travel, corporate travel buyers will continue to rely on TMC guidance for the foreseeable future.