Hidden Costs of Fragmentation - Sabre · • SBT adoption = 51% TMC • Large, full service TMC...
Transcript of 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
Fragmentation: Definition, Types & Causes
Incidence & Impact of Fragmentation
Next Steps: Identifying & Preventing Fragmentation
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
Fragmentation: Definition, Types & Causes
Incidence & Impact of Fragmentation
Next Steps: Identifying & Preventing Fragmentation
A Sabre Perspective
© 2011 PhoCusWright Inc. All Rights Reserved. 6
Definition of Air Fragmentation
Source: PhoCusWright Inc.
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
© 2011 PhoCusWright Inc. All Rights Reserved. 7
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
© 2011 PhoCusWright Inc. All Rights Reserved. 8
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
Source: PhoCusWright Inc.
Carrier A
Carrier B
Carrier C
Carrier D
© 2011 PhoCusWright Inc. All Rights Reserved. 9
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
© 2011 PhoCusWright Inc. All Rights Reserved. 10
Multiple Causes of Fragmentation
Source: PhoCusWright Inc.
Lack of StandardsMarket Conditions
Distribution Models Government
Service as a Commodity
Technology
Goals of Webinar
Fragmentation: Definition, Types & Causes
Incidence & Impact of Fragmentation
Next Steps: Identifying & Preventing Fragmentation
A Sabre Perspective
© 2011 PhoCusWright Inc. All Rights Reserved. 12
Managed Program Continuum
Source: PhoCusWright Inc.
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
© 2011 PhoCusWright Inc. All Rights Reserved. 13
Cost of Fragmentation or Areas of Risk
Source: PhoCusWright Inc.
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
© 2011 PhoCusWright Inc. All Rights Reserved. 14
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
© 2011 PhoCusWright Inc. All Rights Reserved. 15
Impact of Fragmentation: Case Studies
Source: PhoCusWright Inc.
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
© 2011 PhoCusWright Inc. All Rights Reserved. 16
• 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
Source: PhoCusWright Inc.
Impact of Fragmentation: Case Study Analysis
Assumptions
© 2011 PhoCusWright Inc. All Rights Reserved. 17
Profile of Company ABC and its TMC
Source: PhoCusWright Inc.
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
© 2011 PhoCusWright Inc. All Rights Reserved. 18
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
Fragmentation: Definition, Types & Causes
Incidence & Impact of Fragmentation
Next Steps: Identifying & Preventing Fragmentation
A Sabre Perspective
© 2011 PhoCusWright Inc. All Rights Reserved. 20
Identifying and Preventing Fragmentation
Source: PhoCusWright Inc.
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
Fragmentation: Definition, Types & Causes
Incidence & Impact of Fragmentation
Next Steps: Identifying & Preventing Fragmentation
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
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…
BASE FARESPublic | Private | Fare Rules
ANCILLARIES Public | Private | Fare Rules
Transactional (or not)
FF Tier Level
Availability, Seats, FF#
ANCILLARIES
BASE FARESPublic | Private | Fare Rules
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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