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MARKET RESEARCH • INDUSTRY INTELLIGENCE

PhoCusWright
PhoCusWright White Paper
Written by Norm Rose
Sponsored by
Managed Travel 2020:
Technology Drives New
Opportunties
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page i
This PhoCusWright White Paper is made possible by The International Air Transport Association (IATA)
The International Air Transport Association (IATA) is the trade association for the
world’s airlines, representing some 240 airlines or 84% of total air traffc. We support
many areas of aviation activity and help formulate industry policy on critical aviation
issues. www.iata.org
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page ii
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 infuence 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-profle conferences in the United
States and Europe, and partners with conferences in Canada, China and
Singapore. Industry leaders and company analysts bring this intelligence to
life by debating issues, sharing ideas and defning the ever-evolving reality of
travel commerce.
The company is headquartered in the United States with Asia Pacifc opera-
tions based in India and local analysts on fve continents.
PhoCusWright is a wholly owned subsidiary of Northstar Travel Media, LLC.
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 1
Managed Travel 2020: Technology
Drives New Opportunities
Written by Norm Rose
Introduction
Technology is changing every aspect of our lives, including the way business travel is
planned, booked and experienced. Few would consider modern day business travel to
be hassle-free, but technology is making business travelers more informed and able to
add services that make their trips more comfortable.
Most corporations have long recognized that business travel is one of the company’s
largest controllable expenses. In an attempt to manage this spend, corporate travel
managers have created structured programs designed to reduce and control costs by
leveraging volume to obtain supplier discounts. To manage these discounts, corpo-
rations have sought the help of dedicated corporate travel agencies or Travel Man-
agement Companies (TMCs), and have deployed web-based applications known as
Corporate Booking Tools (CBTs).
These traditional ways of managing travel are being disrupted by new technologies
and standards that will change the face of business travel by 2020. These include the
growth of personal device technology, new value-added ancillary travel services and
emerging protocol standards that will provide greater choice of airline products and
drive more personalized offers to travelers.
Purpose of Paper
The purpose of this paper is to examine the impact of technology on the way managed
business travelers purchase airline products and services, predicting what will be the lead-
ing trends by 2020. This paper analyzes disruptive changes happening today and forecasts
how they will impact the managed travel process, the traveler experience and their expec-
tations in the near future, with a focus on airline booking practices. The paper is organized
in four sections:
0 Part One –Managed Travelers Embrace Smart Mobile Devices and Expect More Person-
alized Services
0 Part Two – Technology Driving New Business Practices
0 Part Three – Managed Business Travel in 2020 – Greater Personalization
0 Part Four – Conclusions
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Managed Travel 2020: Technology Drives New Opportunities October 2014
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Methodology
IATA Global Passenger Survey
PhoCusWright partnered with IATA, adding 20 unique questions targeting managed travel-
ers to the annual IATA Global Passenger Survey, conducted between July 29 and Septem-
ber 14, 2014. To be included in this section of the survey, the questions targeted travelers
who work for companies that have specifc policies regarding travel purchasing and
reimbursement. The respondents needed to verify that their companies used one of these
elements as part of a managed travel program: (1) expense policies (e.g., allowed and
non-allowed expenses); (2) the use of preferred suppliers (e.g., airlines, hotels and car rental
companies); (3) the use of preferred booking channels such as a corporate travel agency/
TMC or a company-provided online booking tool (also known as a corporate booking tool
or CBT).
The survey respondents represent a valid sample of 976 respondents from each of the
major geographic regions of Europe, BRICs (Brazil, Russia, India and China), North America,
Asia Pacifc (APAC) and other regions beyond these four categories (see Figure 1).
Interviews with Key Travel Industry Executives
To augment the survey, PhoCusWright conducted 18 detailed telephone interviews consist-
ing of:
0 Five airlines, four full-service carriers (FSC) and one low-cost carrier (LCC).
0 Five TMCs: two global TMCs and three large regional TMCs.
0 Five corporate buyers representing different industries and geographies.
0 Three global travel technology vendors.
These in-depth interviews reviewed current and future trends in the managed travel
sector, providing multiple perspectives on emerging trends impacting the market.
These interviews helped us defne the key issues disrupting the managed travel market
today and tomorrow.
Figure 1: Survey Regional Breakdown
Questions: What is your country of residence?
Base: Business travelers (N=976)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Europe
Other Regions
North America
BRICS
APAC
30%
30%
18%
17%
6%
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 3
Figure 2: Satisfaction with Corporate Travel Service
Questions: How satisfed are you with the current corporate travel service provided by your company/and corporate travel
agency (Travel Management Company/TMC)?
Base: Business travelers (N=976)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Very satisfied
Very dissatisfied
Neither satisfied nor dissatisfied
Somewhat satisfied
Somewhat dissatisfied
25%
44%
19%
9%
3%
Part 1: Managed Travelers Embrace Smart Mobile
Devices And Expect More Personalized Services
In order to understand how emerging trends will impact managed travel programs in the
near future, it is important to understand the perspective of managed travelers today.
Corporate Travelers are Not Completely Satisfed
One quarter of the respondents said they were very satisfed with their corporate travel
service, and another 44% were only somewhat satisfed (see Figure 2).
Among the 75% who were not completely satisfed or even dissatisfed, the number one
reason was, “I can fnd lower fares and better rates online” (see Figure 3).
There is no doubt that the belief that lower prices can be obtained online continues to
be a source of frustration for the managed traveler. With 35% expressing a desire to book
airline reservations directly with suppliers, direct booking creates friction between man-
aged travel goals and business traveler preferences for about one third of travelers.
Managed Travelers Own Smart Mobile Devices
The survey revealed an almost universal adoption of smart devices by managed busi-
ness travelers worldwide (see Figure 4).
Through their smart devices, managed business travelers are now connected 24/7 with
untethered access to travel information.
Managed Travelers Book Airline Reservations through Preferred Channels
More than two thirds (67%) of today’s managed travelers book air through preferred
channels. Nearly four in 10 (38%) respondents book their air reservations through their
company’s website, 11% have assistants make their reservations electronically for them,
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 4
Figure 4: Device Ownership
Questions: Which of the following devices do you own?
Base: Business travelers (N=976)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Smartphone (i.e. mobile phone advanced functionality such
as access to the Internet, email capabilities and the ability
to download applications e.g. Apple iPhone, Samsung S5)
Desktop/laptop
Tablet (i.e., portable touchscreen device such as iPad,
Samsung Galazy, Amazon Kindle Fire)
None of the above
95%
76%
93%
1%
Figure 3: Reasons for Dissatisfaction
Questions: Why are you not completely satisfed with your current corporate travel service? Please select all that apply.
Base: Business travelers (N=731)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
I can find lower fares and better rates online
It does not deliver my personal flight preferences
Other (please specify)
The process is complicated and takes too long
I am unable to make the reservations using my preferred
device (e.g., smartphone, tablet, laptop)
I prefer to book my travel directly with my favorite suppliers
The choices conflict with my supplier preferences (e.g.,
favorite airline, hotel chain)
I am unable to buy optional airline services such as better
seats or early boarding
None of the above
56%
35%
21%
30%
13%
24%
6%
24%
5 %
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 5
Figure 5: Airline Products Booking Method
Questions: Please identify your main method for booking airline products for your business travel. Choose one for each
category – Airline Tickets and Ancillary Services.
Base: Business travelers (N=969)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Through my company travel agency (TMC) website or my
company-provided website
Through my company travel agency (TMC) app or my
company-provided mobile app
I never purchase optional airline products/services
Directly via the airline website
Directly via the airline app
My assistant calls my company travel agency (TMC) for my
reservations
Online travel agency/portal (e.g., Expedia,
Booking.com, Orbitz)
My assistant makes my travel reservations electronically
using the airline, corporate
Calling the airline directly
38%
8%
18%
6%
15%
22%
11%
4%
6%
5%
5%
3%
4%
6%
2%
5%
0%
40%
Airline tickets Optional airline products/services
and an additional 18% have their assistants book travel via the telephone (see Figure 5).
Only 15% book their air travel directly on an airline website.
Optional airline services, also known as airline ancillary services, have a higher level
of direct bookings with airline websites, at 22%. Six in 10 respondents have booked
optional airline services.
When asked about their preferred booking methods for air travel products, an interest-
ing shift emerged. Whether booking directly with the airline supplier or with the travel
agency, the desktop/laptop is widely preferred over the smartphone or tablet. Howev-
er, when asked about mobile apps, 39% of respondents stated a preference for book-
ing directly on the airline’s smartphone app, compared with only 10% that preferred the
TMC or company-provided app (see Figure 6).
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Managed Travel 2020: Technology Drives New Opportunities October 2014
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Figure 6: Preferred Device for Booking Airline Products
Questions: Please indicate your preferred device for booking airline products for business travel. Choose one device per activity.
Base: Business travelers (N=685)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Directly via the airline website
Through my company travel agency (TMC)
website or my company provided website
Directly via the airline app
Through my company travel agency (TMC)
app or my company provided mobile app
13%
59%
6%
23%
39%
9%
16%
37%
10%
66%
3%
21%
21%
18%
7%
54%
Smartphone Tablet Desktop/laptop Not applicable
Seats Dominate Airline Ancillary Services
Nearly half (49%) of managed travelers ranked preferred seating/extra legroom as the most
important airline ancillary service. Highly ranked second place choices were fast-track secu-
rity screening (18%), lounge access (16%) and early boarding (17%) (see Figure 7).
With a large percentage of corporate travelers already at a high frequent fyer status
level, some ancillary fees such as baggage charges and preferred seating are less of
an issue, since they are often complimentary. The pain point is the infrequent travelers,
where these fees have the greatest impact (see Figure 8).
Nearly three in 10 (28%) respondents book ancillary airline services directly on the
airline website (see Figure 9). Today, there are major challenges with selling ancillaries
at the travel agent point of sale (POS). POS capabilities are emerging, and may shift the
sale to the TMC. CBT displays will also need to be adjusted to accommodate ancillary
services at the point of sale.
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 7
Question: Please rank the airline ancillary services below in order of importance to you (1 = most important, 2 = somewhat import-
ant, 3 = neutral, 4 = less important, 5 = not important) when traveling for business?
Base: Business travelers (N=976)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Preferred seating/extra legroom
Fast-track security screening
Lounge access
Early boarding
Checked bag fees
Onboard entertainment (e.g., movies, games)
In-flight Wi-Fi
Onboard meals
49%
13%
12%
12%
18%
16%
17%
5%
8%
4%
11%
2%
2%
2%
4%
6%
11%
18%
14%
13%
7%
8%
6%
13%
7%
11%
13%
11%
9%
14%
7%
17%
4%
9%
10%
12%
10%
14%
12%
19%
10%
10%
10%
10%
10%
10%
10%
10%
7%
21%
25%
32%
57%
44%
59%
29%
1st rank 2nd rank 5th rank 3rd rank
Statement not chosen
4th rank
I do not purchase optional airline products/services
Figure 7: Airline Ancillary Services Importance Ranking
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
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Figure 8: Airline Ancillary Services Payment
Questions: Please indicate which statements are true regarding how you pay for ancillary services when traveling for business.
Check all that apply.
Base: Business travelers (N=883)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Preferred seating/extra legroom
Onboard meals
Lounge access
In-flight Wi-Fi
Early boarding
Expedited security screening
Onboard entertainment (e.g., movies, games)
Checked bag fees
43%
22%
13%
22%
49%
20%
7%
24%
55%
12%
5%
28%
30%
18%
4%
47%
31%
12%
25%
32%
12%
22%
16%
50%
43%
12%
5%
39%
30%
11%
38%
22%
Complimentary based on
my frequent flyer status
My company reimburses me I personally pay for these services Not applicable
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Figure 9: Preferred Methods for Purchasing Ancillary Services
Questions: How would you prefer to purchase ancillary services for your next business trip?
Base: Business travelers (N=389)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Directly via the airline website
From a kiosk at the airport
I would prefer that all optional airline products/services be
bundled into my ticket price
Other (please specify)
Through my company travel agency/TMC and/or my
corporate online booking tool
Calling the airline directly
Directly via the airline website/app on my smart device
(smartphone or tablet)
28%
26%
1%
24%
0%
18%
3%
Figure 10: Changing the Airline Booking and Communication Experience
Questions: How do you see the airline experience changing for your business travel over the next 3-4 years? Choose all that apply.
Base: Business travelers (N=976)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
I will make the majority of airline arrangements on my mobile phone
My mobile device will notify designated contacts in my business
and personal social networks when my flight schedule changes
My mobile device will strore my preferences and my airline
will use those preferences to book my reservations
I will interact with electronic messages sent to my mobile device
at every point of my journey; these messages will be personalized
to my preferences and offer trip advice
I see little change in my airline experience
I will use wearable computers (e.g., smartglasses, smartwatches)
that will transmit my preferences, improve the efficiency of the
process and offer personalized
I believe the airline experience will get worse due to more
weather delays, crowds and technology failures
My mobile device will automatically change all my reservations
(e.g., air, car, hotel, etc.) when I change my flight schedule
46%
44%
42%
38%
31%
24%
19%
0%
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
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Figure 11: Top 3 Ways to Improve Booking, Purchase and Pre-Flight Experience
Questions: Please select the top three ways (1 = top choice, 2 = second choice, 3 = third choice) airlines could improve your
booking, purchase and pre-fight experience when traveling for business?
Base: Business travelers (N=976)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Store my preferences and automatically book
my desired flights, seats and optional airline
products/services
Automatically rebook my flight if I have a
change in my flight schedule
Anticipate weather delays and automatically
rebook or provide alternatives
Automatically rebook all related itinerary
elements (e.g., hotel, car rental) when my
flight schedule changes
45%
17%
14%
22%
24%
24%
18%
25%
33%
7%
27%
21%
1st Choice 2nd Choice 3rd Choice
Travelers Expect More Automation and Personalization
Managed business travelers expect that 46% of airline bookings (up from less than 10%
today) will be made via the smartphone within 3-4 years (see Figure 10). They also an-
ticipate interaction with electronic messages sent to their mobile device at every point
during the journey. Managed business travelers are expecting personalized service at
all touchpoints, and that their preferences will be stored on their mobile device.
Nearly half of respondents (45%) would like to have their preferences stored and their
fights automatically booked based on these preferences (see Figure 11). The managed
traveler expects technology solutions that anticipate weather delays and automatically
rebooks or provides alternatives.
The managed traveler is also looking for automated ways to change fights when their
itinerary changes, or when fights are late or cancelled (51%) (see Figure 12). Managed
travelers want greater integration with calendar appointments (26%). There is some inter-
est in optional services such as hotels, cars, restaurants or ground transportation (11%).
PhoCusWright White Paper:
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Figure 12: Top 3 Booking Capabilities on Website or App
Questions: Please select the top three (1 = top choice, 2 = second choice, 3 = third choice) booking capabilities you would like to
see available on your mobile airline web or app over the next 3-4 years.
Base: Business travelers (N=976)
Source: IATA Global Passenger Survey
©2014 PhoCusWright Inc. All Rights Reserved.
Automatically rebook me on alternative flights
based on my preferences if my itinerary changes or
my flights are late or cancelled
Allow me to book optional services such as hotels,
cars, restaurant meals or ground transportation
Automatically book my airline reservations based on
my calendar appointments and preferences
Book my airline reservations via voice-enabled
personal assistant (e.g., Siri, Google Now)
Allow me to shop for and purchase tickets for
local events and activities at my destination
51%
12%
28%
26%
17%
21%
11%
30%
28%
6%
4%
14%
25%
9%
11%
1st Choice 2nd Choice 3rd Choice
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
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Part 2: Technology Driving New Business Practices
Managed Travel is a Continuum of Policy Enforcement
The managed travel market is often grouped into three categories: tightly managed,
moderately managed and lightly managed with respect to policy enforcement. These
traditional categories are not distinct segments, but actually represent a full continuum
of company profles (see Figure 13).
On one end companies enforce strict travel policies, often limiting expense reimburse-
ment if the traveler violates any aspect of the policy. These are generally larger com-
panies, but smaller frms may have equally strict policies. Tightly managed programs
often deploy specifc Key Performance Indicators (KPIs) that closely monitor travel
policy performance and traveler behavior.
At the other end of the continuum are companies that publish travel guidelines and
often lack measures to track policy compliance. Specifc industry types and overall
corporate culture often infuence where a company fts on this spectrum. For example,
industry sectors that need to abide by strict rules and controls such as the fnancial
services industry are more likely to embrace tightly managed travel policy practices. On
the other hand, high tech companies with a strong entrepreneurial spirit may opt more
for guidelines rather than strict policy control.
The largest segment of companies falls into the moderately managed category. Within
this group the level of enforcement may vary based on type of policy violation. There
are also differences across regions and countries, where local culture and customs can
impact the way corporate policy is enforced. In emerging markets or for smaller corpo-
rations, policies tend to gravitate toward the lightly managed end of the continuum.
Technology is Driving New User Behaviors and Business Practices
When the Internet went mainstream in the mid to late 1990s, a new level of transpar-
ency emerged that allowed corporate travelers to shop supplier and online travel
agencies against corporate negotiated fares and rates. This created a level of friction in
which travelers often questioned the value of managed programs. As a result, the need
for ongoing travel education became a constant effort for most corporate travel
Figure 13: Managed Travel Continuum of Policy Enforcement
©2014 PhoCusWright Inc. All Rights Reserved.
Tightly Managed Moderately Managed Lightly Managed
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managers who must justify their programs to corporate travelers and senior manage-
ment, many of whom are often frequent travelers themselves.
The introduction of the iPhone in June 2007 was a watershed moment for the man-
aged travel industry, though few recognized it at the time and many are still struggling
to manage the rapid adoption of smartphones by their corporate travelers. Of equal
signifcance was the introduction of the iPad in 2010, which often augments or replaces
the traveler’s laptop. The spread and dominance of Google Android phones and tab-
lets has also accelerated mobile smart device adoption worldwide.
In the traditional corporate travel environment, compliance is driven by rules enforced
by the TMC or embedded in the CBT. In today’s app-centric smart device world, com-
pliance is more challenging as the temptation to fnd and book alternatives has been
super-charged by the ability to do this anywhere, anytime, on multiple devices. Clearly,
smart devices have given birth to a new kind of corporate traveler, one who is more
demanding, looks for instant answers and expects more personalized services.
Technology is Adding Complexity to the Managed Travel Ecosystem
The goal of a managed travel program is to direct travelers to book using the preferred
booking channel. Traditionally that has been the TMC or CBT, and more recently a pre-
ferred TMC or company mobile website or app. However, many corporations and TMCs
have still not deployed a mobile web or app dedicated to the managed travel program.
This preferred channel has been challenged by direct supplier contact, either through the
airline call center or based on airline loyalty programs. The web added additional options
for searching airfares. This resulted in friction with the preferred booking channel.
The growth of smart devices has extended access to OTAs, airline direct, metasearch
and social media – 24/7, anywhere. The emergence of value-added ancillary airline
services also added more optional airline services (see Figure 14).
The Impact of Technological Change on the Managed Travel Air-
line Ecosystem Today
Personal mobile technology is driving change worldwide. This includes parts of the
world where mobile device ownership has had a leapfrog effect, with smart devices
empowering segments of the population that never owned a desktop or laptop PC. As
mobile bandwidth increases and devices continue to become more powerful, the shear
amount of information that is accessible via a mobile smart device is staggering. The
managed travel sector is struggling to keep up with this rapid change.
Lack of Mobile Strategy and BYOD
From a corporate travel management perspective, this brave new world of mobile
smart device computing is challenging the enterprise. Even the most advanced corpo-
rate travel managers struggle with developing a comprehensive mobile strategy. In a
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 14
recent Carlson Wagonlit global survey on top travel priorities for 2014, only 38% of trav-
el managers with global responsibility ranked mobile as a high priority. Specifc regions
had even lower mobile strategy priorities, such as EMEA with 21% of travel managers
stating that mobile was a strategic priority for 2014.
1
This effort has been signifcantly
complicated by the corporate trends that allow travelers to Bring Your Own Device
(BYOD). In a BYOD environment, corporate travel managers lack visibility into mobile
travel app usage. Some companies dictate what apps are allowed on mobile devices,
while many do not (see Figure 15).
Open Booking
The concept of Open Booking has been a hot topic over the last two years. The prem-
ise of Open Booking, also referred to as Managed Travel 2.0., is simple: Companies set
targets for trips, and allow travelers complete freedom to book through any channel
based on meeting or beating the benchmark. Managed travelers are then incentivized
to fnd lower rates and must share their itineraries with the company in order to support
corporate duty of care requirements. Various tools have emerged to capture out-of-
channel bookings made directly with suppliers. Because Open Booking technology can
capture out-of-channel bookings into the managed program, it benefts all enterprises,
even those that don’t want to implement an Open Booking policy.
Figure 14: Managed Travel Airline Ecosystem Web, Mobile and Value Added Ancillaries
©2014 PhoCusWright Inc. All Rights Reserved.
Managed
Business
Traveler
TMC
Travel Agent
Airline Agent
Web
Web
App
App
Web
Web
App
App
CBT
OTA & Metasearch
Airline Direct
Airline
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
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Impact of New Entrants
Travel innovation is often driven by startups that provide innovative approaches to
travel planning and purchasing. As more companies provide Application Programming
Interfaces (APIs) to their travel applications and platforms, new entrants will continue to
emerge, disrupting the way managed business travel is booked and experienced. This
was evident in a 2013 Hackathon held by British Airways on fight 9120, which few from
San Francisco to London overnight, flled with 130 members of the tech community
and a select number of BA frequent travelers.
2
Similar hackathons (though not in the
air) by American Airlines, Sabre and industry media outlets such as Tnooz are constant-
ly pushing the industry to tap the entrepreneur to improve the technology behind travel.
New entrants such as Rocketrip, a venture-funded new booking platform that uses
employee incentives to drive compliance, and TripScanner, a browser-based, Open
Booking enterprise tool targeted at small and midsize businesses, are two examples of
new entrants disrupting the managed travel ecosystem today.
Figure 15: The Impact of Technology and Disruptive Trends on the Managed Travel
Airline Ecosytem
©2014 PhoCusWright Inc. All Rights Reserved.
Managed
Business
Traveler
TMC
Travel Agent
Airline Agent
Web
Web
App
App
Web
Web
App
App
CBT
OTA & Metasearch
Airline Direct
Airline
NEW ENTRANTS
OPEN BOOKINGS
MOBILE DEVICES + NEW COMMUNICATION PROTOCOL
1 “CWT Reveals Top Travel Priorities for 2014,” Carlson Wagonlit Travel press release (January 30, 2014).
2 Zoe Fox, “The Hottest Spot for Hackathons? 30,000 Feet in the Air,” Mashable (June 13, 2013).
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XML
The underlying communication platform for travel is also changing. The Electronic Data Inter-
change for Administration, Commerce and Transport (EDIFACT) is an international electronic
interface standard (EDI) developed under the United Nations back in 1987.
3
This protocol
was designed to allow the easy interchange of information across disparate systems.
In February 1998, the World Wide Web Consortium (W3C) published its frst version of
an Extensible Markup Language XML (1.0.). Dr. Charles Goldfarb, an IBM researcher
who was personally involved with the invention of XML, claims it to be “the holy grail
of computing, solving the problem of universal data interchange between dissimilar
systems.”
4
XML has changed the way information is exchanged between systems. By
defnition, XML is extensible, which means it can expanded to increase the amount of
information exchanged between systems.
Some of the communication in the travel ecosystem has been converted to XML, but
EDIFACT communication has remained the primary protocol for the majority of airline
communication. A new airline XML standards is being introduced that allow for greater
product differentiation, customized offers and effcient servicing of customer preferenc-
es, responding to the very heart of the disruptive change driven by managed traveler
expectations.
Part 3: Managed Business Travel In 2020 – Greater Personalization
In 2020, managed travelers will experience greater automation that reduces trip fric-
tion, have access to more transparent information and will receive personalized services
for all aspects of the trip.
Emerging Technology Will Cause Further Transformation
With the dominance of smartphones and tablets in the hands of managed travelers
and the transformational nature of these devices, air shopping and purchasing will
continue to move to mobile by 2020. New personalized services will be facilitated by
intelligent assistants and will be available on a variety of wearable technology.
Personalized Services
By 2020, the managed travel ecosystem will seamlessly integrate traveler service pref-
erences with expanded airline services to meet ever evolving managed traveler expec-
tations. New communication protocols and the ability to track and measure customer
preferences throughout the journey will be imbedded into the process. Big Data will be
used to better match services with the preferences of travelers, anticipating their needs.
Wearable Technology
Wearable technologies will augment services provided by current mobile smart devic-
es. These include smart watches and glasses that provide an easier hands-free comput-
ing environment. By 2020, the adoption and impact of wearable technologies will likely
provide an added level of effciency to the managed travel experience with increased
3 United Nations Economic Commission for Europe
4 Tim Anderson, “Introducing XML,” (January 2004).
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 17
use of augmented reality (AR), delivering real-time travel advice and offers to the man-
aged traveler. Wearable technologies will be in wide use by airline service personnel,
enabling the delivery of more personalized services.
Intelligent Assistants
Today, intelligent assistants such Siri, Google Now and Cortana have limited ability
to substantially support travelers. By 2020, intelligent assistants will be able to handle
more complex tasks. Specifc intelligent assistants for travel (i.e., intelligent travel assis-
tants or ITAs) will be introduced that will automatically update itineraries during disrup-
tions and recommend services to travelers en route. This technology will help meet the
2020 managed traveler’s expectations for more automated services.
Disruptive Business Practices Will Impact Airline Purchasing Practices
Open Booking and the Capture of Information from all Channels
Open Booking will gain momentum, but will likely only be adopted by certain types
of companies whose corporate culture supports this approach. The exact size of the
Open Booking segment is hard to predict, as generational shifts may alter corporate
culture and thus drive more acceptance of the Managed Travel 2.0 approach.
The ability to capture out-of-channel bookings will be widespread by 2020, enabling
travel managers to look at all their travelers’ reservations and apply policies to any out-
of-channel bookings. This means that whether companies completely embrace Open
Booking or simply use the tools to capture out-of-channel bookings, managed travel in
2020 will capture all reservations from all channels.
The Airline as a Retailer
Airline merchandising technology will enable specifc a la carte or bundled ancillary
offers that match customer preferences. Some airlines will use the merchandising plat-
forms to dynamically bundle ancillary services based on the value of the passenger and
the overall corporate client relationship.
In addition to today’s focus on seats, boarding and Wi-Fi, some creative ancillaries are
emerging, including pre-purchase of online meals, fexibility in ticket rules (e.g., ability
to change at a reduced fee) and customized in-fight entertainment delivered on per-
sonal mobile devices. The airlines are hard at work creating a la carte and bundled an-
cillary offers involving merchandise, complementary travel services (e.g., hotel, ground
transportation) and even branded apparel. Corporate negotiated ancillary bundles will
likely become part of an overall airline negotiation strategy.
By 2020,. Airlines will be able to provide a unique set of services for each reservation
request, and a tailored response based on customer insights. Corporate relationships
and discounts will likely still be in place for large companies, but by 2020, unique
airline-controlled offers will be part of the ecosystem as well. This shift in the way the
airline offer is created will be enabled by widespread adoption of the New Distribution
Capability (NDC), an XML data exchange standard, facilitated by IATA.
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 18
Part 4: Conclusions
Predicting the future based on today’s technology can be challenging. Major change
is often facilitated by innovations which in turn create disruptive business models. For
example, Uber would not be possible without the smartphone. Understanding how tech-
nology will fuel disruptive models is the key to understanding managed travel in 2020.
From the traveler’s point of view, the message is clear: Managed business travelers
want personalized services that reduce travel friction and match their preferences. They
expect automation to seamlessly handle itinerary changes.
In six years we may see moderate change in managed business practices, or a new
era that looks dramatically different than it does today. What will dictate the level of
change is how the emerging ecosystem embraces new technology, understands travel-
er behavior and meets expectations.
For tightly managed business travel, new tools will likely emerge to create even greater
control over the traveler through their mobile device. The question is: How big is the
tightly managed segment? Our research indicates that the tightly managed business
segment is no more than 15-20% of the market. This leaves 80% of the market vulnera-
ble to disruptive trends and technology (see Figure 16):
Figure 16: Managed Travel Airline Purchasing Disruptors 2020
©2014 PhoCusWright Inc. All Rights Reserved.
Tightly Managed
Generational Shifts Open Booking
Moderately Managed
Lightly Managed
Personalized Messages Dynamic Offers & Bundles
PhoCusWright White Paper:
Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 19
0 Generation Shifts – Millennials moving into senior management positions will likely
bring their self-service, instant gratifcation expectations to their roles, infuencing
the entire corporation to be more proactive in providing personalized travel services.
0 Open Booking – Managed Travel 2.0 will likely take hold with some moderately and,
certainly, lightly managed companies. As tools to capture out-of-channel bookings
improve, and as TMCs evolve to support fragmented itineraries, Open Booking will
likely be mainstream for a portion of the market.
0 Personalized Messages – By 2020, personalized messages will be driven by Big
Data analytics. The fear of being bombarded with unwanted requests is real, but
if the offers are truly personalized, managed business travelers will recognize their
beneft and thus embrace the process.
0 Dynamic Offers and Bundling – The airlines are implementing systems to drive
personalization to all travelers in the form of dynamic offers and unique bundles.
The Role of NDC as an Enabler of Transformation
Often the role of technology in disruption is misunderstood. Apple’s iPod did not
disrupt the music industry. MP3 players already existed. It was iTunes, the business
strategy that was the true disruptor. Smart devices are impacting every industry, but
the business models around the technology are truly transformative. Travel is prone
to disruptive business models, enabled by mobile smart devices by the very nature of
the mobility of its customers. But just as with iPod versus iTunes, it will be the business
models created from new technology that likely will drive greater change for the man-
aged travel industry.
The underlying technology enabler for travel distribution transformation is NDC, which
at its heart is simply an XML standard. Given that XML is already used by all players in
the ecosystem, the emerging business models will likely be the catalyst of change.
The NDC Standard will enable the travel industry to transform the way air products
are retailed. The goal is to allow a greater and richer amount of information to fow
from the airlines throughout the entire ecosystem. NDC will provide airlines with the
capability to dynamically create customized products and services, regardless of the
channel through which the reservation is being made. The airline’s role in payments
may change for those who choose book direct via an Open Booking policy, where
airlines will accept and process payment, directly rather than through a TMC or corpo-
rate charge card. By 2020, this will likely be via mobile payment services, making this a
seamless experience.
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Managed Travel 2020: Technology Drives New Opportunities October 2014
©2014 PhoCusWright Inc. All Rights Reserved. Page 20
When new business models are created, there is always a fear that existing relation-
ships and roles may be altered, impacting the current stakeholders. There is a valuable
and separate role for each ecosystem player in a managed travel 2020 world enabled
by NDC. Change is inevitable, and it is ultimately the responsibility of the stakeholder
to adapt. In 2020, whether you are a TMC, technology provider or corporate travel
manager, you must add value to customers, partners and suppliers. The managed
traveler is ultimately pushing this change for more personalized offers and services. To
meet this challenge, all parties should cooperate in utilizing information and providing
services that best reduce friction for the managed traveler, while helping the corpora-
tion manage its overall travel expenses.