A dramatic increase in the amount of corporate travel bookings made through custom Web-based systems is expected to cut deeply into the sales made by traditional travel agencies — unless those agencies develop new services to remain competitive — according to a report released Wednesday by Jupiter Research.
Currently, only 6 percent of online corporate travel, or US$4.4 billion, is booked through special Web travel portal-like systems that follow pre-set corporate policies. However, Jupiter is predicting that figure will grow to $12 billion, or 9 percent of the total by 2002.
By 2004, the figure will jump to $24.7 billion, or 25 percent of the total market, Jupiter said.
The report found that in the coming years, nearly a third of the online corporate travel sector, or $33 billion of a $106 billion market in 2005, will be made via such customized online travel systems.
The move toward corporate travel sites is highly likely to cut out local travel agency sales, the firm said.
“Travel agencies, in many cases, will have to adapt or die,” Jupiter senior analyst Melissa Shore told the E-Commerce Times.
Traditional travel agencies are being squeezed out of the business by corporate America’s desire to save money on travel expenses, the report found. That corporate initiative is being played out in the form of custom Web portals where employees must book their business travel in accordance with requirements and alliances prescribed by their employer.
Travel agencies are also feeling pinched because travel suppliers themselves are increasingly selling directly to corporate customers — and keeping the money usually paid to travel agents.
“Travel agencies are not going away,” Shore said. However, she added that in order to survive they will need to evolve away from only offering automated services to providing value-added services to corporate clients.
According to Shore, those enhanced services could include negotiation of corporate rates with travel sellers and other customer service options.
In addition, to stay competitive, travel agencies may begin offering other services related to travel management, including expense management and event planning.
Shore said that for the most part, travel agencies would not create these new services, but instead will likely contract with other companies to do so.
Customized semi-private Web sites, according to Jupiter, allow businesses to offer their employees the flexibility of booking their own travel online, while at the same time controlling the travel expenditures and choice of vendors.
Shore said that the online interface that employees see would not be much different than at any online travel provider available to the public.
The difference is on the back-end, where companies can provide rules that affect which fares employees are able to purchase at the semi-private portals.
Despite the benefits of managed travel Web portals and sites, their adoption has been stymied by several factors, including the tendency of many travelers to pick up the phone and book tickets with an offline travel agency.
Another major factor inhibiting the growth of corporate travel portals, according to Jupiter, is the existence of “rogue-purchasing road warriors” who derive a “sense of empowerment and entitlement when researching and purchasing outside of company policy online.”
Currently, the online managed travel solutions sector is driven by “early adaptors,” according to Shore. She added that several factors would grow the market over the next few years, including 1) companies deciding to abandon their offline managed systems in favor of online managed systems, 2) a growth in the overall online corporate travel sector, and 3) the taming of the so-called rogue purchasers.
Taming the rogues is going to be one of the biggest challenges facing companies that want to convert to online managed travel plans, according to Shore.
She said that companies could convert rogue purchasers by refusing to pay for travel purchases made outside the approved online system, or through an education campaign that convinces them that the approved system is “good for you and good for the company.”