Six years doesn’t sounds like much. But in corporate travel, it's a lifetime.
NB: This is a viewpoint by Ethan Laub, founder of open booking startup TripScanner. He's an alum of HBS and Wharton, and has worked at American Express Business Travel.
Think back for a moment to 2009. Corporate booking tools were just starting to gain traction. Concur was a relatively new entrant, not the power player that it is today.
And “Open Booking” – the ability to manage travel while letting employees book where they prefer – hadn’t yet been coined as a term.
Since then, there's been steady progress. True, the early hype around open booking hasn't been matched by rapid adoption. But the pace of adoption is sure to pick up by 2020.
The questions everyone is asking are (1) How rapidly will open booking spread, and (2) Which segments of the market will it penetrate first?
In Managed Travel 2020: Technology Drives Opportunities, market research firm PhoCusWright predicts that open booking will gain momentum particularly in the Moderately Managed and Lightly Managed segments.
I believe that PhoCusWright is spot-on with its prediction.
And as someone who leads an open booking technology company, I’d like to describe the advances that will drive open booking growth over the coming years, and how this might impact travel management companies (TMCs).
At its most basic level, organizations will embrace open booking if it can help them effectively manage travel, with greater flexibility and at a lower cost than traditional managed travel programs.
To further adoption, we need to understand how open booking technology will evolve, and how quickly it can meet the needs of different market segments in corporate travel.
It all starts with good data
For open booking to work, we must first solve the challenge of data capture. If employees are allowed to book through any channel they prefer, there must be a way to bring all of that data together in a consistent, real-time format.
Until recently, most solutions relied on travelers to forward their confirmation emails to the open booking provider. These emails would be parsed and converted into useful data for reporting and other purposes.
It’s no surprise that this method has gaps. Road warriors are busy, and often forget (or can’t be bothered) to forward their confirmation emails.
The good news is that open booking systems are fast closing this gap.
Providers are taking different approaches, such as using browser extensions (Runzheimer's ProcureApp), employee incentives (Rocketrip), and supplier partnerships (Concur) to capture data more completely.
My own company's recently launched apps can automatically capture travel confirmation emails from an employee’s mailbox. This makes the process effortless for employees, and is getting us closer to the “holy grail” of open booking -- full data capture.
While each of these systems will take time to optimize, I expect several of them (including TripScanner's) to achieve 95% + data capture within the next year or two.
Preferred supplier discounts
Perhaps the greatest challenge for open booking is to support preferred supplier discounts. For large organizations, this is one of the most important financial benefits of booking through a TMC.
At TripScanner, we focus on organizations with small-to-midsize travel programs, making this feature less of a priority for our customers. However, other open booking providers are working on solutions.
For example, ProcureApp Flex supports corporate discounts when the booking is made through the supplier’s website.
And Concur’s TripLink supports corporate discounts with several major suppliers, including United and Marriott, among others.
However, with thousands of travel suppliers and an ever-growing list of OTAs and apps, it will be difficult to support corporate discount agreements consistently across all major suppliers and booking channels.
In my view, large organizations with substantial preferred supplier programs will continue to prefer the TMC/GDS model.
Meanwhile, organizations with modest preferred supplier programs will become increasingly receptive to open booking.
For small-to-midsize organizations, preferred supplier discounts are difficult to obtain and usually cover only a small portion of travel bookings. Open booking solutions offer alternative ways to save money for these organizations.
At TripScanner, we search up until departure for better deals on existing reservations, letting customers rebook and save money on hotels and car rentals.
Rocketrip takes a different approach, using incentives (aka “gamification”) to get employees to travel more frugally.
Solving duty of care
Once open booking tools can capture all (or most) of an organization’s booking data, it can then be used to support employee “duty of care” – ensuring that travelers are safe and accounted for.
Whether as a standalone solution, or as a data-feed to third-parties like International SOS or iJet, open booking data will enable organizations to track their travelers and support them in an emergency -- no matter where they booked their trip.
By nature, organizations considering Open Booking tend to have more relaxed cultures. However, that doesn’t mean that they want a T&E free-for-all. Open booking solutions can provide support in this area.
For example, TripScanner checks each reservation for compliance, and alerts the employer if a booking is out-of-policy. This allows them to void or cancel the reservation, or reinforce company policy with the “rogue” employee.
I’ll be the first to admit that this approach won’t satisfy everyone.
Some organizations, particularly those with “tightly managed” travel programs, want the ability to block out-of-policy reservations before they are booked. They may also want trips to be pre-approved by a manager before ticketing.
In my view, open booking systems probably won’t be able to satisfy these requirements anytime soon. Instead, “tightly managed” programs will probably stick to the traditional TMC/GDS model for the foreseeable future.
A “bottom-up” adoption path
PhoCusWright argues that open booking will gain adoption primarily among moderately- and lightly-managed travel programs. I agree, but would add that it will also penetrate the unmanaged segment as well.
I find this prospect very exciting because it dramatically expands the “pie” for managed travel solution providers.
According to a 2012 GBTA study, 33% of US companies have an unmanaged travel program, and an additional 47% have a lightly-managed program. This means that roughly 80% of the market is not managing travel optimally.
If you look at the technology improvements over the next few years--full data capture, savings tools, duty of care, and compliance monitoring--these are the most important needs for moderately- and lightly-managed travel programs.
So I expect open booking to have the greatest impact in these segments. In some cases, it may replace the traditional travel program, while in others, it may complement it by capturing program “leakage”.
In contrast, the more challenging features--supporting substantial preferred supplier programs, pre-trip approval processes, and centralized payment – are generally required by larger, “tightly-managed” travel programs.
Open booking is unlikely to solve these puzzles completely by 2020, so I expect it to have a more limited impact on this segment over the next few years.
Visually, the adoption path of open booking will look something like this:
The impact on TMCs
Assuming that open booking makes inroads over the next few years, what does this mean for TMCs?
Some TMCs view open booking as a long-term threat. After all, TMCs make most of their money from supplier revenue and transaction fees. If bookings move outside the TMC channel, these revenue streams could disappear.
In my view, TMCs that primarily service large, tightly-managed travel programs won’t be heavily affected by open booking over the next few years. Similarly, travel agencies that provide high-touch, specialized service will be insulated as well.
The TMCs that will be most affected by open booking are those that offer fairly generic travel programs for lightly-managed corporate customers, using off-the-shelf technology. These TMCs need to think proactively about how they will adapt to the new environment.
If they cling to old business models, they will inevitably lose share to more forward-thinking competitors.
I believe that TMCs that will survive and even thrive in this new landscape will evolve from “booking providers” to “travel management consultants / technology integrators”.
Instead of limiting their focus to bookings made solely through their channel, these TMCs will helps customers manage total business travel, regardless of where the reservation was booked.
Clearly, this will require a new revenue model that relies less on supplier revenue, and more on technology and consulting revenue.
Some TMCs will be slow to adapt. They will fall behind their competitors out of fear of cannibalizing their existing business model. But others will embrace these new technologies, gaining a competitive advantage and adding value for their customers.
I’m excited to see what the next six years has in store for managed travel. If my crystal ball is even half right, it will be a transformative period for our industry.
NB: Ethan Laub is the Brooklyn-based CEO of TripScanner, whose cloud-based system enables open booking.