NB: This is a guest article by Jim Davidson, CEO of Farelogix.
Here we are, just over a month after Sabreannounced that it will remove American Airlines displays from the Sabre GDS in August 2011.
That’s about six months from now, or 180 days from now, or 4,320 hours from now… In the general scheme of things, August is not really that far off.
Even with the recent public "truce" between AA and Sabre, one has to wonder: what are those corporations, booking tools and TMCs who today depend on Sabre to book American Airlines going to do now in preparation for August?
With few exceptions, the answer appears to be: "not much". Put another way, we seem to have a serious industry case of corporate paralysis.
Sure, there is plenty of hand-wringing, coalition-joining and wishing all of this would go away - but not a lot of real progress to address the issue.
Paralysis can be defined as the loss of movement; or inactivity. Corporate paralysis, however, is a business phenomenon that happens when either of two conditions exists:
- Disbelief that an upcoming or planned major event, action, or situation will actually occur
- Inability of the corporation to respond to an unnatural or unplanned event due to lack of skill, resources or independence.
So, which set of conditions are happening today in our industry? Arguably both.
Let’s start with disbelief. It seems that many do not believe that Sabre will take AA out of the Sabre GDS. Never mind that Sabre said it would do so, announced it publicly, sent letters to its customers and I am sure even consulted with its board of directors and owners.
Despite all that, it seems a large number of the corporate booking tools and TMC’s that stand to be impacted are just not taking the threat seriously. These are the folks you hear mumbling things like, "we have been here before", "we just have to wait and see", and "it’s just a negotiating ploy".
But if you are a company with dependencies on Sabre for some, or worse yet all, of your operations, and you subscribe to this disbelief theory of corporate paralysis, well, it seems your best risk-mitigation strategy is to hope that you are right.
In addition, if you are a publicly traded company, you are likely huddling internally to determine when you will inevitably have to publicly report this Sabre announcement as a possible material impact/risk on your business.
Bottom line: disbelief is a powerful, but extremely risky strategy, if you don’t happen to have a working crystal ball.
Let’s move onto the second condition of corporate paralysis: the inability to respond to an unnatural or unplanned event due to lack of skill, resources or independence.
When it comes to corporate travel management, I believe the issue is lack of control or independence, far more than any lack of any skill or resource.
It is no secret that most, if not all, travel agencies, OTAs and even corporate booking tools have financial and operational dependencies on one or more GDS. If you don’t believe me, simply ask yourself the following questions:
- If the GDS were to cut off travel agency financial assistance today, would it impact the survival rate of the travel agency population? Probably.
- If a GDS were to suddenly threaten to cut off, or actually cut off, GDS access to one or more corporate booking tools, would that action impact the survival rate of the corporate booking tool population? Probably.
That loud sucking noise you hear is the power being whooshed away from companies that realize they are stuck between a rock and a hard place as relates to controlling their very own business interests.
What a poor set of choices!
Speak up too loudly against the status quo, and you may well lose your financial incentive. Integrate your corporate booking tool with a direct connect, and your GDS may just decide to turn you off entirely.
So be careful - if you even want to dip your toe into the direct-connect pond, you’d better do so in secret, and don’t ever talk about it publicly.
The problem is not strictly financial reliance on the GDSs. It’s also a set of contractual handcuffs designed to preserve the status quo model at all costs -- even to the detriment of the corporate travel market.
By the time one gets through the various confidentiality agreements, parity clauses, full content deals, performance penalties, rights of first refusals, excessively long terms, incentive payback clauses, and other required terms by many GDS, it’s actually surprising that any agency or corporate booking tool is even allowed to talk with airlines about direct connects, let alone consider using one.
Oh wait, actually talking is in fact also sometimes prohibited. In fact, as reported in a weeks ago, Orbitz is not allowed to even "engage in discussion with any airline that is reasonably likely to result in a direct connect relationship" or suffer financial penalty from Travelport.
Do any of us really think Orbitz is the only company forced to wear such handcuffs?
Despite this article’s title, I regret that no amount of aspirin can cure travel industry corporate paralysis.
Fortunately, there is a hero in all this, and that is the corporation, in particular its respective officers and board of directors.
There is simply no way that corporate America or other countries around the world can afford to be held hostage by seemingly "friendly" vendors. Corporate paralysis -- for any reason -- is simply not a friend of the bottom line.
At the end of the day, corporations want an efficient and effective travel management processes with the best product choices available to their travelers.
They don’t care about the GDS, or Farelogix, or Open AXIS, ITSA or Open Allies.
Corporations have no real interest in taking sides here as long as they get what they need…which is an end to the paralysis.
Ultimately, corporations will either convince their current corporate booking tool and TMC to put the necessary technical and commercial capabilities in place to insulate them against industry turbulence and ensure they receive the best possible product and service mix, or the corporations will simply find someone else who can do the job.
NB: This is a guest article by Jim Davidson, CEO of Farelogix.