NBTA Explains Travel Management View of New Fee
CONTACT: Caleb Tiller | 703-684-0836 ext. 38
Alexandria, VA (September 1, 2004) -- The National Business Travel Association (NBTA) yesterday held a summit with Northwest Airlines on the carrier’s new charge for bookings made via the Global Distribution Systems (GDSs). The discussion covered Northwest’s reasons for implementing the charge; the impact of the charge on corporations; corporate responses; and the potential for corporate responses to have an impact on Northwest’s business.
The meeting successfully laid the groundwork for a dialogue between Northwest and travel managers. Each party was able to outline its business position, and each committed to further dialogue as the market continues to evolve.
“As the voice of travel management, NBTA was able to sit down with Northwest to explain the effects this fee will have on our members and their companies,” said NBTA President and CEO, Carol A. Devine, CCTE. “We explained to Northwest our view of the marketplace: to be successful, a full-service airline must attract business travel. Unfortunately, the Northwest GDS charge does exactly the opposite -- it pushes business travel away from Northwest by causing travel management headaches that cost corporations money.”
“We listed the multiple problems this charge will cause for corporations and showed why we think the result for Northwest will be negative,” continued Devine. “Although Northwest gave no indication of plans to adjust the new fee structure, we are pleased that corporate concerns about the fee will be heard at the highest level of Northwest management.”
NBTA provided Northwest with preliminary results of a survey of NBTA members on the Northwest charge. Although NBTA makes no recommendations on specific responses to the fee beyond analyzing its impact, of nearly 200 travel managers who answered a question about options for handling the new fee, 65 percent indicated they are exploring booking away from Northwest Airlines. The next highest response rate was 22 percent who said they may reevaluate their contracts with Northwest. Other options, including negotiating with the travel management company and booking Northwest via non-GDS channels elicited response rates of less than 11 percent.
NBTA summit participants explained that the Northwest fee creates additional costs well beyond the US$7.50 per roundtrip, without adding any value. Corporations will have to establish processes for reviewing billing, creating an audit trail, charging internal departments and redressing errors. Each of these processes will require time and expertise to create and then to apply on a regular basis.
NBTA participants explained that using the Northwest’s Web alternative for booking is not a viable alternative for corporate travel for several reasons. Most importantly, because it does not meet corporate reporting needs, use of the Web booking tool would:
- add costs for gathering data from an additional source and integrating it into reports,
- preclude travel managers from tracking unused portions of tickets, and
- make standard quality control practices difficult or impossible for travel on Northwest.
Additional shortcomings of Northwest’s Web booking alternative for corporate travel include the following:
- It does not give travel managers ready access to traveler information for purposes of risk mitigation.
- It adds significant time to the process of researching and booking travel.
- It cannot be configured to support travel policies.
- It does not adequately support complex itineraries.
- It necessitates multiple itineraries in different systems for one trip.
- The entry of passive GDS segments in conjunction with Web bookings increases the potential for error.
Northwest explained that it views its distribution costs as unacceptably high for tickets issued via the GDS. Those transactions, Northwest said, cost the carrier an average of US$12.50 per roundtrip, while the cost to the carrier for bookings made on its Web site is US$5.00. The difference between those two costs, US$7.50, is the amount Northwest announced it would charge for GDS bookings. The carrier believes entities booking Northwest via the GDSs should bear that difference in cost.
In a discussion about the communication of the new fee, Northwest committed to continuing to enhance its communication with corporate travel managers.
NBTA believes that the travel industry’s distribution challenges will be solved in the marketplace through a series of changes, and that the fee model introduced by Northwest will not become the accepted model. NBTA remains committed to working on this and other important issues on behalf of its core constituents, travel managers. The Association believes that the best current approach to the Northwest fee is a business approach, and that the process of negotiation and dialogue within the industry will lead to solutions that work for managed travel. That process began with yesterday’s summit.
The summit was planned last week in discussions between Bill Connors, NBTA Executive Director & COO, and Fay Beauchine, Northwest Vice President, Passenger Sales & Customer Relations. Taking part in the meeting were Carol A. Devine, CCTE, NBTA President & CEO; Betty A. Sweetman, NBTA Vice President; Kevin M. Iwamoto , NBTA Chairman & Past President; Bill Connors, NBTA Executive Director & COO; Katina M. Tryforos, Chair, NBTA Aviation Committee; Cindy R. Morse, Chair, NBTA Technology Committee; and Pat Epting, Northwest Airlines Managing Director, Corporate & Agency Sales, North America.
On September 2, at 11 a.m. and 2 p.m. ET, NBTA will hold a Web seminar for travel managers on “GDS Deregulation -- Gauging the Changes” that will help travel managers think proactively about their business in a deregulated GDS market and in light of Northwest’s recently announced GDS fee. For more information and registration, see the GDS Change Information Center [web page no longer available].
The National Business Travel Association is the source for critical information on the business travel industry. For more than 35 years, NBTA has dedicated itself to the professional development of its members through advocacy, education and training, and networking opportunities. NBTA represents over 2,500 corporate travel managers and travel service providers, who collectively manage and direct more than $170 billion of expenditures within the business travel industry.
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