Big US corporations moving online(1)

21 November 2003

McDonald’s, one of the world’s largest firms, recently announced it was ditching its traditional travel agency, asking its 400,000 corporate employees to book travel online instead.

The beneficiary? Orbitz, which clinched the Big Mac. US media reports call this move indicative of the current situation over there – a “stampede into online travel by US corporations”.

The size of the market is huge – US$18.8 billion this year on web travel alone – 42 percent more than a year ago, said Phocuswright.

And providers like Orbitz are gearing up to take big bites of this business.

Orbitz will customise a version of their consumer website for McDonald’s. The site will display McDonald’s preferred suppliers and rates as well as Orbitz retail rates. It will also track spending and bookings by employees, ensuring policy compliance.

Sabre Holdings Corp., whose Travelocity is the No. 2 online travel company, recently integrated the GetThere division into its other units and launched Travelocity Business, an online travel agency.

It said the move was to “address the rapidly growing online market opportunities in the unmanaged and managed travel markets”.

Phocuswright predicts the online corporate market will balloon to become a US$36.6 billion business by 2006.

Corporations, desperately looking for ways to reduce the cost of doing business, are realising the cost per transaction that these online players charge are just a fraction of what their travel agents were charging them.

The top three players – Expedia, Orbitz and Travelocity – charge US$5 per unassisted Web transaction and up to US$20 if personal help is needed. Traditional agents often charge double or triple that, according to Phocuswright’s analyst Lorraine Sileo.

In Asia/Pacific, this scenario may not play out for a while. Corporate online tools are more suited for point-to-point trips, said Hans Belle (pictured), vice president-marketing for Sabre Asia/Pacific.

“In Asia, with a larger mix of international and domestic trips, and the more complex fare structures, you probably wouldn’t see the same scenario as in the US,” said Belle.

However, there is a small percentage of unmanaged corporate travel that is coming through online channels.

Zuji, although predominantly a leisure travel provider, said it is seeing a growing number of corporate travellers from small and medium enterprises using its website to book their business trips. It said, for instance, it has one client who has booked 30 trips in the last 12 months on the site.

Still, Zuji has no plans to enter this market in a concerted way.

“At this time of our development, we have no shortterm plans to enter into the ‘high-end’ managed corporate travel business. Our focus is on growing the existing four markets and entering into new markets,” said Zuji chief Scott Blume.

Belle said, however, there is a greater acceptance among corporations in Asia/Pacific of corporate online booking tools.

“For most travel management companies, their RFPs to corporations will include a provision of online booking tools,” said Belle.

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