US $1,295.00

Corporate Travel Distribution: Key Markets

August 2006
US $1,295 CA $1,602 £858 €1028

There has never been a more pivotal and competitive time in corporate travel. Against a backdrop of deregulation and airfare reform, crippling fuel costs, airline financial instability, terror threats and intense market competition, there is evidence of sustained business travel recovery. But many players in corporate travel are floundering because they are relying on the old business models to sustain them in an environment that is characteristically different than ever before.

The market dynamics are ripe for a real shift in channel power between distributors, suppliers, intermediaries and other players in this market. This has the potential to upset the current roles, business models and positions of each.

Technology will continue to be the major enabling force that will transform corporate travel commerce online and affect supply chains (or the distribution channel), business models, work styles and open up new global markets for expansion.

Corporate Travel Distribution: Key Markets focuses on the online distribution of corporate travel and the most salient trends that will impact its growth and composition in the U.S., European Union and Asia Pacific regions. It highlights the leading trends that will pivotally and strategically affect how corporate travel is distributed in these markets through 2008.

Report Overview Table of Contents Methodology

REPORT OVERVIEW ^top

In the history of corporate travel, there has never been a more pivotal and competitive two years than 2004 and 2005... well, until 2006 and 2007. Against a backdrop of deregulation and airfare reform, crippling fuel costs, airline financial instability and intense market competition, there is evidence of sustained business travel recovery.

The corporate travel industry has been characterized more by pre-emptive strikes rather than strategic moves that provide the end-user (corporation) with real value. In the early stages of online corporate travel, distribution impact was unilaterally measured by a company’s rate of adoption, or the proportion of total transactions that were completed online through a corporate booking tool. Air dominated these transactions because of its proportionately higher percentage of budget spend, relative simplicity in booking (domestic, roundtrip) and broad GDS availability. Travel managers dominated the decision to use the tools, corporate policy dictated what specific fares travelers purchased, and supplier discounts were a measure of program success. Meanwhile, the market was undergoing a migration of legacy systems to the .NET platform to support new Web-based technology for online bookings and business process re-engineering through automation, GDS deregulation and procurement oversight of travel. However, as online adoption approaches mainstream status in both the leisure and corporate travel marketplaces, and travelers and suppliers are leveraging both online and offline methods for shopping and purchasing travel, the online marketplace has evolved to a channel of distribution rather than a separate and distinct market.

Distribution has become more complex because:

multiple types of travel components and services are purchased online

web-savvy leisure travelers are pulling corporate booking tool usage throughout an organization

content aggregation, system integration and data consolidation require a global approach for revenue growth and to normalize fluctuating profits

technological innovation and integration is essential for competitive differentiationand to respond to market changes in demand and costs

As a result, distribution will encompass three critical components:

the ability to create and satisfy demand for its products and services

the ability to move products through traveler “consumption” in an efficient and cost-effective manner

the ability to create and maintain customer loyalty

By broadening the definition of distribution to include these components and rising above the industry noise, a critical chasm was revealed that has not been evident for more than 20 years. The market dynamics are ripe for a real shift in channel power among distributors, suppliers, intermediaries and other players. This has the potential to upset the current roles, business models and positions of each (see Table 2.1).

Technology will continue to be the major enabling force that will transform corporate travel commerce online and affect supply chains (or the distribution channel), business models, work styles and open up new global markets for expansion. As a result, corporate travel will need to become more efficient in providing a highly monetized customer service experience— one that is valuable for travelers, corporations and channel providers. As travel products and services become further commoditized and pricing can no longer be the sole driver of customer choice, businesses with IT-enabled customer service will win. This competitive differentiation will be determined by speed, connectivity, innovation and quality.

Key Findings
Within the U.S., corporations overall are financially focused on the factors that affect their market positioning and viability, including:

merging cultures, processes and styles of business after company acquisition(s)
demonstrating decreasing costs and process improvements

identifying new market opportunities or new applications for existing products to increase revenue

maintaining a development pipeline of new products to introduce into the market

increasing channel fees and the resulting higher cost of service to the end-user

shifting American manufacturing to overseas resources.

TABLE OF CONTENTS ^top

Chapter 1: Corporate Travel Overview

Chapter 2: Size of the U.S. Travel Market
Key Findings
Size of the U.S. Business Travel Market:
U.S. Travel
U.S. Business Travel
U.S. Corporate Travel
U.S. Online Corporate Travel
Disposition of Business Travel Expenses
U.S. Online Adoption

Chapter 3: Leading Trends Shaping the U.S. Corporate Travel Market
The 3 Cs of Corporate Travel (Competition, Content and Choice)
Strategic Business Intelligence at the Core of Program Optimization
Global Footprints Are Big Shoes to Fill
Compression of the Value Chain: Direct-to-Traveler Approach Drives Wallet Share
Procurement and Process Portals Drive Employee Self-Service
Hotels: The Next Online Frontier

Chapter 4: Impact on Corporate Travel Distribution
Global Distribution Systems
GDS New Entrants
Travel Management Companies and Internet Travel Management Companies
Online Booking Tools
Suppliers
Corporations

Chapter 5: European Market
Dynamics of Corporate Travel
Online Corporate Travel Readiness
Market Factors of Online Adoption
Size of the Market: European Travel Market
European Corporate Travel Market
European Online Corporate Travel Market
European Online Corporate Travel Market by Channel
European Online Corporate Travel Market by Segment
Overview of Key Markets
Market Profiles: United Kingdom, Germany, France, Scandinavia, Italy, Spain

Chapter 6: Asia Pacific Market
Overview
Size of the Corporate Travel Market
Drivers of Online Corporate Travel Adoption in Asia Pacific
Inhibitors of Online Corporate Travel Adoption in Asia Pacific
Online Corporate Travel Market Readiness
Market Profiles: Australia, China, Hong Kong/Singapore, India, Japan
Overview of the Market
Dynamics of the Corporate Travel Market
Online Corporate Travel Market Readiness
Market Factors of Online Adoption
Inhibiting Factors

LIST OF TABLES
Corporate Travel Paradigm Shifts
Total U.S. Travel Market Gross Bookings, 2004-2008
Total U.S. Travel Market Growth Rate, by Channel, 2004-2008
Total U.S. Travel Market, by Channel, 2004-2008
Total U.S. Travel Market Growth Rate, by Segment, 2004-2008
Total U.S. Business Travel Market, 2004-2008
Total U.S. Corporate Travel, Gross Bookings, 2004-2008
Total U.S. Corporate Travel Channel Shift, 2005 & 2008
Total U.S. Online Corporate Travel Market, Gross Bookings, 2004-2008
Online Penetration of U.S. Corporate Travel Market, 2004-2008
Disposition of Business Travel Expenses, 2005-2008
U.S. Online Corporate Travel Transactions and Adoption Rate, 2004-2008
U.S. Online Corporate Travel Transactions, 2004-2008
European Travel Market, Total and by Segment, 2005-2008 (US$B)
U.S. Corporate Travel Transactions, Online, 2005 & 2008
U.S. Corporate Travel Transactions, Online and Offline, 2004-2008
U.S. Corporate Travel Transactions by Channel, Online and Offline 2005 & 2008
Cost-to-Spend Budget Shift
Sources of Total Travel Spend Data
Customer Development Life Cycle
Portal Usage: U.S.-Based Companies
Perceived Value of Portals
Uses of Portals in Corporate Travel Management
Portal Evolution
Business Trips Extended With Leisure Component
European Travel Market, Total and by Segment, 2005-2008
Travel Sector Penetration as a Percentage of Total European Travel Market 2005-2008
European Online Corporate Travel Market and Growth, 2005-2008
European Online Corporate Travel Online Penetration, 2005-2008
European Corporate Travel Growth Rates, Total and Online, 2005-2008
European Online Market Share, by Method of Booking
European Corporate Travel Expenditures by Segment, 2005
European Corporate Travel Market Share, by Market, 2005
European Online Corporate Travel Market Share, by Market, 2005
Asia Pacific Corporate Travel, by Segment, 2005-2008
Asia Pacific Online Corporate Travel, 2005-2008
Asia Pacific Online Corporate Travel as a Percent of Total Corporate Travel, 2006 and 2008
Ranking of Online Market Readiness Factors in Corporate Travel
TMC Business Partnerships in China

METHODOLOGY ^top

To access the corporate travel marketplace for the U.S., Europe and Asia Pacific, PhoCusWright interviewed more than 160 executives at technology companies, TMCs, online travel agencies and ITMCs, suppliers and GDSs in 2005 and 2006. Respondents were interviewed about their business strategy, client requirements, and the corporate travel marketplace in general.

This report sizes the total corporate travel market, including both online and offline booking methods. The online corporate travel market encompasses those T&E expenses able to be purchased online (including air, car and hotel), regardless of the specific online booking brand used. Data for the corporate travel market include rogue (out-of-policy) and in-policy travel, as well as half of all combination (leisure/business) travel.

U.S. corporate travel gross bookings are defined as U.S. supplier revenue (air, car and hotel) generated from managed business travelers, including international travel on domestic carriers.

European corporate travel gross bookings are defined as European supplier revenue (air, car, rail, hotel and car hire) generated from managed business travelers. These figures include intra-European and international travel on all Europeancarriers. Europe market data encompasses the 15 original European Union countries (Austria, Belgium, Denmark,Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, Netherlands, Portugal, Spain, Sweden, and U.K.), plus Switzerland. Individual country figures are available for selected markets.

Asia Pacific corporate travel gross bookings are defined as APAC supplier revenue (air, car, rail and hotel) generated from managed business travelers. Market size figures encompass the largest business travel markets including: Australia, China, Hong Kong, India, Japan and Singapore.

Actual figures and estimates are provided for 2004 and 2005, as well as annual projections for 2006-2008. Projections are based on executive interviews, industry data, market trends and company reports. PhoCusWright also considers historical growth and e-commerce trends when developing its forecasts. All sales figures are in U.S. dollars (US$).

These data do not include online leisure bookings, unmanaged travel (except where noted), or group travel, unless defined as part of a corporation’s travel, or transient, budget.

All data in this report are provided by PhoCusWright Inc. unless otherwise noted.