To state that the last two years has been challenging for business travel barely touches the surface on the sheer amount of disruption experienced by corporate travel executives. Apart from the obvious problems with restarting business travel after a two-year hiatus, COVID has also created a unique environment where many companies have experienced employee retention and acquisition challenges, often losing as many employees as gaining new ones. Consequently, there are many new employees who have never taken a business trip for the company, while those who did pre-COVID often seem to have forgotten the basics of travel, requiring massive retraining efforts.
Beyond the COVID disruption, a new C-Level imperative on Environmental, Social, and Governance (ESG) goals is placing new emphasis on sustainability and diversity. Staff shortages at TMCs and suppliers are causing unwanted disruption and poor service response.
All this within a new era of air travel retailing where airlines continue to roll out their merchandising strategies. The traditional process of funneling all corporate travel bookings through a designated online booking tool and travel management company – which was a problem pre-COVID – continues to be an issue, resulting in program leakage which can be 10-15 percent of air and as high as 40-50 percent of hotel reservations. This leads to duty of care challenges for any traveler who goes outside the preferred booking systems.
And now on the horizon: Web3.
Is this another headache for the corporate travel manager or does Web3 represent an opportunity for positive change? To learn more, we’ll take a look at the basics of Web3, how it could impact the corporate travel process and focus on specific technologies that should be prioritized within broad category of Web3.
What is Web3?
Web3 is more than a buzz word. At its heart, Web3 represents the next generation of the Internet. This is an essential concept to understand as Web3 is not happening just within the travel industry, but rather is an overall computing trend that will impact all industries including travel.
Web 1.0 – The term brochureware was often used to describe the read-only web pages of Web 1.0. Prior to the introduction of the World Wide Web (WWW), the Internet was already a primitive social platform with text-driven message boards a major early Internet phenomenon. Triggered by the release of Mosaic, the WWW allowed for the first time not only text but multimedia graphics to be displayed on a desktop computer through a web browser. Netscape founded by Marc Andreessen was an early commercial version of the Mosaic technology and the Netscape browser along with Microsoft Explorer helped drive mass adoption of Web 1.0. During the growth of Web 1.0, the common theme of “Everyone needs a web page” became the mantra and most travel companies followed suit, creating their first online web presence. But alas, this Web 1.0 represented only static web pages, clearly more was needed.
Web 2.0 – It wasn’t until the introduction of Web 2.0 in the mid-1990s that the web came to reflect a more dedicated commercial purpose. Web 2.0 ushered in the era of large social media and e-commerce sites such as Facebook, Twitter and Amazon. In the travel space the Web 2.0 platform saw the emergence of large Online Travel Agents (OTAs) and in the corporate booking space the mass adoption of Online Booking Tools (OBTs). Mobile became the centerpiece in the late 2000s of the Web 2.0 era, as the smartphone become the primary computing platform for many, though still not fully embraced by the corporate travel sector.
Web 2.0 had its share of ups and downs as well. Few will forget the 2000 DOT.COM bubble bust when reality caught up with the hype. It is interesting to note that the early poster children for the failure of Web 2.0 were Pets.com (pet food delivery) and Webvan (food delivery), two services that are now thriving on Web2.0. The cautionary note here is to separate the business concept from the underlying infrastructure needed to execute that concept. It was this the lack of underlying infrastructure – both technological and physical – that caused early pet food and people food delivery strategies to fail.
Additional problems emerged with Web 2.0 ranging from social media being a major distributor of disinformation to an increasingly finite number of large e-commerce sites offering services for free but using customer data to enable targeted advertising and promotions. For corporate travel, the OBT market moved from independent innovative companies to being dominated by the GDS and large booking and expense platforms.
Corporate travel has benefited from the increased efficiencies of self-booking, though dissatisfaction runs high with the current spate of online booking tools. Concentration of power in the hands of intermediaries between the buyer of travel and seller of travel has slowed innovation and created an oligopoly of players who act as gatekeepers on content and functionality.
Is there a better way?
Web3 – Web3 includes multiple technologies such as virtual reality represented by the metaverse. But for this article the discussion will be limited to decentralized computing platforms powered by blockchain technology.
We are now entering the era of decentralization under the broad umbrella of Web3 technologies. Please don’t misinterpret this statement. Decentralization here refers to the underlying technology, not the management philosophy. In other words, decentralization does not mean travel managers now let their travelers do whatever they want. Instead Web3 removes barriers to improve the entire travel process, from negotiation to execution, making it more efficient and effective for all stakeholders. The overarching goal is not to eliminate intermediaries such as TMCs, but rather recast their role to deliver core value such as support of all reservations regardless of booking source.
At its core Web3 is about blockchain technologies, an immutable distributed ledger that records transactions and ties the payment of assets to that transaction. A simple example illustration would be the ability to transfer title of a home as part of an automated transaction that did not require a third-party title company. Perhaps the sector where we’ve seen the most activity is in the world of finance where decentralized finance (De-Fi) is offering greater financial returns and providing liquidity to borrowers without the need for a bank as an intermediary. Blockchain technologies are being used across multiple industries.
In each industry sector, blockchain is being used to promote peer to peer transactions, increase data visibility and security and better manage identity. Given the multiple layers of intermediaries that reflect today’s corporate travel industry, clearly this move to a more decentralized computing environment has the potential of delivering key value to buyers and sellers.
Problems with Status Quo
Major stakeholders (including travelers) are upset with the current opaque, inefficient corporate travel process.
The Corporate Buyer – For corporate buyers, the top issue is transparency. This is a broad term encompassing the often-hidden multiple forms of compensation paid to intermediaries through multiple layers of distribution plus the lack of corporate rate integrity across the trip lifecycle.
For airlines negotiations, the issue becomes contract performance measurement and delivery of soft negotiated benefits. Travel buyers often are frustrated to learn that their airline performance missed a key compensation by a small amount costing the company significant benefits on backend performance contracts, with notification often 90 days after the fact.
This happened to me while I was the corporate travel manager at Sun Microsystems in the early 1990s where we missed one backend revenue goal by $1,000 costing $300,000 in additional backend payments. Despite advancements in several areas, this still seems still to be an issue for many today.
The other gap is in the way corporations handle soft dollar compensation. Soft dollars refer to benefits negotiated at the time of the contract but delivered in the form of upgrades, upgraded status, favors and waivers or simply a credit card fund that can be applied at the company’s discretion. Travel managers report that delivering on soft benefits is a manual and cumbersome process often not used as strategically as they would prefer.
Hotels negotiations have a different problem. Negotiated rates only provide value if they are honored. This is a major issue highlighted by Tripbam, the reshopping and auditing technology provider, who analyzed millions of rates and found that the lowest negotiated rates was honored only 74 percent of the time, leaving a quarter of travelers not getting the negotiated benefits.
The Corporate Traveler – A 2019 study by ACTE and American Express GBT stated that “Despite 81 percent of businesses saying they have a mandate in place requiring travelers to book through company tools, only a little more than half (59 percent) say OBT adoption is 70 percent or greater. Fewer than five percent of travel managers surveyed claim full adoption, while five percent said only one in ten employees use the OBT.”
Given that OBTs have been on the market since the mid-1990s, this lack of adoption clearly points to a problem. Often the conventional wisdom focuses on the tool’s lack of ease of use found on leisure sites, but given all the changes in booking interfaces, this only tells part of the story. The lack of full content is another a factor frequently cited (e.g., I can get a better deal shopping online). The lack of personalization is often also missing in current online booking tools despite the oft-stated goal of driving unique content and bundles to the corporate traveler.
The Supplier – It would be an incorrect assumption to believe that the only motivation of the airlines and hotels is to reduce distribution costs. The goals of initiatives such as the IATA New Distribution Capability (NDC) have a much a broader objective of returning control of the fare quoting to the airlines rather than a published price and subsequent discount calculated by the GDS. For over seven or eight years, we’ve heard that airlines want to offer unique bundles and move to continuous pricing. So why has this not happened? The simple answer is legacy infrastructure.
How Can Web3 Help?
The transition to Web3 is both a revolution and an evolution. It will take time to embrace a completely new infrastructure for travel, but it will emerge, provided buyers take control of their programs and see the visible benefits of these technologies. The ability to embrace a single source of data truth for contract compliance and tracking is key. This is enabled by immutable smart contracts that can deliver benefits to the point of sale and track negotiated benefits throughout the lifecycle of the trip.
Like most of Web3 technology, smart contracts signify the digital representation of the physical contract without any intermediary controlling its use. In my next BTE article, we will explore more deeply the value of Web3 smart contracts.
For now, I encourage each stakeholder to learn more about the impending change Web3 technologies can provide and experiment on different use case scenarios to uncover the value of increased transparency and innovation possible through this new approach to computing.
