Data can tell buyers about the past – but it can also be used to manage the future. Bettly Low reports
Would you like to win US$35,000? Well, here’s how. The United States’ General Services Administration (GSA) – the business support agency of the US federal government – is looking for a digital tool which will “provide federal agencies with the best recommendations on how to reduce travel costs”.
The first prize is US$35,000. But note: the GSA “does not want an analysis tool that tells what is already known” – it is seeking a tool that it can use to cut business travel costs before they are incurred.
And the GSA is not alone. Conventional business travel management information (MI) reports include data on past travel and the associated cost. The new boys on the block, however, find clues from present behaviour to point to potential costs and, more importantly, cost savings in the future.
Future travel costs are usually managed in one of two ways: first, supplier contract negotiations, which will govern unit pricing; and second, demand management, which assesses what is being purchased in the context of the actual need. There are new ways to approach both.
The economics of data
Susan Hopley, founder and CEO of information trading platform The Data Exchange, is aware of the challenges travel managers face in this area. Her company is predicated on the idea that data has value. Companies deposit their data into this intermediary’s secure vault, from which they can sell their data and buy that of others.
Hopley believes that the economics of data are changing. “The power of data has totally changed the balance of power in travel purchasing,” she says. “Historical data is just that. It informs the past and is increasingly less useful in predicting the future of pricing.”
Buyers must negotiate contracts with suppliers that have large revenue management departments, with sophisticated data collection and analysis models. The explanation as to why historical behaviour is now only one data stream feeding into complex algorithms is straightforward: the pressure on airlines to deliver profits is immense.
After the 2008 economic downturn there was a sharp decline in business travel. Flying under-occupied planes was costly. By aligning capacity to demand airlines would be able to maintain yield and control costs. Understanding demand was the key to pricing. That meant looking to the future.
Covering the market
One person who understands what airlines did in the past and what they are doing now is Herman Mensink, vice-president EMEA of Prism, which specialises in airline data. Prism allows airlines to see whole market data, including corporates’ market shares.
According to Mensink, airlines are no longer looking for volume but for market share. “Historically, corporates have overpromised and under-delivered,” he says. “When no market share data was available, airlines were only able to contract on volumes because they didn’t know about the whole market. Airlines are increasingly wanting to deal with those corporates that are loyal and truly capable of shifting market share.”
Airlines know market shares, but individual buyers are not allowed, by the terms of their contracts, to share their airlines’ pricing data with other corporates. However, Hopley believes that buyers could be better prepared for the bargaining table if they joined to aggregate their data in a way which masked the identity of any individual company.
Travel management companies (TMCs) do produce data which allow their clients to benchmark their fares with those of other corporates of a similar travel profile but Hopley thinks this is inadequate. “If you benchmark only against your own kind, you might not understand the wider marketplace.”
Hopley proposes a collective approach: “The choice is between doing something and doing nothing. Working in isolation is no defence against sophisticated supplier systems. There is an opportunity for buyers to revamp the way they acquire and use data.”
So what specific data might help buyers? Hopley quotes the example of a corporate that wanted daily data on average fares, including leisure, on 40 city pairs across multiple agencies. Another client wanted the average room rates of hundreds of specified hotels around the globe according to place of purchase.
Dedicated data projects don’t come cheap, but the rewards can be great. Keesup Choe is CEO of data analysis firm PI. He believes that savings of up to 10 per cent are not unrealistic. “If your travel programme is US$50 million, it becomes a significant amount,” he says.
PI specialises in using big data on the buying side. Choe says: “Travel is an area underserved by technology. It could be because data is a bit messy. Outside of a few large TMCs, there is no consistency. Hotel data management is a whole story in itself. Yet you need all this information to do the profiling and the RFPs [requests for proposal].”
Buyers need strategic data to help them with future decisions. Big data is about collecting and analysing data from multiple sources to help decision-making. This is not new. Buyers have always compared booked with flown and used card and expense management data as well as booked. What is new is looking to non-travel data.
Keesup Choe collects “the stuff which is usually ignored”, that from social media and other web sources. Choe then lets the algorithms work out the correlations rather than choosing the sets and charting the relationship. “Let the machine suggest patterns that give you insight into potential increases and decreases in demand,” he says.
Tony Pilcher, now an independent consultant but for many years head of travel at HSBC, says: “We in the travel industry need to look at other people in the real world. They look at data to identify trends to sell products, to see where people are and what people are buying.”
Companies whose business is selling, such as retail, are likely to have big data projects. The technology investment is not cheap so, not surprisingly says Choe, “companies will give first priority to marketing and sales, not the travel department”.
But travel managers can use outsource specialists such as PI to achieve the same objectives. Those that can’t or don’t want to use an independent data specialist solution can be reassured that travel technology companies and TMCs have also recognised the value of multi-source, real-time data.
The Travelport Booking Feed shows all bookings in real time, so that corporates know what has been booked before ticketing. The travel technology firm is about to unveil a product which can monitor the real prices available on routes. Carriers will be able to monitor their fares against those of other carriers to see how competitive their fares are and corporate customers can have this information in real-time.
If managers do not see reports until a couple of weeks after the reporting time, opportunity has been lost, according to Choe. He explains: “If you receive your February report on March 15 and it shows there’s been a spike in travel to Hungary, it will be several weeks later that you will be contacting the business unit to find out why. Getting access to more timely information allows you to do demand management.”
Matthew Pancaldi, HRG’s global client management director, also believes this is vital. “What’s happened in the past with a customer isn’t necessarily what they will do in the future. We’re trying to help the customer to manage their costs in a revenue management pricing model and both of those things are dynamic.” HRG Insight is a data delivery tool that collects data from pre-trip to post-trip, and allows clients to access their global data anytime and reconfigure it as desired.
Pancaldi continues: “We used to give clients just raw data. Now we give more relevant and specific information on which we would already have done analysis, so we’re going to them with trends and opportunities in various scenarios. We’re working with customers to build models for everything spent on a trip.”
But air and transport data has moved from the sufficient to the necessary-but-not-sufficient. Pancaldi says: “In an ideal world you wouldn’t look just at spend with suppliers but total T&E [travel and entertainment] expenditure and return on investment of individual trips. To get that you need more than a TMC, so how do you bring together travel, card and expense data? It’s not mainstream at the moment but is something people are looking at and working towards.”
The tactics are changing but, as Pilcher says, the travel manager’s aim is constant: “We look for a product that keeps travellers happy and fit for purpose in a way that achieves our cost objectives.”
And Choe reminds us that corporate objectives are not uniform. “For some clients the focus is not on savings at all but how to improve the traveller experience,” he says.
Travelport vice-president Reg Warlop agrees that what happens with the data depends on the customers’ objectives. He believes that corporates need benchmarking, personalisation, advice and recommendations – useful for a first-time visitor to a city.
Warlop urges all corporate buyers to “gain access to your own data, not just MI reports but the whole data. Understand what is available in real-time rather than once a month, and probe much deeper.” Data is also not just about buyers and sellers. “The first step is for travellers to have control of ‘what people see about me’ – which is now rarely the case,” he says.
So slick data management need not be the preserve only of suppliers but, as Susan Hopley tells us, “they are becoming increasingly successful at understanding and marketing to individual travellers”.
Keesup Choe sums up the challenge very neatly when he says: “I can’t think of any sector where the disparity of investment is so large between the sales side and the buying side.”
Perhaps the time may just have come for collective action.