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Monday, October 08, 2012

Top 10 Travel Distribution Fallacies - #6 Business Travelers will pay whatever we charge

Business Travelers will pay whatever we charge

As we look at the gas prices on this photo, depending on when you are reading this blog, you are likely to be thinking that the gas is cheap.

We are clearly jaded.  $3.09 per gallon is outrageous.  And at most stations if you aren't careful, in the small print, you may find that if you don't use the Mobile credit card or cash, you may even pay more.   Or if you pay $9 for a car wash, you may even get a discount of $0.10 per gallon.  I date myself in saying that I remember paying just $0.15 per gallon for gas.  Nothing is as it used to be.

The gas companies have us over a barrel.  For the most part, we can't not drive (although with two kids attending school across town and holding elder care responsibilities for my mother in law, I certainly find myself wishing that I could cut back!), so we can't really afford to be price sensitive.

Travel is different.  It has been proven over and over again during the economic crisis that businesses are indeed price sensitive and that they can and will shift their travel spending or even eliminate it altogether.

With the new price transparency that the Internet facilitates, business travelers are finding the fares and rates that are clearly intended for the leisure or occasional traveler.  This is dramatically eroding overall supplier revenues, and in many cases the savings in booking fees and commissions pales versus the loss in revenues .

But in travel, it is also true that nothing is as it used to be.  Ancillary fees are the new "fine print".  

U.S. airlines collected more than $1.7 billion in baggage fees during the first half of the year, the largest amount ever collected in that six-month period and that is clearly an important source of revenue. The unintended consequence is that overhead bins are fuller than ever and the fight for early boarding to find overhead space has generated a new revenue opportunity for the airlines - "priority boarding". And the collected an additional $1.3 billion in fees for canceling or changing a reservation during the first six months of 2012.   And those of us in the technology side of this industry know just how profitable the collection of those fees is against the actual cost of canceling and changing reservations.

So will business travelers pay whatever we charge them?   My guess is no.

For years teleconferencing has threatened to reduce the need for travel.  Once extremely expensive, we all now how laptops, smart phones and even notebooks with cameras and have completely free tools like Skype and Google Hangouts available to us for multi-party conferences.

Bottom line?  The world is different.  Corporate travelers are NOT a captive audience.  They do vote with their wallets.




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