STATISTIC STRATEGIES
WOULD YOU LIKE to win US$35,000? Well, here’s how. The United States’ General Services Administration (GSA) – the busi- ness 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 in- formation trading platform The Data Ex- change, 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 in- termediary’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
44 BBT MAY/JUNE 2014
is increasingly less useful in predicting the future of pricing.” Buyers must negotiate contracts with sup-
pliers that have large revenue management departments, with sophisticated data collec- tion 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 align- ing 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 over- promised 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
“The power of data has totally changed the balance of power in travel purchasing”
DATA CAN TELL TRAVEL BUYERS ABOUT THE PAST – BUT CAN ALSO BE USED TO MANAGE THE FUTURE
market. Airlines are increasingly wanting to deal with those corporates that are loyal and truly capable of shifting market share.”
BE PREPARED
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 be- lieves that buyers could be better prepared for the bargaining table if they joined to ag- gregate 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 cor- porates 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 agen- cies. 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 un- derserved by technology. It could be because
BUYINGBUSINESSTRAVEL.COM
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