You have to arm yourself with knowledge about how the airlines work if you want to get the reasonable airfare you need to get your attendees onto a plane to your meeting because, as Mark Burton, PhD, director of the Center for Business and Economic Research at Marshall University, Huntington, W. Va., says, "The airlines are absolute masters at pricing. As an economist, I look at it as pure artistry. As a passenger who paid $800 and is sitting next to two people who paid $129, I’m altogether ticked off."
What the airlines excel at is what economists call price discrimination, a way of identifying and segregating fliers who have different demands for the same service. The main identifiers for business travelers are that they want to be home on Saturday nights, and they book tickets shorter term than leisure travelers. And, of course, they get to pay more for the privilege.
Now, with the proliferation of lowball fares available through Priceline.com, Orbitz, Travelocity, and other online sites, the airlines have found another outlet to charge passengers based on demand, not service. "They didn’t like to pay commissions to travel agencies, and now they have a substitute that allows them to change prices from minute to minute as the flights start to fill," says Burton.
To combat the trend, the Alexandria, Va.-based National Business Travel Association is urging the U.S. Department of Transportation to address the issue of making those cheap online fares available to organization and travel agency customer reservation systems, something that 99 percent of corporate travel managers are in favor of, according to a recent NBTA survey.
What You Can Do
For now, one thing you can do is make attendees aware of current industry research, such as a study by airfare auditing and research firm Topaz International Ltd., based in Portland. The study, which ran from May through December 2001, found that corporate travel agencies could get, on average, fares that are $170 less than those found on the Web, resulting in savings of more than 27 percent. How is this possible? The online fares tend to have many more restrictions than fares in the CRS, and "often fall outside the parameters of corporate travel policy," says Valerie Estep, Topaz’s president.
In addition, Jonathan Howe, a partner with Chicago-based law firm Howe & Hutton, says to ask for "most-favored nation" status. "Put in the contract that if they are offering a lower fare than you can provide, your attendees get the best fare available. If there are only two seats available at that low Internet fare, you want those seats. I’m not sure the airline will accept it, but if you don’t ask, you won’t get."
Changes In The Air?
One thing that may be shaking up the business fare structure is a recent move by America West Airlines, which announced an alternate pricing structure that may have big implications for the future, if AWA doesn’t bow to pressure from the other airlines and discontinue the deal and other airlines follow its lead. AWA eliminated Saturday-night stay requirements and rejiggered its pricing structure into four categories: walk-up, three-day advance purchase, seven-day advance purchase, and 14-day advance purchase. This could bring fares down as much as 50 percent, analysts say. It might pay to see if these lowered fares are bringing pressure to bear on other airlines that serve your meeting’s destination, resulting in more leverage when negotiating for your group.
The Rub with Hubs
Another important thing to know is that hub cities, which usually have lots of available airlift, may also be more expensive. "There’s a lot of research that shows cities with hub airports—Pittsburgh and Minneapolis/St. Paul come to mind—tend to have much higher airfares," says Burton, because their domination of the area creates a lack of competition. Less expensive cities, airfare-wise, would be those like Boston and Columbus, Ohio, which don’t let any one airline dominate their airport, and perhaps have a significant amount of flights on discount airlines like Southwest, which "always has a dampening effect on prices," he says.
But it goes even farther than that: Each city pair—say Boston to Chicago—is a market in itself. "Charleston, S.C., has seven airlines, but they don’t compete on any particular city pairs," Burton explains. "On any given city pair, you only have one real choice, and whoever’s operating the routing knows that." The same thing can hold true for small-city airports who don’t have enough travelers to support more than one carrier— "That’s why I could fly from new York to Amsterdam for half of what it would cost me to fly from Huntington, West Virginia to Chicago," says Burton.
Howe adds that you’ll have a harder time negotiating a special deal when the airline already owns the market. "But if they’re trying to break into a new market, that’s where you have a chance to negotiate."
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