The fare structures of U.S. airlines are taking on such labyrinthine complexity, and changing so often, that some meeting planners are questioning the value of the carriers' traditional meeting discount programs--programs that, compared to the volatility of individual fares, seem to demonstrate little movement or innovation.
The value of the standard meeting discounts--10 percent off individual unrestricted business fares and five percent off restricted discount fares, even the best of which always require a Saturday night stayover--is being eroded, especially in the former case. Ten percent off of business fares, which rose an astonishing 39 percent between February 1996 and November 1997, is hardly a bargain. (The Wall Street Journal recently reported a $2,000 fare on a same-day purchase of a Boston-to-Los Angeles ticket.) And with demand growing faster than supply, the fare trackers at American Express are forecasting an additional five to six percent rise in business fares this year.
As a result, a growing number of corporations are tightening the screws on their business travelers, requiring them to adhere more closely to restrictive travel policies--staying over Saturday nights, for example.
Meanwhile, many meeting planners are huddling with their travel agencies in search of new ways to reduce air travel costs. For a lot of them, zone fares are becoming a popular alternative to the traditional meeting discount.
Getting Into the Zone Zone fares are a collection of flat fares into a meeting city that vary only by region of departure and do not require a Saturday night stay. Getting these fares generally requires a minimum number of passengers, which could range from 10 to 25. They are not set at a fixed percentage off individual fares, so as regular business fares for midweek travel keep rising, the zone fares represent a better and better bargain.
"I don't see the zone fare prices increasing more than a couple of percent each year--certainly not in line with the increases in published (individual business) fares," says Kevin Stenerson, transportation planning supervisor at Minneapolis-based Carlson Meeting Management.
"They're getting very popular among meeting planners," says Helene Estes, general manager of Philadelphia-based Rosenbluth International Meetings, a division of the megatravel agency of the same name. "Every other fare changes with the marketplace, but these are defined fares. You can plan a meeting up to a year in advance and know what your [air travel] costs are going to be with zone fares."
Airlines confirm that they have been growing their zone fares programs dramatically, and finding increasing acceptance from meeting groups.
"About a year ago, we modified our zone fare program and made those fares available to all of our North American destinations," notes Earl McClendon, manager, meeting, incentive and group sales for Delta Air Lines. "Previously, they were available to only about 35 or 40 cities. As a result, we've been seeing a rather large shift of our business now going with the zone fares."
United had tried to stay away from zone fares, but recently gave in to competitive pressures and added a zone-type fare product, called Area Fares, to its roster of meeting offerings.
American Airlines recently expanded the availability of its zone fares to the Caribbean and Europe, and expects to roll out "ameeting product" sometime early in 1998, according to Rick Weber, American's manager of groups, company meetings, and specialty fares.
The expansion of zone fares to many more cities is only part of the good news on that front; the other part is that zone fare levels apparently will remain relatively stable for the foreseeable future.
At Delta, for example, zone fares are showing "no big increases," says Bob McNally, the airline's new system manager, meeting, incentive and group sales. "We are preparing to roll out our Year 2000 zone fares, and if there are any increases, they are only moderate increases, and only in certain markets," he says. "For the most part, they are staying in line with the competition."
American's zone fares "have stayed fairly constant through the end of 1998," says Weber. "Now we have (zone) fares out and available through the end of the year 2000, and on average the fares for 1999 and 2000 are 5 to 10 percent higher than the current levels."
As airlines see more of their corporate meeting and incentive business migrating to zone fares, watch for them to keep fine-tuning their zone fare products. "Some airlines have indicated that they're trying to do a better job of managing that zone inventory," says Rosenbluth's Estes. For example, in some instances, "They're putting instant-purchase or 24-hour purchase policies in place, which historically had been 7 or 14 days," she notes.
"Historically, zone fares have been [available for] a two-night minimum stay," says Carlson's Stenerson, "and we're seeing that change to a one-night minimum, which helps, because a lot of meetings are getting shorter. The zone fares they charge are typically about $50 more for a one-night stay, but still 30 percent to 35 percent off published [unrestricted] fares."
"We're currently adding some seasonality factors into the zone fares, making it more attractive to fly on certain days of the week, and at certain times of the year," adds American's Weber. And at Continental, the refund policy for international zone fares has eased. These previously non-refundable fares are now refundable, less a $75 service charge.
While zone fares often provide the best deal for meetings, Kent Kawaguchi, assistant vice president, corporate travel and incentives at Safeco in Seattle, notes that planners shouldn't forget to check the negotiated fare discounts that their companies may have for individual travelers and compare them with the zone fares under consideration. At his company, "In some cases, those [individual negotiated fares] are turning out to be less expensive," Kawaguchi says.
Do the Math Likewise, the best meeting fare, if the restrictions can be met, often does turn out to be the five percent reduction on Saturday-stayover discount fares. "We always offer it (i.e., a Saturday night stayover option) to our people who are booking their [meeting] trips with us, and tell them what the fare difference is going to be. Then they can decide what they want to do," says Linda Bourbonnie, president of Conseco Travel Services, a part of Carmel, Ind.-based Conseco Companies.
At Safeco, Kawaguchi says, "We have a number of back-to-back meetings, so invariably we have one which is covered by a Saturday night. For those that don't involve a Saturday night, we give our attendees the option to come in early to include a Saturday night, and we encourage them to use that option. For those who don't get Saturday night stays, we take advantage of zone fares."
On the plus side for planners, the value of the five percent meeting reduction has remained relatively unscathed, because discount fares have not been rising at the rate of the unrestricted business fares. Then again, figuring out exactly how much they have changed is not easy.
American Express estimates that the lowest discount fares in the 215 domestic city-pairs it tracks rose by five percent during the first 11 months of 1997; an earlier survey had shown that the lowest discount fares had declined by 11 percent during the first nine months of 1997.
The company tends to find variable results in discount fare levels because it samples fares only one day a month--and the lowest fares available tend to fluctuate wildly, depending on whether there's a fare sale at the time of the survey.
"If you smooth out the line [of monthly discount fare levels in the survey], dropping out any unusual sales that our methodology happened to pick up, you come up with a trend line that shows, for the last one-and-a-half years, that the lowest discount fares stayed at about the same level, or came up maybe two or three percent," says American Express spokeswoman Melissa Abernathy.
Flying Full If the major airlines are holding the line (or at least not raising it much) on discount and zone fares, their current favorable economic climate--four straight years of profits and an industry load factor of around 70 percent, higher than its been since the 1940s--may make them less willing to give in during negotiations.
"In the past, you might have gotten the airlines to waive some requirements, like advance purchase or minimum stay requirements, and gotten those lower fares," says Safeco's Kawaguchi. "But now, normally all they'll offer you is their basic program--the zone fares or the lowest applicable fare less five percent, and a standard number of passes."
Some companies would rather forego "soft dollar" benefits like volume-based free tickets and upgrades. At Conseco, Bourbonnie says, "We'd rather take a discount from the airfare. We negotiate that more than we do free tickets and other soft-dollar things."
Meeting experts suggest several other strategies to arrive at the best possible air travel deal. For one thing, planners could save money by talking to their travel agencies before they select the meeting site. Carlson Wagonlit Travel, for instance, offers a service called Destination Analysis, which can give clients an idea of the relative cost of selecting one city over another.
For another, experts suggest that planners and their corporate travel department colleagues look at the big picture and consider how best to work together, looking for ways to consolidate their meeting business and transient travel--or at least to be aware of each other's objectives.
At Rosenbluth, "We can help [companies] manage both parts of the expense," Estes says, "making sure that when it's time to use the transient rates, we use the transient rates; and when it's best to use the group rates, we manage their use of the group rates. I do see a trend in companies understanding that they need to set up a group department separate from, but in conjunction with, their transient."
As an example, she cited a situation where the company travel department, which negotiates airfares in specific markets, might be having trouble meeting its volume commitment to its preferred airline in a particular market. In that case, the company's group department might find it convenient to schedule a meeting that will bring enough business to that market to protect the company's deal for individual fares with the airline.
A Game of Chess--with Deep Blue For the most part, airline officials insist that they remain willing to negotiate with meeting planners--on the airline's terms. Air carriers still make special arrangements to fill seats that might otherwise go empty. The problem for planners is that the airlines are better than ever at pinpointing exactly where and when those seats are departing, and steering their negotiations accordingly. This is the heart of the matter-- the science known as yield management.
It's still possible to negotiate something extra, says Delta's McNally. But, he explains, "We rely on our yield-management folks to control the inventories. The opportunities [for meeting deals] are still there on certain key flights, but they may not be the 5 p.m. flights out of New York or Washington--they might be earlier or later in the day."
McNally says Delta is always trying to remain competitive, but with most airlines now becoming so route-specific, date-specific, and even flight-specific in their offers to group organizers, it's tough to make generalizations. "Recently we've seen a lot of airlines promoting certain city-pairs on a case-by-case basis, providing additional discounts," he explains. "And these obviously depend on travel dates and number of passengers. It's really becoming like a chess game--watching who's making what moves, and deciding how to react to those moves."
The chess analogy is especially appropriate for United Airlines, where yield managers are now equipped with the best chess player yet: The airline is phasing in a new generation of yield-management technology based on IBM's SP2 parallel processing system, best known as "Deep Blue," which defeated world chess champion Garry Kasparov last year in a series of demonstration matches.
"United's Deep Blue parallel processing system is aimed at developing a detailed forecast of how people fly and buy," a United spokesman said, "and then making seats and fares available in the most efficient way to gain the maximum amount of revenue. It's the most sophisticated yield-management application in the entire airline industry, and is expected to raise United's revenue by $50 to $100 million annually."
So meeting planners who consider themselves masters ofshould now consider themselves put on notice: In the months ahead, you might find yourself facing your toughest opponent yet.
Several major airlines are turning to the Internet to promote their meeting and convention programs and products. Here's what some of the better sites offer.
* American Airlines' First Call group and meeting area includes a promotion of monthly group discounts, beyond regular discounts, that are available in specific markets listed on the site. In December, for example, American listed specials in 30 markets in and out of Dallas/Fort Worth, 14 markets for Chicago, and lesser numbers for several other cities, with a booking deadline of December 31 and a travel deadline of March 31.
* Continental and Northwest both offer online meetingrequest forms that can be filled out on-screen and instantly e-mailed to the airline's group department, and both promise quick turnaround, with a contract sent out within 24 hours of receipt.
* The Southwest Airlines site features a meeting program questionnaire designed to be printed out, filled in, and then faxed or mailed.
Most airlines' online meeting sites provide instant e-mail areas; links to other parts of the airline's Web pages, such as frequent-flyer information or airport club sites; and basic terms and benefits of the airline's meetingand policies.
Continental: www.flycontinental.com Delta:www.delta-air.com