INDUSTRY UPDATE

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INDUSTRY UPDATE
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Topics of Discussion

• Travel Distribution
• Convergence of lanes, services, price
• Systems Technology
• Content
• Mobile sophistication
• Portals and On Demand environments
• Airlines
• Impacts of financial strain
• Merchandising
• Dealership model
• Hotels
• Middle market feeling the pinch

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Travel Distribution

• History
• TMC agencies vs. online suppliers vs. airline
  websites
• Strengths / Weaknesses
• TMC / Corporate travel management firms
• Exceptional at corporate travel management
• Great at end-to-end processes and technology
  integration
• Not so great at sourcing their own content
• Online suppliers (Expedia, Orbitz, Travelocity)
• Content sourcing packaging / attractive to
  leisure travelers for low end pricing
• Exceptional at marketing
• Not so great at services beyond ticket
  fulfillment
• Airline websites
• Exceptional at display of their own content /
  attractive to loyalty fliers
• Limited offering
• Internal competing priorities for technology
  development

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Travel Distribution
Profile System Depository
Content Aggregator
Transaction Processing Facilitator
Interface Between Profiles TPF
Quality Control / File Finishing Tool
Sales Accounting Interface
Itinerary Delivery System
GDS ATPCO
Data Warehouse
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Travel Distribution
GDS
Proprietary Technology
Third-Party Technology
Expense___ Reporting__
HYBRID Technology System
GDS ATPCO
Travel Agencies
Airline Sites
Online Suppliers
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Travel Distribution

• TRENDS FORECASTS
• Travel managers are feeling pressure to cut costs
  and control spending
• Video conferencing
• Closer internal collaboration
• Numbers of travelers / meeting participants
  reducing
• Tighter, more intelligent controls
• Purpose of trip management
• GDS continue to rule the distribution world
• Increased costs for full content solutions /
  subscriber supplier
• Translates into increased consumer costs
• More hybrid technology will by introduced
• Direct connects will evolve slowly
• Going GREEN takes a front seat
• More companies are focused on green initiatives
• Travel Risk Management continues to be a priority
• Emerging and experimental markets
• Safety security of travelers continues to be a
  high priority
• Use of on demand technology will become an
  important risk management component
• International laws may affect behavior in the U.S.

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Systems Technology

• Content
• Negotiations with GDS continue to focus on full
  content for premium pricing
• Content is more fragmented
• Airlines require merchandising content
• The ability to sell unbundled product via the
  existing distribution channels is critical
• Mobile sophistication
• On Demand tools
• Ready to run
• Pay as you go
• Very intuitive / short learning curve
• Codeless customization
• Loosely coupled integration
• Constant monitoring quick feedback
• Real time communication / statistics / updates
• Extending to risk management
• Portals
• Single sign on technology
• On Demand environments
• Real time control management tools

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Systems Technology

• TRENDS FORECASTS
• Content will become more fragmented before it
  converges (again)
• Full content through GDS will become more
  expensive
• Progressive TMCs will eventually manage content
  with hybrid systems
• Technology will become a much bigger
  differentiator among TMCs
• Mobility and SSO portals will become
  interdependent
• On Demand environments will replace
  self-service
• Real time value
• Mobile technology will continue to get smaller,
  easier to use and more intuitive
• Wi-Fi connectivity will become standard in
  aircraft, hotels, rental cars, public stations,
  etc.

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Airlines

• Open Skies
• Lost amidst all the industry turmoil
• Impacts of financial strain
• Domestic capacity cuts
• American 11-12
• United 17-18
• Continental 11
• Delta 10
• Northwest 5
• US Airways 6-8
• Virgin America 10
• Job loss
• Dealership Model
• Distributor alignment
• Merchandising Model
• Unbundled pricing
• Aisle seat / front of coach premiums
• Luggage charges
• ATPCO announced state-of-readiness

Airline securities analyst Jim Higgins of Soliel
Securities "The more capacity cutbacks, the
better. We estimate that the industry needs to
reduce domestic capacity by 12 to 15 in order
to be cash-flow breakeven. That estimate is
based on a year-end 2007 baseline, and with oil
rising, "we'll need more cuts to maintain cash at
last year's comfortable levels". (WSJ, 16 Jun
2007)
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Airlines

• TRENDS FORECASTS
• Due to increased oil prices airline capacity will
  need to be reduced by at least 20
• Scrutiny over aggressive oil speculation will be
  challenged by the airlines
• Open Skies may cause U.S. carriers to lose profit
  traction in international markets
• Merchandising Model will gain traction
• Travelers will have to be more disciplined
• Decision to travel
• Added costs / expense management
• Corporations will modify policies to address
• Requirements to travel by car or rail
• Reimbursement of added fees
• Airport chaos will ensue
• Not enough overhead bin space
• Downsizing allowable carry-on size
• Strict reinforcement of carry-ons
• Exemptions policies will backfire

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Airlines

• Wall Street Journal Survey Results (16 Jun 2007)
• What will you do when faced with an airline's
  per-bag checking fee?    

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Lodging

• Occupancy is holding steady
• Anticipating bad third and fourth quarter for
  three star / middle market properties
• Luxury hotels are not anticipating any impact
• Lower rate rooms are feeling the pinch / increase
  in suites higher rate rooms
• Budget properties are expecting a slight upturn
• Meetings events occupancy is slowing
• Reduced number of events
• Reduced number of participants
• Renovations on the increase
• Gadgets and high-tech
• Cushy beds
• More transparency between home and hotel

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Lodging

• TRENDS FORECASTS
• Economy Market
• Little to no change throughout the end of the
  year
• Occupancy may increase more than they anticipate
• Reduction in leisure driving market
• Increase in business market
• Middle Market
• Renegotiation of corporate agreements to induce
  more travel
• Limited time offers for soft dollar concessions /
  programs
• New construction will slow significantly
• Focus new construction in emerging markets
• Luxury Market
• Target the Young, Rich Restless
• High end business traveler
• Continue to build new hotels but at a slower pace
• All Markets
• Amenity rich approach
• More technology appropriate for the brand

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Car Rental

• Significant reduction in program car options
• Auto manufacturers offer generous terms for
  vehicles buy back at a guaranteed rate
• Costs for cars has increased 20 year over year
  the past three years
• Revenues are up
• Hertz 2.04b in 1Q08
• Average U.S. rate increased from 52/day to 57
  per day
• Offering high-margin extras
• GPS Navigation Units
• Satellite Radio
• Fast toll technologies (EZpass)
• In-vehicle WiFi hotspots
• Pre-pay fuel
• Trying to impress an image of Going Green
• Strapped with SUVs and high performance cars
• Too few hybrids in fleets
• Market not quite ready for hybrids

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Car Rental

• TRENDS FORECASTS
• Little to no change throughout the end of the
  year
• Travel Managers will address amenities in travel
  policies
• Audit processes will be built to include car
  rental extras
• Amenities will become standard within 18-24
  months due to competitive pressure
• Green options will become a higher priority once
  solutions are reality in general population

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Contact Information

• Tammy Troilo-Krings
• CEO Leadership Coach
• Travel Solutions, Inc.
• Two Easton Oval
• Third Floor
• Columbus, Ohio 43219
• 614.901.4100 V
• 614.901.3939 F
• 614.598.4340 C
• ttroilo_at_ts24.com