AA and Hogg Robinson: Big Direct Connect Deal on the Horizon

American Airlines and Hogg Robinson Group, one of the largest travel management companies in the world with an estimated $16 billion in annual sales, agreed in principle to explore a Direct Connect deal.

The two companies will explore “a long-term arrangement for the benefit of their corporate clients in which HRG would receive guaranteed direct long-term access to American’s fares, schedules, and customized travel products and services.”

HRG said it would plan to access American’s content through the airline’s direct connect link using its own technology, either directly or via a GDS application programming interface.

HRG announced in March that it had signed an agreement with Travelport for use of its Universal API.

TMC’s attitude shift
The new deal with American represents a shift in attitude toward Direct Connect for HRG.

Bill Brindle, the travel management company’s director of group distribution and technology, told delegates to the Innovation in Airline Distribution conference in London in March that travel agents don’t want to have to connect directly with a carrier to participate in sales of ancillary products. (See Two Agencies Say ‘Thanks, but No Thanks’ to Direct Connections, March 10, 2011)

But he added that HRG has “great merchandising capabilities” that could benefit both airlines and his company and was eager to sell ancillary products such as lounge access and to enable clients to get the full benefit of their frequent flyer program status.

The deal, if it comes to fruition, would be a coup for American, which has met with considerable resistance to its Direct Connect strategy.

Priceline, Expedia lead the way
Priceline, an early adopter, has been using American’s Direct Connect since late last year.

Expedia signed a memorandum of understanding with American in April that allowed the companies to resume doing business together after a three-month spat that benefited neither party. The official announcement stated that Expedia planned at some point to “access American’s fares, schedules and customized travel products and services via American’s direct connect link by using aggregation technology provided by a GDS.”

But traditional travel management companies have been hesitant to embrace American’s approach. If HRG gives its blessing to the results, Direct Connect could gain traction.

HRG is a publicly traded company based in Farnborough, U.K. It operates in more than 120 countries, and has a global team of more than 12,000 people, including 5,000 employees worldwide, according to the company’s annual report. The TMC generated $16 billion in sales in 2010, according to Travel Weekly’s Power List 2011.

Priceline comparison
“The implications are pretty significant if this goes through. It’s not that dissimilar to the fact that Priceline embraced Direct Connect,” said Norm Rose, president of Travel Tech Consulting Inc. in Belmont, Calif.

“We have now seen that Direct Connect is in reality possible. Most of the opposition has been talking about the ability to do comparison shopping. You can do that on Priceline,” Rose said.

Breakdown of GDSs?
Rose commented that if two of the major corporate booking tools and one or two of the largest travel management companies were to embrace Direct Connect, then you’re “starting to see a breakdown of the hold that GDSs have on the corporate market.”

“There’s no question that this announcement, if it comes through, is another notch on American Airlines’ side, which will give them some additional leverage,” Rose said.

Details tell all
Kevin Mitchell, chair of the Business Travel Coalition, said it’s difficult to predict the implications of the Hogg Robinson development without knowing the details.

“If it’s outside of the current industry infrastructure and work flows, than that’s going to be problematic for corporate travel management companies. If it’s a direct connect that’s going to work within the existing infrastructure, that’s a different story,” Mitchell said.

“The devil is in the detail,” he added. “There could be any number of provisions in such an agreement between American and HRG that could suggest this is a powerful agreement that could change the game, or that it’s meaningless.

“One of those provisions, hypothetically, could be that the agreement between American and HRG really doesn’t materialize until and unless one of the GDSs agrees to the Direct Connect model with American. That would be a way for HRG to hedge its risk,” Mitchell said.

Technology stew
Michael MacNair of MacNair Travel Management/American Express, observed that it’s hard to predict anything since nothing has been pinned down. “I can tell you this though – our industry has put together a hodgepodge of technologies that don’t work extremely well together.

“If we all worked together on the final customer – companies’ and travelers’ – experience, we would all be more efficient and we would help create more travel. It’s a pain to travel and it’s a pain to manage travel in this environment,” said McNair, who is president and CEO of the Alexandria, Va., firm.

Marilee Crocker and Dori Saltzman contributed to this story.