Presentation on theme: "Automation Negotiations, Default Protection and More Rose A. Haché Attorney at Law Telephone:(713)621-7253 CBTG 2009 Annual Group."— Presentation transcript:
Automation Negotiations, Default Protection and More Rose A. Haché Attorney at Law Telephone:(713)621-7253 E-mail: Hachelaw@aol.com CBTG 2009 Annual Group Meeting
GDS Contracts Accept lack of predictability Marketplace is in transition Clients range from $1M to $7B No “typical” client
Background GDS Contract Length of commitment: 5 years Productivity payments allowed Mandatory participation by carriers Loyalty could not be enforced Old Framework of DOT regulations
Background on Today’s GDS Contract Old Framework of DOT regulations Override connection to GDS deal prohibited Co-terminus provisions part of contracts = restrictive covenants Shortfall penalties part of productivity formula
Current State of Marketplace The importance of the agent has been the shocker. Global capabilities are crucial. Legacy GDS companies will aggressively protect their investments.
Marketplace News Aggressively Protect Contract Terms UAL Credit Card Impact Looming Summer of 2011 increase to $.80
Today’s Contract Negotiations Menu of optional services Monthly cost-check Contract commitment 1-7 years Requirement for exclusive use, or percentage Negotiate shortfall fee Automatic renewal on adding equipment-Co-terminus provisions need to be added Negotiate payback (pro-rate) Include aggregation clause Range of contract terms:
Today’s Contract Negotiations Particular Revelations: Verify NWA lack of full integration on Amadeus affects exit row seats & FF Travelport GUI Environment early to mid-2010
Today’s Contract Negotiations Negotiate shortfall, $.80 Content Fee, upfront payback and future fee impact Promise longer contract if a perfect deal Insert co-terminus clause Negotiate Aggregation Clause
Today’s Contract Negotiations In exchange for future opportunities: Higher incentives Explore ability to tie particular airline to higher incentive Tailor incentives to favor preferred airlines
Negotiation Strategy Key Questions: Where do you see yourself one year from now? Three to five years from now? How many segments do you realistically see producing over the next 12 months? 36months? 72 months? Impact of Funjet type Web sites or UAL credit card on segment production
Negotiations Strategy Do you start with your existing GDS? Excellent beginning... Call GDS competitors, when and if truly interested in converting. Request 3 references of similar size and mix agencies: What were the pleasant and unpleasant surprises?
Negotiation Strategy Ought you deal with more than one GDS? Yes. If serious, test the waters. Travelport will pursue new business. Amadeus remains generous in every way. Sabre adjusts to the marketplace, and often preferred for government business
Negotiation Strategy Is it best to switch to increase inducements? Conversions: Tolerance for change Verify how segments are counted Compare multi-leg ticket pricing/convenience, group bookings and ticketing, vendor (Amtrak) variations
Negotiations Conversions: Content/participation comparisons of air, cruises, tours, hotels Do not assume: equal content capabilities Inquire: How long are your full content contracts with my most important carriers?
Negotiations Conversions: Impact on productivity and efficiency Get their best trainer who “speaks” both languages Obtain and split bonus for employee time devoted to training
Negotiations Conversions: Check references Some employees will embrace the change Impact on productivity and efficiency Data-merge must be perfect What is your plan if it is not?
Negotiation Strategy How long before your expiration date should you start to talk? If no shortfalls-12 months if 50,000+ segments If in shortfall-ASAP Otherwise, 4 months….
Shortfalls or Need for Change Verify count Do not procrastinate Be friendly and direct Delete what you don’t need or can’t afford Re-contract or innovate a response
Negotiations At what point do I contact a lawyer or other consultant? Once you have the offer(s) call. Some lawyers do more than just legal terms, and will coach you on economic incentives available for agencies with your production. GDS Contracts are legally enforceable.
Negotiations Get organized : Data on past 12 months of segment production Know your expiration date(s)-GDS and space
Negotiations Get organized : Will you need a free move? How long is the perfect term? Coordinate with space lease term? Check Virtuoso(Sabre), Odyssey(Travelport) and other deals… create your own LLC collaboration.
Negotiations Get organized: What will my monthly bill look like under the new contract? Zero? Scan numbers and impact of robotic software Unbundled scan or bundled scan? Variables cost?
Financial Incentives Cash signing bonus ranging from 4 to 6 figures Address no de- installation charges
Financial Incentives Tiers: Ranges go from $.20 up to $2.85+/segment Verify incentives start from #1 Cumulative option: continue, renegotiate, or terminate the agreement Backdate contract to recoup segments
Financial Incentives Verify no shortfall penalties or how to get there If cash upfront, limit threshold to zero, provided loyalty percentage is met Free move Protect against debit memos: Auto price protection?
Financial Incentives – Technology Fund – Acquisition Fund
Financial Incentives –Development of Affiliate Program –Premier Account Status-Beta testing –BBR Booking credit
Financial Incentives –Payment now due under old contract –Spend soft dollars –Waive penalties for re-contracting –Address services not used ex. Microfiche $26/month
Financial Incentives Three rounds to obtain best offer
Legal Amendments Verify meeting within 30 days to renegotiate contract if certain events occur: 1. Substantial Loss of Business 2. Loss of Individual Account 3. Loss of Particular Carrier
Legal Amendments – Industry event – Technology change – Loss of Content – Period to review and object to the setoff
Legal Amendments – Confidentiality language to protect travel agency’s database, pnrs, E-mail addresses, and contacts – Co-terminus language protection – Mirror indemnity language
Legal Amendments Options: Impact of potential Participant revenue reduction No charge for deinstallation at end of term Cessation of Business/Shutdown Clause
What keeps the Company President awake at night?
Client’s failure to pay $9,000, or $90,000 or hundreds of thousands of dollars An independent contractor creates $150,000 in debit memos Supplier default UAL Credit Card Policy Affecting Everyone
Qualify the Client What information do you collect about corporate accounts? Do accounts submit an application for credit? Do you conduct a credit check? Have you updated your database for authorized travelers?
Travel Services Agreement Ideas Right to offset-Deduct for defaults in payment against compensation due Require a list of authorized travelers Late payment provisions-add interest Cancellation fees included Anti-raiding provision
Travel Services Agreement Ideas Self-settling credit card A/R on a 10 day to 30 day cycle-spell it out ACH Options-Carefully understand it…
Security Features Personal Guaranty Letter of Credit Escrow
Independent Contractor Debit Memos Microcosm of a Corporate Account Qualify with a credit and background check: 1.Former travel agency owners 2.Top producers 3.Former employees of other agencies Written contract should spell out payment terms, including an offset provision, consent to apply charge to their credit card, and a Personal Guaranty.
Failure to Pay Cut off: Internal control Documentation Persistence Face to face meeting Final Resort: Need the written agreement and proof of use of services to successfully sue.
Credit cards-Fair Credit Billing Act Escrow Account-Viking River Cruises Pay net, deducting commission Sell default protection insurance-No documents without insurance or a signed waiver Preferred Vendors Keep current with CNN Air Travel Update
Insurance Availability Independent provider Bundle cost/include insurance Implement execution of waivers Document with e-mail Non-preferred supplier form
UAL’s Credit Card Policy Sell another carrier & focus on booking patterns. Obtain client’s written consent to charge credit card and do it on the UAL web site-Direct responsibility by UAL if there is a problem… Eastman AutoLink solution? Impact on GDS and card issuers
UAL’s Credit Card Policy August recess-Contact your Representative and Senators Use the sample letters All carriers are watching our industry’s effectiveness to stop UAL.
Now is the best time to add business Lunch with smaller competitors Weddings, Family Reunions, Students, Pet Friendly Travel Business Executives require face to face contact Privacy of computer data is of growing importance Crystal Ball Predictions
Proactive Future Plans Battle to keep profits Strategy: Recognize and implement financial and legal tools to protect your agency. Size matters
Pet Friendly Travel New Business: Offer Pet Friendly Travel/Main Cabin not Cargo Visit www.Petairways.com 2 month waiting list/Trained Pet Attendants Recession Proof Business: Pet Spas
Proactive Future Plans Mantra: “What will you do today, that will change tomorrow’s outcome?”