Tony D'Astolfo: Good day, everyone, and welcome to Zeno Labs Live, the new live video series from travel booking and expense management provider Serko where we feature subject matter experts on various topics across the corporate travel industry. I'm Tony D'Astolfo and today I'm joined by Lauri Reishus, President and Chief Executive Officer at the Airline Reporting Corporation, ARC. Welcome Lauri, and thanks for joining us.
Lauri Reishus: Thank you, Tony. Next best thing to being in person.
Tony D'Astolfo: There you go. And hopefully we're going to do that soon enough. So lots to cover today Lauri. We do this really quick here at the Lab, so we kind of push it really quick, a lot of topics to get through. So I'm going to jump right in if that's okay with you?
Lauri Reishus: Absolutely.
Tony D'Astolfo: All right, let's go. January 1, 2021 was a day, I'm guessing, you'll never forget. It's the day you took over as CEO of ARC, which just so happened to be smack in the middle of a global pandemic that has pretty much decimated business travel. Now you did have some time to transition, but would it be fair to say that Mr. Primo left you a house on fire?
Lauri Reishus: No, probably not. I mean, it was a conflagration right, not just one house on fire, the entire industry. Honestly, I often thought that, thank God I took the job January 1st, 2021 and not January 1st, 2020, because I did have the whole year of 2020 to help navigate through the pandemic for the organization with Mike by my side. So he put us in a really good place coming into the pandemic, and as you know really reshaped ARC's vision and our products and our culture, and put us in a place where we were able to, again, navigate all those challenges fairly successfully, even while making some really painful decisions along the way. So, nope, I still have Mike on speed dial, but he left, I think me and the organization, in the best possible place.
Tony D'Astolfo: Good to hear all things considered. So I think ARC is probably the best barometer for what's on the horizon. So let's look forward a little bit - what is the data telling you in terms of business travel?
Lauri Reishus: Well, I think everyone knows the first half of this year kind of culminating with the July period. We saw a nice steady recovery, especially once vaccinations became more widely available in April and May. We saw a lot of pent-up demand, domestic travel for sure, really took off. And we really track with pretty good precision three segments of the agency distribution channel, the online travel agencies, the managed corporate, and then we have this other bucket that's leisure and probably a lot of small to mid-size business travel.
Lauri Reishus: So the OTAs really led the way by July. They were at 90% plus recovered from 2019 levels. Corporate travel was down 90% at the beginning of the year. By July, we were about halfway recovered. And then after July with the Delta variant, we saw a little bit of a dip. And really, I think last week's report had the managed corporate space at about 62% below 2019 levels. Expectations for the rest of the year for us, in terms of how we're forecasting, is we believe we'll be ending the year at about 55% below, kind of all in on 2019 levels. And in 2022, as we put our financial plan together, obviously start the year at about 55% below 2019 levels. And we are forecasting will be ending 2022 at about 30% below.
Tony D'Astolfo: One other thing I wanted just to add on that, are you seeing any differences in the booking trends, like time to book? Are the business guys waiting, booking earlier?
Lauri Reishus: Yeah, it's been kind of all over, when people started traveling again, we saw a shorter than normal booking pattern. I think people were taking the opportunity of some really great pricing and once they felt comfortable, boom, there was a lot of pent up demand. We're really back to our normal, roughly three weeks out on average. So it's normalized, which given the fact that we don't have a lot of corporate recovery that's just kind of an interesting data point. I'm not sure what it really tells us.
Tony D'Astolfo: All right. Pandemic happens and your airline owners are scrambling. They had to do a lot of things. They got a lot of assistance. Now things have improved a little bit. Well, actually not too bad on the leisure side, but in the business side, again as you say, there's still probably two thirds off where they would like to be. I want to talk specifically about NDC. There was a lot of talk, a lot of investment prior - has this taken a backseat now because of the situation that the airlines are in?
Lauri Reishus: That's not been our experience. Of course, every airline is taking their own decisions, but if you kind of even think more broadly than NDC, NDC is a strategy to progress an airline's retailing distribution, set of strategies, everything from payments to getting content out into the marketplace, we saw really a lot of demand for NDC in 2020 and 2021. We have more airlines now implemented in the ARC system with NDC than we did prior to the pandemic. So clearly there are airlines that have made the decision to keep going and prioritize the work to develop their retailing capabilities, despite all of the constraints that they're under. And that's really what we've heard from the airlines is they only have so much money to spend on technology projects.
Lauri Reishus: And more often than not their retailing strategy, whether that's NDC or other flavors of means of getting their product out into the marketplace have taken a priority for them.
Tony D'Astolfo: Good to hear it. It feels the rest of the industry, or let's say the rest of the ecosystem needs to catch up, right? We had talked about the GDSs getting more aggressive and then of course, all the big TMCs have to figure out what their strategy's going to be to consume this stuff.
Lauri Reishus: Yeah, I mean, we did see a lot. There's not enough time for us today to really talk about all the GDSs, but you've seen each of the major GDSs progress their NDC capabilities as well. And so that tells us again in a resource constrained time, they've still made that a priority.
Tony D'Astolfo: Good people doing it. Okay, good to hear. I'm intrigued by ARCs investments in Traxo and NuTravel the concept of omnichannel I think starting to get some good traction pre-pandemic. Do you think the momentum slows coming out of the pandemic, that people are just more concerned and want to manage more closely what's going on? And then as a second, but related question, pretty interesting the Universal Connect... I'd love to know your opinion on that. Whether that's a hedge by the airlines to just provide direct distribution to their highest yielding customers. So let's start first with the investments and then we'll talk about Universal Connect.
Lauri Reishus: Yeah. I mean, I think that the fact of the matter is most corporate programs are already omnichannel programs, right?
Tony D'Astolfo: Whether they like it or not, just because...
Lauri Reishus: They've got people booking in various direct and indirect and certainly post pandemic or I guess in this period of getting to post pandemic, the duty of care issues are looming large, the desire to have the optimal traveler experience feels just as strong pre-pandemic as in this between period. So, my read of the marketplace is there remains a lot of interest by some buyers and many suppliers to find a more effective, direct distribution strategy. And with acknowledgement that it's not a binary experience for customers, the buyers and travelers have times when they want to book direct, that's an optimal experience for them, for whatever reason.
Lauri Reishus: I think this is very true of the road warriors, the frequent travelers. Given the kind of capabilities that you have in the mobile apps today for suppliers, yet buyers want to have their arms around their entire program. So we're still really bullish on the vision that there's a retailing experience. Travelers sometimes need a lot of help from their TMC other times want to be more independent, but yet have the TMC having their back if they get on the road and need to make changes. And so finding a way to create a real seamless experience for travelers feels to me like something that I hear from buyers is still a really important to them. So again I don't want to dismiss the impact of COVID on the industry and people's ability to invest and ideate, but really, I mean, there's kind of two ways people look at a crisis like this.
Lauri Reishus: They look at it as sometimes an opportunity to do new things, take a fresh look at things and others kind of go more of we need to retrench, we need to solidify our programs or our position. Neither is wrong, but you kind of see both happening out there. But I just think the end of the day, the traveler experience needs to continue to evolve and get better. And I think an omnichannel approach makes total sense for this industry because other industries have proven that it's a real game changer and provides immense customer satisfaction. And that's what we're all about, right? I mean at ARC, we are B2B. Our job is to support those that are delivering the traveler experience with as many capabilities as possible to make that a really efficient process. That's kind of where we sit.
Tony D'Astolfo: It makes sense. You know my take is that there's a hesitancy, I think, on the part of the business traveler and on how they're getting guided. And I think they're just going to want more guidance. So, I think it's interesting coming right out of the pandemic as people start to return to travel. I think you'll see hesitancy, I think fast forward a little bit. You're probably right. They'll get back to normal a little bit. And then they'll start saying, "Hey, you know what? I go to that airline website or that hotel website, they treat me a little differently." And so my experience is that much better. So anything that helps me take advantage of that is probably a good thing. All right, good.
Lauri Reishus: I do agree with you just to because on our pre-call chat, there's a lot of assistance needed right now for travelers trying to get out on the road, just navigating all the protocols and the TMCs are in the best possible position to help the corporate travelers that are out there to navigate all that for sure.
Tony D'Astolfo: All right. Now let's talk a little about Universal Connect. I don't want to assume people know what it is. So give us the elevator chat on it.
Lauri Reishus: So Universal Connect is a platform that's being developed by NuTravel and we made an investment in NuTravel in late 2019. For ARC it was a diversification move, right? We traditionally have been in the indirect, agency sales channel only. We have a growing data business, and we believe in the omnichannel vision, and we wanted to diversify our own involvement in the industry. That said, Universal Connect is a platform where a corporate buyer can put their traveler profiles, upload their traveler, program requirements, discounts, policies, all of the kinds of things that you administer a travel program with.
Lauri Reishus: And then it creates a place for direct connections to airlines websites. So in other words, if I'm a traveler from ABC Corporation, I go to Universal Connect. Any supplier that's connected there, I can go in and it will deliver to the supplier all of my policy requirements and my discounts so that when I shop on whatever airline or whatever hotel I'm starting obviously with airlines, the results that come back will recognize the corporation that I'm with and all of that information gets shipped to the airlines. So the airline can come and get that information from the Universal Connect platform. And it's just a really kind of easy way for a buyer to enable their travelers to make direct bookings, if that's part or to their program vision.
Tony D'Astolfo: And any rub so far with your agency members relative to "this will potentially take some business away from me?"
Lauri Reishus: There's mixed reactions. Plenty of agencies have said, "We see this is the direction things are going. We want to be involved." We've had agencies say, "As soon as you're ready to start or NuTravel is ready to start integrating agencies into the platform, put us on list. We want to get our tech teams talking." We've had others that have raised questions and concerns about it. And no, I won't be coy about it. There is a shift in the agency role to one of servicing, duty of care, reporting, all the other elements besides sort of the booking path when there's a direct booking.
Lauri Reishus: But again, the old thinking Tony of - I mean, how many years have people been talking about direct versus indirect, this kind of binary choice that just doesn't feel like the world that we're in today and other industries. And, most of the agencies, I think that we've spoken to are really directionally intrigued with this. They're trying to think through its priority for them as well, based on what their customers are asking. So you can't make change without change happening and change impacts everybody. And people have to sort out, what's my value proposition with this shift. And I think there's a lot of that going on right now.
Tony D'Astolfo: And it's an interesting time because the economics, the business models, so many things have been put under the microscope as a result of the pandemic. So I'll be watching closely on this one. It'll be interesting to see how it evolves.
Lauri Reishus: Agreed.
Tony D'Astolfo: All right, so I'm very impressed with the direction your predecessor, Mr. Primo took relative to the 'new ARC' - I call it the new ARC, and you've been equally aggressive. So it's clearly the dawn of a new era at ARC where you guys are getting more bolder and aggressive and doing more. So what's next?
Lauri Reishus: Well, certainly the omnichannel vision has just begun, right? There's some investments we've made, there's work that we're doing. We think a key concept that ARC could provide into this mix is something we're calling the unused ticket value ledger. The idea that, and certainly we know, this pandemic turned everything upside down. There's a lot of credits out there. And I think the airlines have sorted out a lot of how to deal with that. But the whole idea, if you think about an omnichannel retailing experience outside of our industry, I'm a Nordstrom shopper because I really like the fact that it really is an omnichannel experience. And if I have this thing called notes, which is credits, when I go to checkout it knows I've got notes. It gives me an easy checkout process to apply any kind of credits.
Lauri Reishus: We think there might be a capability in the industry that would be, really that's a problem to solve for both the agency and the direct channel to give and even just think about starting with the corporate market, give the corporate buyer an ability to manage those unused funds really efficiently in the buying process. One of the issues for a corporate buyer is, I buy the ticket, if I don't go, the credit is actually in my name, not the organization's name. So again, I think there's a lot of backend ways people have been dealing with this, but it's not highly efficient. So ARC tries to look for where are problems that impact a lot of people a lot of airlines, a lot of agencies.
Lauri Reishus: And is that a problem that we can solve by making a more efficient capability? That's kind of, I don't want to say neutral but widely available to all, that's where we really try to play. And so we think that's interesting, certainly there's a ton of work around data. We are really data obsessed here at ARC. We're really building up those capabilities. We see lots of opportunity in the data space. We have a great partnership with IATA. Many people don't know that we are the stewards of the industry's largest repository of airline ticketing data for both the direct channel and the indirect. So lots of opportunity there. So those are the things that we're thinking about, but don't let me leave you with this feeling that, oh, omnichannel's done. We think there's years and years and years of work ahead with that to bring at least some of that vision to life.
Tony D'Astolfo: Strategic direction. So something far reaching, but the unused ticket thing is a itch that needs to be scratched. Right, people are struggling today, so good stuff, right. We're going to move into a couple quick-hit questions, something we call the Zeno Zone, to get to know a little bit more about Lauri, the person. So I hope you're ready for this.
Lauri Reishus: This one scares me because this one I don't know anything about, yeah.
Tony D'Astolfo: All right. So first question, I'm curious if you have one very major business decision to make and you can make one phone call, who gets the call?
Lauri Reishus: Probably the chairman of our board, Bonnie Reitz. Bonnie was part of Gordon Bethune's turnaround team and Mike brought her into the organization as our chair. She has relationships galore in this industry and that she strikes a really great balance of being objective and seeing the big picture, but yet knows a lot about what ARC can and cannot do well, and you know, just where we are as an organization. So she'd probably be... Big business decision I'd go to Bonnie first and then I'd probably tap a lot of other people too.
Tony D'Astolfo: Well that's good. Okay good to hear, all right. Three dinner guests, anyone, this is dead or alive. Anyone in the history of time, you have three dinner guests to put at a table, so who's going to be at Lauri's table?
Lauri Reishus: I think Mark Twain because I like his writing and he's got a great sense of humor. This is probably a very cliché question, but no one's ever asked it to me before, so I don't have it prepped, but Mark Twain. I'm a big fan of Ruth Bader Ginsburg. So of course all these people are no longer with us, and who'd be the third? Jane Goodall, yeah.
Tony D'Astolfo: Okay. All right. So she's going to lead the conversation. I assume you're just going to observe.
Lauri Reishus: Well, I've heard her speak and she's really pretty fascinating. So yeah. That's my dinner party. It's kind of an odd group, but yeah.
Tony D'Astolfo: Follow up to that one. Are you guys sitting in a fine dining establishment or a dive bar? And I'm going to take a guess on this one. I think I know, but go ahead. Fine dining or dive bar?
Lauri Reishus: I think this is definitely a dive bar group, although I'm a fan of fine dining. So, maybe I need to rethink my dinner guests, but you can't see Mark Twain in a... Mark Twain's got to be in a dive bar, right?
Tony D'Astolfo: Yeah. Well, that's what you think I guess.
Lauri Reishus: I don't know. I don't know. Crazy question.
Tony D'Astolfo: All right. Cool. Last question. It's not actually a question. You're an industry insider with a lot of knowledge. So I ask everybody going out the door, Lauri give us a prediction of something you think is going to happen in our industry in the next 12 to 18 months, that's the horizon.
Lauri Reishus: I personally think, I mean, even our own forecast says that we don't think business travel will recover to 2019 levels until the end of 2026. I know, right? And that's based on, we compile data from all the airlines and who knows? It's who knows right now, but that's our best estimate right now. But I think it's going to come back. I think it's going to come roaring back. And I know lots of people are saying, it'll never recover to 2019 levels. I've had this debate with dear friends in the industry who are convinced, maybe it's going to be 30% less than it was. And that'll be the new normal, 12, 18 months. I think we're going to be surprised at how much, I just think it's so important to be in person.
Lauri Reishus: And that doesn't mean we give up this thing called Zoom or whatever. I don't even know which we're using here, StreamYard, but I think it's a both and we've learned, this is a really great way to get some work done, but I think you can do this and we'll get back out on the road in numbers that will even surprise ARC's own forecasters.
Tony D'Astolfo: Good. I'm glad to hear that. Because '26, scared me a little bit.
Lauri Reishus: I know but I'm like "Really guys, is that what you think?" And they're, "Yeah, that's what we think."
Tony D'Astolfo: I'm an optimist. I think you're right. I think it'll come sooner or later. I actually think the pie's going to get bigger. Some more people are going to start to travel for work. They're going to not be inhibited by what we're dealing with today. So I'm on the optimistic side as well. All right, Lauri that's it. That's all we got today. I want to thank you so much for joining us. It's been a real pleasure getting your insights and I want to thank everybody else who joined us live today for Zeno Labs Live and hope you join us again. Until next time, this is Tony D with Lauri Reishus, signing out.
Lauri Reishus: Thank you, Tony.
Tony D'Astolfo: Welcome.
Lauri Reishus: Bye.
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