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As more and more travel companies outsource business processes offshore, travelers from Boston to Bakersfield may find themselves booking their flights with agents in Bombay or Bangalore in the future. Is this trend going to continue? And does it really matter?

by Michael Mulvagh
June 2005

During almost an hour of back-and-forth conversation between Dr. Crosby and the Manila-based travel agent, his anxiety level increased as his cell phone’s battery decreased.

“I was standing in the middle of JFK’s Terminal 2 on my cell phone when the exceedingly polite, Filipino-accented travel agent asked me if she could put me on hold once again while she talked to her supervisor,” says Dr. Chip Crosby, a New York–based clinical psychologist and frequent international business traveler. “Because my flight had been incorrectly booked by my travel agency, when I arrived at the Delta check-in counter I was told they could not issue my ticket or assign me a seat until the original booking agent corrected the error.” During almost an hour of back-and-forth conversation between Dr. Crosby and the Manila-based travel agent, his anxiety level increased as his cell phone’s battery decreased. And when the agent put him on hold one more time to try and remedy the problem, Dr. Crosby had the sinking feeling that he would not be in Paris tomorrow morning, that he would miss the meeting he had scheduled four weeks ago, and that he would need to call his friends in Chamonix and tell them to start skiing without him.

Today’s business travelers deal increasingly with offshore service centers as a primary means of booking travel. Many travel companies and airlines, anxious to squeeze the very last breath out of already sickly margins, have taken the lead in outsourcing many of their business processes to offshore locations. “Back-office” travel services, such as accounting transactions or electronic online reservation fulfillment, began migrating overseas to low-wage, developing countries like India and the Philippines in 1997. Increasingly, however, customer-direct interactions such as reservations are being outsourced to highly populated, non-unionized countries in Asia, Eastern Europe and Latin America.

The transfer of call center jobs overseas is likely to continue for the foreseeable future, according to many industry experts. A 2003 study conducted by Forrester Research reports that U.S. companies will ship 3.3 million service jobs and $136 billion in wages overseas through the year 2015. According to Janet Pau, senior analyst with AT Kearney, “Companies are looking to expand their presence not only in markets like India and the Philippines, but are also investigating new frontiers including China, Malaysia, the Czech Republic and Singapore. These markets have a strong underlying financial structure, a huge availability of English-speaking workers and an overall geopolitical environment that are very attractive for setting up businesses.”

Is the American consumer ready to accept the offshore servicing model? It depends, according Dr. Jon Anton, director of benchmark research at Purdue University’s Center for Customer-Driven Quality and a leading expert on offshore customer service strategies. In a recent study he conducted, 65 percent of Americans said they were likely to either decrease their purchases or discontinue purchases altogether if they are made aware that they are calling an offshore call center. “This sentiment might be a passing fancy and a one-point-in-time reaction,” says Dr. Anton. “For example, when car manufacturing jobs started going abroad, people didn’t like it and reacted negatively. But then, after a period of time, people found they actually liked Japanese cars and liked the service just as much or even better.”

But business travelers’ readiness to accept the offshore servicing model is largely dependent on how they book their reservations and where they are traveling. When a business traveler makes a reservation online, there is likely to be little objection or even attention paid to where the reservation goes after the desired flights and seats have been booked. Travel service providers know this, and thus continue to move more online bookings to lower-cost offshore locations for both customer support and final ticketing. The exception, however, is when a traveler—particularly a wealthy, C-level frequent flyer—does not or cannot book travel online and prefers to speak with someone in real-time who can advise about the entry requirements for Brazil, the most expeditious way to get from Denver to Dubai or the fastest way from Heathrow Airport into London. These travelers expect a different level of service that cannot be achieved online or through a large offshore call center.

Under tremendous pressure to reduce costs in order to survive, airlines are moving business operations overseas as a means to stay afloat. With labor costs being one of the airline’s biggest headaches, companies such as British Airways and Delta Air Lines have either tested or established call center presences overseas in order to take advantage of the reported 30–50 percent savings in labor costs.

British Airways, for example, has a significant call center presence in Mumbai (Bombay) through WNS, a company it started and spun off a few years ago. In fact, WNS now provides travel services to other companies, including Scandinavian Airlines and Travelocity. “Our travel practice has grown to the point where we are providing services to 13 major airlines and four or five travel agencies with a staff of over 3,500 people,” says Anish Nanavaty, executive vice president of WNS. “With an average agent salary of US$4,000 per year in India versus US$35,000 in the States, the process cost savings are huge, while customer service is solid. Often customers don’t even realize they are speaking to an India agent.”

The success and future expansion of travel offshoring efforts will be measured almost exclusively by customer satisfaction. There will always be U.S. travelers who want to “buy American” and will not easily accept the offshore servicing model. However, resistance may lower over time as more travelers become exposed to the latest telephonic technology that empowers them to make certain choices. “More advanced companies who have chosen to offshore certain calls are investing in sophisticated phone switches that recognize and keep the high-value calls in the market that provides the caller with the greatest amount of comfort,” says Dr. Anton. “And others are providing callers with the option to push #1 to hold for an American agent or to push #2 if they want to be connected to an offshore agent immediately without holding.”

With approximately eight years of solid experience to learn from, travel companies are realizing that success in offshore servicing requires significant investment in three key areas: 1) a strong, locally-based middle management organization on-site in the call center operation; 2) tools that measure customer satisfaction levels and identify immediate and future training needs and 3) senior management’s understanding that a 12–18-month ramp-up time will be required to work the bugs out of a startup operation. Without a sharp focus and infrastructure in these areas, the offshore venture will likely underperform.

At the end of the day, the combination of traveler benefits, cost savings and customer service will continue to shape and drive the evolution, expansion and ultimate acceptance of offshore servicing. Premium travelers like Crosby will continue to want speedy resolutions to their problems and hassle-free guarantees for the future if they use a travel services provider with offshore agents. “Luckily for me,” says Dr. Crosby, “all’s well that ended well, and in the end, my problem got resolved once I asked to be transferred to a U.S.-based travel agent. I was finally assigned seat 4B, and I made my flight with a few minutes to spare.”

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Michael Mulvagh is a customer service consultant and writer in New York. Email Michael at editor@executivetravelmag.com.