American Express Business Travel and Rearden Commerce, the startup creator of a Web-based travel management service, have announced an investment and joint development deal aimed at expanding the market for the service.
As part of the deal, American Express has invested $22.5 million in Rearden Commerce, which has taken a seat on the startup companys board of directors.
The two companies have formed a joint product council that will create a development roadmap for future Rearden Commerce features and functions as well as plan what additional merchant services the two companies want to add to the platform, said Andrew McGraw, American Express senior vice president and general manager for North American business travel.
Rearden, based in San Mateo, Calif., has developed a Web-based application designed to give corporate users instant access to essential business services.
The Rearden platform, built on the service-oriented architecture, provides access to more than 135,000 merchants providing nearly every possible service that might be used by travelers.
“Our go to market plan and strategy is we will go private label to the market. It will be called [AXIOM] the American Express Intelligent Online Marketplace powered by Rearden Commerce,” McGraw said.
American Express will market AXIOM, which is designed as a one-stop “shopping mall” to its more than 4,000 corporate business travel customers in North America.
The difference between Reardens service and other online travel reservation services, such as Travelocity, Orbitz, or Hotwire is that it goes beyond the typical airline, hotel and car reservation services to include such services as dining reservations, package shipping, parking, limousines, entertainment tickets and audio or Web conferencing.
For Rearden, the American Express partnership is an important step for the company to keep expanding its platform, said Jeffrey Pulver, Reardens vice president of marketing.
“Our business is really fueled by the network effect, so the more buyers we get on the system and the more employees we get on the system…the more value it brings to our suppliers,” Pulver said.
Reardens ambition is nothing less than to expand its travel platform to a scale rivaling Amazon.com and eBay, he said.
For the corporate customer the key benefit is that it can give employees a menu of preferred merchants for all travel services.
This gives the organization greater visibility and control over how much it is spending and how it is spending T&E dollars.
Travel service managers can add and revise preferred merchants based on the latest discounts and service agreements.
They can also maintain an online guide of travel and expense policies that employees must follow.
The ancillary services represent nearly 50 percent of the typical business travel expenses, McGraw noted.
But these expenditures are largely unmanaged and uncontrolled and “therefore customers do not have any opportunity to derive savings from them,” he said.
These services drew the interest of American Express, McGraw said, because if anything they offer more opportunities to generate savings than the core airline, hotel and car services.
Most of the airlines are still struggling to come out of Chapter 11 reorganizations, while huge demand and a shortage of hotel capacity in major markets means that it is hard to find substantial discounts in airline and hotel reservations, he said.
The two companies actually signed the partnership and investment agreement back in July. However, American Express wanted to train its marketing staff and actually start selling the service before it actually announced it.
As a result, American Express has already sold the service to 15 customers. The company had previously beta-tested the service at one of its customers as a proof of concept, McGraw said.
American Express and Rearden Commerce has gained a significant market advantage by focusing on the other 50 percent of travel expenses that have heretofore have been beyond the reach of management tools, said Bob Offutt, senior technology analyst with PhoCusWright, a travel industry analysis firm.
Offutt said he believes that the rising generation of business travelers who have grown up working on the Internet will be ready to use an online travel management platform that gives them access to a wider range of services.
A system “that provides convenience in terms of airport parking, event tickets and dining…will actually be a natural draw to further use,” Offutt said.
These services give them an advantage over services such as Travelocity, Expedia or Orbitz because the Rearden “platform treats all of the services equally as opposed to the other platforms which are air, car and hotel with some add-ons,” he said.
Whether Rearden can turn its travel service to a commerce platform on par with an Amazon.com or eBay really depends on whether they can keep growing and branching out beyond this latest deal with American Express, Offutt said.