Analysis: The risk Rosenbluth couldn’t afford not to make

No one can blame Rosenbluth for revising the Biztravel Guarantee by lowering payments made to dissatisfied airline customers.
A $1.6 million payout in eight months is a lot for biztravel.com, which has estimated gross bookings of $70 million.
Rosenbluth has received some notoriety for the groundbreaking customer service pledge—even though a lot of industry observers knew it was risky, it was presumed Rosenbluth could afford it. Actually, Rosenbluth couldn’t afford NOT TO make such an offer.
Ranked as the ninth largest online travel agency, biztravel.com is far behind the market leaders in an industry where scale is the key to survival. Rosenbluth acquired the struggling service with the expectations that some of its business customers will book their travel on the Web. Biztravel.com is an extension of Rosenbluth’s customer service. So it’s fitting that Rosenbluth, to keep www.biztravel.com on the map, used customer service to lift its membership and brand recognition.
Scaling back the airline rebates should save Rosenbluth millions of dollars over time; adding the car rental and hotel guarantees shouldn’t hurt it much. For one, the guarantees only extend to a small number of suppliers. Secondly, air represents an estimated 70% of biztravel.com’s business.
Biztravel.com claims a surge in revenue was due to the biztravel.com guarantee. The service grew 45-50% since May 2000, when the guarantee was introduced. While that’s significant growth, it’s in line with industry gains as a whole, much of which is due to the acceptance and adoption of travel e-commerce.
So it’s difficult to put a finger on the boost attributable to the Biztravel Guarantee—and how sustainable that boost will be over time. In addition, no one really knows at this point how travelers will react to the rebate modifications. No matter what happens, though, Rosenbluth threw a life jacket to biztravel.com when it acquired the service in August 1999. And it’s thrown it another one now—by keeping it viable, not making it bankrupt.
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