Measuring the value their work brings to their companies is a challenge for all travel managers. For Jeroen van Hek, global business travel category manager at the Dutch banking group ING, proving that value is at the heart of the company's travel program. Van Hek has introduced a total cost of ownership model to calculate the return ING gains from its investment in travel management, including costs for internal staff, travel management company fees and technology tools. He calculates ROI based on an initiative he introduced to standardize definitions of "savings," "cost avoidance" and "cost reduction" with his peers in Cortas, a group of the Netherlands' largest corporate travel spenders.
Van Hek also has rolled out a consolidated ING travel program in 35 countries, mirrored by a strategic meetings management program in the same markets.
Van Hek's mission to more systematically evaluate travel management began with the 2010 transfer of ING's travel program to global procurement from facilities management. "It gives you more credibility with the chief procurement officer, CFO and the rest of the organization if they can look at the deliverables of the program, but there was no clear vision or methodology for reporting," he said.
He therefore felt compelled to create his own methodology, starting with standard definitions. "This has enabled Cortas members to benchmark using the same criteria, whereas before all companies had their own interpretations of these conventions," said Cortas chairman Herman Mensink, noting Van Hek "has come up with a uniform convention that is increasingly being applied by corporates."
As useful as van Hek finds benchmarking with fellow travel mangers, the primary motivation for his standardization initiative was to achieve internal credibility. "The majority of travel agencies report savings by comparing negotiated fares with published fares," he said. "I can't sell that to my CFO. I need to benchmark against what I am already spending."
Van Hek helped define the spend benchmarks by setting pricing caps on air and hotel bookings. Savings is defined as the differential between the cap and any price that is lower. He negotiated a global air deal with the SkyTeam alliance, which was willing to offer a discount on all routes—even those on which ING offers little volume. The SkyTeam fares serve as the caps on those routes, and travelers are allowed to book other carriers only if the fares are lower by a fixed percentage. On routes where no negotiated fares are available, savings are tracked against the published fare.
[PULL_1]Additionally, ING will not display hotels in its booking tool with rates that exceed a city-specific cap. The company in 2011 achieved lower average hotel rates than in 2010, partly the result of downgrading designated property types in its hotel program. Van Hek also has noted to suppliers examples of how ING shifted business away from vendors, then brought it back. "It showed we were able to steer bookings," he said.
The total cost of ownership principle also underpins ING's relationship with BCD Travel, which since 2009 has served as the bank's consolidated transient travel services provider in 35 European countries. ING now pays BCD through a TCO model in which the TMC fee is a capped percentage of the bank's total travel spend. BCD can earn additional incentives based on its savings, cost avoidance and cost reduction performance.
Van Hek recently tasked BCD Travel with managing ING's meetings spend, in part to compensate for the loss of business from ING's insurance division, which is being divested. Noting that hotels and other suppliers are combining transient and group sales in a more determined fashion than in the past, van Hek created a portal for sourcing from a wide range of meetings suppliers, including audiovisual providers, marketing companies, web designers and even a company which produces toy orange lions—the ING logo. The portal is intended not only to secure better prices with suppliers but also to assure their quality.
ING staff are now obliged to register in the portal all meetings and events. "It ensures we can steer them towards preferred suppliers from the beginning," said van Hek. "They leave the sourcing and contracting up to us." The recently formulated global meetings policy also requires employees to consider using the bank's remote conferencing facilities where appropriate.
The report originally appeared in the November 2011 issue of Travel Procurement.