Demand For Multinational Service Prompts Mega Action
Demand For Multinational Service Prompts Mega Action
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By Megan Hjermstad
As corporations, driven by competition and consolidations, expand their operations throughout the world, they increasingly are seeking the help of travel management companies to take their travel programs global, or at least multinational. And the mega agencies and agency consortia--including American Express, Business Travel International, Carlson Wagonlit Travel, Maritz Travel GTM, Rosenbluth and Woodside Travel Trust--hsave risen to the demand by expanding their focus into more international operations.
As corporations and their travel management companies drive to globalize, they must overcome differences in culture and technological sophistication. To do so, agencies are standardizing processes and integrating computer systems. Naturally, the demand must be there to justify that investment, and it is.
By 2010, 90 percent of corporations will be conducting business in more than one country, according to statistics presented at the global leadership program of Woodside Travel Trust, a senior level executive program at the University of Pennsylvania's Wharton School of Business.
"Four or so years ago, a lot of our customers came to us and started talking global," said Hervé Sedky, vice president of multinational for American Express. "It was the first time that we looked at a travel policy and stopped looking at the U.S. only and started looking global. Although the trend started four to five years ago, with maybe some very sophisticated customers starting before that, in the past year, we've seen a ton more activity."
American Express has seen an increase in global deals and contracts by 400 percent since 1995; the number of customers asking to look at accounts managed on a global basis increased by 100 percent during the past two years.
"The environment is changing and competition is forcing customers to become global; forcing them, in some cases, to look beyond their headquarters market, or in our case, beyond the United States," said Sedky. Indeed, many of American Express's corporate clients are looking beyond the U.S. market, he added, "so obviously at American Express, we have had to change as well."
Liliana Frigerio, executive vice president of global sales and account management at Carlson Wagonlit Travel said that while most companies going out to bid are aiming to globalize their travel programs, many are taking the intermediate step of regionalization.
"They go out to bid on a global basis, and the bid is always global," she said. "But sometimes during the bidding process, they realize maybe it doesn't make sense to go to one agency and pick an agency per region. They might start with 50 agencies and it's rather difficult to go from those numbers down to one. So, they are very happy when they go down to two or three."
Frigerio noted, however, that in certain parts of the world companies are more likely to be involved in global consolidation efforts. "In Europe and the United States, consolidation is really a word that you hear extremely often," she said. "Latin America and Asia in the past two years have really stepped up the speed, though these two marketplaces are behind. I don't like to say that they are behind, it's just that things happen afterwards there, but when they do catch on, then it goes very fast. It's not going to take Latin America and Asia as long to get to the same consolidated situation."
David Radcliffe, CEO of Business Travel International, said in the past five years revenue derived from international consolidation has risen from 20 percent to 75 percent. "It is a rapidly growing trend as most companies now are looking to maximize buying power," he said. International business at BTI partner WorldTravel Partners over the past two years also has grown as a result of clients pursuing a global strategy.
Thomas Lacny, executive vice president of global sales at WTP, credited the surge in global consolidation to "a combination of being better enabled from a technology standpoint--the use of the Internet and the implementation of better telephony--and supplier readiness. Suppliers are really becoming more global and are willing to negotiate above and beyond."
While interest in globalizing travel programs is strong, few companies truly have such programs; most companies are in the process of or have yet to implement their global programs.
According to an American Express survey of 52 corporate managers of U.S.-based global companies, 85 percent said it was "quite" or "extremely" important that American Express align account management on a global basis. However, only 60 percent had selected worldwide initiatives and rolled them out on a limited scale or gone global.
American Express has worked with about 300 Fortune 1000 companies on global coordination. "Some are to a very small degree expanding their business, looking at Canada particularly, sometimes Mexico and Latin America," Sedky said. "Others are incredibly sophisticated global deals, where we've rolled out in a matter of months, or about a year."
At Carlson Wagonlit, fewer than 10 accounts are truly global, but all of its customers with a spend over $10 million are serviced in more than two countries. "Very rarely do people participate in a bid where we do not service that prospect in at least another country," said Frigerio. Carlson's smaller customers also have expressed interest in consolidation. But Frigerio sent out a warning: "Consolidation brings a lot of advantages, but you've also got to have the clout behind it. If you have $5 million on a worldwide basis spread out in 20 countries, consolidation is going to cost you more than the benefits it can bring. There is an entry where it starts making sense."
Rosenbluth also has seen interest in consolidation among companies of varying sizes. "Originally, you would think it would only be a big global company, but the dynamics are so different from the first perception," said Timothy Small, Rosenbluth's vice president of business development. According to Small, midsize technology companies and large e-commerce companies, though in their infancy, already are looking to globalize. "Yet," he said, "you're looking at major companies that aren't globalized nor will they think of globalizing just because of the corporate culture."
WorldTravel Partners' top 200 customers all are international, and "all are looking at globalization more seriously than ever before," Lacny said. "We have seen accelerated requests from client bidding for a designated number of countries. For example, one client had a bid for 22 countries; for others it is maybe five to six countries. It may be a U.S. bid, but the company is still asking, 'How do I craft a strategy to begin managing on a larger scale later on?' "
Radcliffe said BTI has well over 20 customers operating across 10 international boundaries.
Bob Booth, general manager and COO of Maritz GTM, said it has between 10 and 20 global clients, based on his definition of a global customer: "operating in all three regions--we divide the world into EMEA (Europe, Middle East and Africa), the Americas and Asia/Pacific." Basically, he added, a global customer is a company that has a travel program in multiple countries per region. "I would say it also would be a customer that has a travel policy that would apply to all three regions and has preferred suppliers in place across all three regions."
Booth added that Maritz GTM has some customers that wouldn't fit his definition of global, but are consolidating travel programs in either a couple of countries or on a regional level. "They'll pick their top three to five countries--based on where most of their spend is--and they'll consolidate them, let it sit for a while and see if they want to do more," Booth said. "Many companies will look at regional solutions. They'll feel that as a corporation they're not ready to do a global program, but they'll do something in the Americas, something in Canada and Mexico, and incorporate maybe Latin America as well."
Most global travel management companies can promise their global customers locations in virtually every major business destination in the world.
For instance, Woodside Travel Trust--formed in 1992 by the merger of two agency groups, Woodside Travel Management Corp. and Travel Trust International--has partner agencies operating in 80 countries. "What we're bringing to corporate clientele is local expertise and significant relationships, negotiating ability and infrastructure within a particular country, and yet we have the global umbrella of WTT to bring the common products and services needed for companies going down this path," said Patty Corbino, vice president of global business development.
Maritz Travel GTM--formed last April by uniting GTM Travel Management and Internet Inc., a division of Maritz Travel Co.--has locations in 40 countries and expects that number to grow to 50 by year-end. Maritz GTM also includes many of the former affiliates of WorldTravel Partners before it acquired BTI Americas (BTN, Oct. 26, 1998). "Once you get above 50, it's customer by customer," Booth said. "Some customers might need Azerbaijan; then you really set up a relationship based on your customer requirements."
Similarly, the approach at WorldTravel Partners and Business Travel International has been to be wherever its customers want a location. "For example, one company involved in a major consolidation wanted Uruguay and Paraguay. We appointed designated partners working through Argentina to identify those partners, and added them six months ago," said Lacny. WTP-BTI now has locations in more than 76 countries.
The strongest tools for implementing global programs are global data consolidation capabilities now offered by all global travel management companies--and demanded by their corporate clients. Corporate clients building global programs can use the data collected worldwide to negotiate global deals with suppliers. "That information has global clout if they're dealing with an airline, or we're dealing with an airline on their behalf. We now have the information to leverage on a global basis versus a U.S. basis," said Small.
Rosenbluth uses Vision, a back-office system that captures all travel management information in a uniform consolidated form. Vision is a Web-based tool that enables travel managers to access reports and snapshot views of travel data. At the agency, global data consolidation has sped up in the past year.
"Last January, we were reviewing global data from the previous September," Small said. "Within 30 days, at a meeting in February, we were reviewing January data. We went light years ahead in the course of the fourth quarter of 1998 as far as collecting global data. I would say that 95 percent of our global data is timely, accurate and matches the standards of the United States. The portion that we're missing will be corrected come June. I'm very comfortable and confident in the product that we can deliver as it relates to information."
According to Sedky, American Express has global reporting capabilities for its travel business in all regions of the world. "For all markets where there is significant spend or travel activity, we're having absolutely no difficulty getting the data," he said.
"We do manage global data--charge card, travel, purchasing card--through a global warehouse in the United States," said Sedky. "The neat thing is that we also are working to purchase additional data in the air sector, for instance, to get true air patterns, and in the hotel sector. We can feed that into this data warehouse so that we can increase the depth of this reporting."
Maritz GTM uses its own reporting product, called Northstar. "The way we've rolled it out has been in support of our multinational client base," said Booth. "We wanted to make sure they were the first ones to be up and running on it. Maritz is the developer of the system; we expanded its use to be a worldwide product. There are a number of U.S. customers on it and now GTM's multinational client base has been migrated to it."
While it is more difficult to get data in certain parts of the world, Booth said Maritz GTM can bring in data from anywhere in the world even if it requires a more labor-intensive process. "There's a variety of system sophistication throughout the world," he said. "Some countries have very sophisticated back offices and mid-offices and the data is very easy to get. In other countries, that becomes a much more manual process. We either take the data from their back office or we provide a format where they actually type it in, based on the tickets that they've generated, and forward the data to us that way."
For its part, WTP also has its own proprietary data system called GEMS (Global Expense Management System), a BTI-wide product that enables the agency to consolidate data and provide it to clients for analysis. "Clients are harnessing that to bring to an internal company audience, to help implement policy in their own company and to sell consolidation to management and to suppliers," said Lacny.
WTP clients also can leverage the technology offered by newly branded TRX Technologies--previously Travel Technologies Group (BTN, March 6)--to help consolidate data from multiple sources.
Carlson Wagonlit has 10 years of experience in consolidating data on an international level and currently consolidates data for about 120 customers in about 52 countries. "Although technology is not the same in all countries, through our data consolidations program--which is proprietary--we are able to get the data that comes from different sources and put it into a program so it can be read consistently and coherently," said Frigerio.
The differences in technology deployment among countries are illustrated by the spread of electronic tickets.
"The adoption of e-ticketing across Europe is nowhere near as far along as it is in the United States, with the exception of maybe Germany--Lufthansa is a big supporter of e-ticketing," said Booth. "Latin America is certainly not very far on e-ticketing; Asia is kind of mixed."
While Latin America is further behind other areas, Rosenbluth's Small admitted, "you can e-ticket a lot more internationally than you could six to 12 months ago. I think eventually it depends on the comfort level. You have to ask, 'Are they expatriates or are they local Mexican nationals?' Because if they're expats, they're going to accept e-ticketing and online booking, and they'll know the language and they're up to date. Whereas if it's foreign nationals, the whole e-ticket thing is sort of 'Star Wars' to them."
While South America still is catching on to e-ticketing, "e-ticketing is making some real impact in Europe now," said Patty Corbino, vice president of global business development at Woodside Travel Trust. "The issue is defining what type of tickets can be generated electronically. Net-net tickets that are predominant in Europe, consolidated tickets which can't be generated electronically. So you are dealing with some different dimensions."
American Express's Sedky agreed. "The U.S. airlines are driving e-ticketing globally; there are some U.S. carriers that now have e-ticketing solutions in Europe," he said. "That absolutely is pushing e-ticketing across all regions. Travel managers are putting pressure on airlines because it has dramatically reduced pricing in terms of eliminating delivery costs in markets like the U.S., so they are demanding it everywhere else."
However, Sedky cautioned against assuming that the United States was the leader in implementing technology of all types. "France is a good example of a market that is not as progressive around Web products but, for instance, is a lot further ahead than we are in the U.S. in the area of smart card technology."
The United States clearly is leading the march toward Web-based booking, but the Internet has caught on so quickly around the world that the adoption rate of online tools abroad should be rapid. "As I've seen with other technology solutions outside of the U.S., it doesn't take the other locations nearly as long to ramp up," Corbino said.
Europeans are ready for online tools, agreed Small, "it's just a matter of whether company technology is able to handle it. In South America, it's a glimmer in people's eye."
Booth said Maritz GTM has one customer with a 20 percent self-booking adoption rate in Europe. "In Europe, 20 percent would be really high," he said. "The one that hit 20 is a U.S.-based multinational corporation and business correspondence is all in English. So to roll out the product is relatively easy." Different languages often require separate booking tools, which makes standardization difficult. But while language and culture have been two of the largest obstacles in all aspects of globalization, particularly in Europe, Radcliffe said, "both of these barriers are eroding."
The challenge for each of these companies in helping clients structure global programs has been to provide a measure of consistency, while respecting national and regional differences. At Rosenbluth, the approach has been to determine the unique comfort level and position of every company culture and every country culture.
"The way that you price a business and the way that you deliver business are different in every country," said Small. "For example, when you come to price in the U.S. you've got transaction pricing; that's a brand new concept that hasn't even been tried in many instances in a place like Brazil. We're still competing with travel management companies that are rebating, where in the U.S. you don't have 8 percent to play with. The real challenge is understanding the clients' needs, knowing what you can deliver to match those needs and being able to customize your approach for each entity."
Maritz GTM also recognizes the need to respect local differences within a global program. "In the same way that the way you conduct business is different in every country, the services that business travelers need vary country by country as well," said Booth. "In Europe you have much more rail; in Asia you have much more pre-paid options and more use of consolidator fares. So your travel program has to have guidelines. You have to have a good travel policy, and you have to have a good approach to supplier management. But you also have to build in flexibility so that you're going to get the best deal per country, per region.