Electrolux Ramps Up Mgmt. Practices

<B>Electrolux Ramps Up Mgmt. Practices</B>

By Amon Cohen

<I>Brussels - </I>The virtues of global travel management programs frequently are extolled on the drawing board. In the real world, implementing best practices worldwide is a much more difficult proposition, requiring vast reserves of determination, inspiration and patience.

All of these qualities were manifest when household electrical appliances manufacturer Electrolux staged its annual travel management board meeting last month.

The progress and setbacks it has experienced since last year's get-together, which it similarly invited Business Travel News to attend, illustrates the challenges even the best-managed companies face.

On the credit side--and the vast majority of developments at Electrolux are on the credit side--the company has seen an impressive improvement in corporate card adoption by travelers and a corresponding drop in cash advances.

There also has been a surge in up-front airline discounts.

In the United Kingdom, the group is running a pilot of the Captura automated expense management system, with encouraging feedback.

Most importantly, a change in management culture at Electrolux has enabled the travel team to mandate more firmly than in the past, leading to a corresponding improvement in corporate travel policy compliance.

On the debit side, forays into online booking so far have proved disappointing, with poor adoption rates for a pilot with GetThere in Sweden, while a hotel booking system that bypasses the global distribution systems similarly is doing less well than expected.

However, the corporate travel department will start to reallocate travel agency costs internally in the next few months and global travel manager Jo-Achim Hamburger hopes the differential between transaction fees for conventional and online bookings will force the pace of change.

Nor is that the only major development on the horizon. Electrolux currently uses three agencies in the United States--Navigant International, Southern Travel and Suzy Davis Travel--but is tendering to consolidate to just one.

At the same time, it is reviving the idea of making its agency deal net of global distribution system remuneration and cutting its own deal with a GDS to earn the sector booking incentives directly. Electrolux might even take the concept global.

"We could conclude a global agreement with a GDS," Hamburger told the meeting's attendees. "At the moment, we have an offer on the table. It is a significant amount of money, but it is a new idea for Europe--even though it is common practice in the United States. The U.S. agents are responding to it well, but I don't know how agents in Europe will react."

Hamburger is plotting his travel management program in the face of significant changes for his company. The price of white goods has fallen 6 percent to 7 percent on the world market in the past year, while the cost of raw materials has risen.

Travel accounts for E120 million (US$105 million) of a SEK85 billion (US$8 billion) purchasing bill, but the pressure is on to cut costs in all areas.

Corporate travel policy therefore has switched from a country-by-country basis to each of the six business sectors that make up Electrolux.

"This has given much greater ownership of policy," Hamburger said, "and there is more of a culture of mandating. It is the business sector managers who call the shots, and discipline among the travelers is very good because they understand the economic situation."

As one example, the percentage of business class tickets bought by Electrolux Home Products, the largest of the group's six sectors, has dropped from 80 percent to 35 percent.

Hamburger paid tribute to senior management for leading by example. "They are all traveling in economy--they are really living it," he said.

The new mood is leading to some spectacular successes in adoption of the American Express card. One hundred percent of travelers in Austria are using it and in the company's home market, Sweden, the figure is 97 percent. Other countries are finding it harder to change attitudes--notably in southern Europe, where usage can be as low as 45 percent.

Hamburger simultaneously is working hard to stamp out the use of hotel vouchers, which add significant process costs. He also is vigorously promoting the negotiation of up-front airline discounts.

The United States has been the most successful, with 66 percent of the company's tickets there bought on an up-front basis. In consequence, the average ticket price dropped from US$609 in 1999 to US$553 in 2000.

Hungary also is doing well, with 63 percent, but other countries are as low as 10 percent and the key markets of Sweden, Germany and the United Kingdom are in the 30s and 40s. Overall, the percentage of up-front discounts has shot up in one year from 10 percent to more than 40 percent.

Hamburger wants to take that figure higher still as part of his strategy to change the internal financing of travel.

"We need to show the traveler the impact of the negotiated discount on his ticket and then it will be easier to charge a transaction fee because it will still work out much cheaper in total than the market price," he said.

Hamburger will introduce internal fees--starting with Germany and Sweden--in September, though initially only on tickets with up-front rebates.

Similar to other companies in Europe, Electrolux is having to reconsider how it finances travel in the light of commission abolition by leading airlines. British Airways went to 0 percent in the United Kingdom in April and Lufthansa will do the same in Germany in January.

In this new environment, the case for moving bookings online becomes much stronger. Electrolux pays its travel agency 2.5 times more for a traditional telephone booking than for the fulfillment of online reservations.

Hamburger and his colleagues are debating whether to push ahead with the rollout of GetThere, which has had only lukewarm response since the pilot started in Sweden last October. He would like to continue because of the strong financial argument in its favor.

"I think we should go on and roll it out, even though it is not perfect," said Hamburger. "There are still some pricing bugs. It also is taking us a long time to change attitudes, and we have the problem that travelers cannot blame anyone if something goes wrong with their booking."

Electrolux also last summer launched a travel intranet site, called Travel Planner. This year, the number of daily hits has risen from 2,200 in January to 3,500 in June, but Hamburger would like to see it go much higher.

Part of the intranet is an online hotel booking system, operated by German consolidator HRS, which brings costs down by bypassing the GDSs. Around 150 travelers booked online through HRS in the first four months of this year, and Hamburger expects turnover through the system to reach E800,000 (US$698,000) by year-end.

"People don't know Travel Planner exists," he said. "They still find it easier by phone.