German Corporate Travel Market Matures

<FONT SIZE="+3">Business Travel Europe

<B>German Corporate Travel Market Matures </B>

By Paul Needham

<I>Frankfurt </I>- German travel managers are increasingly paying management fees to travel agents and using online services for information and bookings.

These significant structural changes are coming as Europe's largest corporate travel market is set for up to 5 percent growth by the end of 1996 and still more growth over the next few years. These trends were highlighted in recent large-scale surveys and in interviews with travel managers in Germany.

A survey of 122 large companies and 30 travel agency groups for <I>Wirtschaftswoche</I> magazine estimated that the German business travel market currently generates $103 million, with half of all business trips made within Germany and the remainder split equally between Europe and overseas.

Travel managers forecasted a 5 percent increase in spending this year, while agencies predicted a smaller 3 percent rise. The survey found that 27 percent of German companies pay travel agencies a management fee, 45 percent use a travel agency for all bookings-through an in-plant in one out of four cases-and 43 percent have an in-house travel department. It also showed that 30 percent of firms have access to online travel information, and 10 percent of bookings are made directly online with suppliers.

A separate survey, conducted by German business travel consortium VDR, of 100 members showed 60 percent expect travel spending to rise over the coming two years, and only 11 percent forecast lower travel costs. Respondents reported a total air volume of $310 million, with 59 percent spent on European destinations.

Fifty-two percent of VDR member firms organize travel through an in-house travel department, 25 percent through an in-plant and 13 percent allow travelers to book individually.

In 63 percent of firms, travelers or secretaries book hotel rooms directly, with 55 percent of bookings made by phone or fax rather than electronically, the VDR survey showed. "As long as this continues, we will never be in a situation to control costs and negotiate with hotels," said VDR president Michael Kirnberger said.

German managers underscored some of the changes indicated in the studies with a debate on management fees versus commissions.

Hans Lehrburger, travel manager of Siemens Medical Technology, said management fees brought financial risk to the company. He said internal costs per transaction varied from $40 up to $100. Instead, travel managers should look more closely at market prices for airfares and hotels, he said.

Andrea Zimmermann, travel manager of F.W. Woolworth in Germany, said she had switched to a management fee because it gave her a better overview of travel costs, although financially it amounted to the same as commission rebates and kickbacks.

Hans Rettweiler, travel manager of computer firm Software AG, criticized travel agents for not knowing their own costs and thus being unable to build costed fee schemes instead of earning commissions.

Lufthansa corporate travel key account manager Lars Zanders said that VDR members should get together with their agents to devise time-unit benchmarks for particular services for which agents could charge their clients. He cited the automobile industry, for example, which calculates how much time it takes to perform each step of construction on a car model.

VDR president Kirnberger, who is travel manager of German pharmaceutical company Merck, said that 68 of the association's 230 corporate members had participated in the group's VKON flight consolidation purchasing scheme (<I>BTN</I> Europe, May), generating a total 1995 rebate of $260,000.