India Corps. Tighten Travel Belts In Asian Flu Aftermath

<B> India Corps. Tighten Travel Belts In Asian Flu Aftermath</B>

By Neelam Mathews

The bullish sentiment of a liberalized economy of the early '90s, followed by economic slowdown in the past two years--partly as a result of the Southeast Asian financial crisis--has many corporations tightening their belts. Slow growth means corporations in India are monitoring spend more closely than ever and looking for better deals from travel management companies to cut their travel and entertainment spends.

"Margins are getting squeezed as competition gets fierce. Corporates are also focusing on cost-cutting internally. Only those travel management companies with good management tools can survive," said Carlson Wagonlit-Ind Travels general manager, Vijay Chadha.

An American Express survey predicted that travel and entertainment expenses in India will grow at 10 percent annually, compared with the worldwide 4 percent. The study projected that Indian corporations will be spending $3 billion on T&E by the year 2000.

Travel management companies have started addressing spending patterns by cost containment through negotiated rates, value-adds, communication, implants and expense processing. Corporate discounts are a major deciding factor for Indian and multinational companies now looking at the most cost-effective buys.

With competition heating up in India, and numerous alliances forged with world majors, the advent of multinationals is giving new meaning to the implementation of proven business travel management practices.

The Amex survey showed that the average company in India spends US$385,000 annually on T&E. Though one-third of total T&E was spent on international travel, 67 percent of companies in India had no negotiated air travel program.

Atul Mathur, head of American Express travel services for South Asia, said that "T&E is the second largest controllable expense after salaries. Major companies have realized this and have started to take advantage of favorable pricing, by providing volume to suppliers to get negotiated rates."

McKinsey & Co. manager of finance and administration, Renu Joshi, said, "There is a transparency in dealings today. We negotiate with vendors directly or with the travel management companies on corporate rates. While we expect a good price, value add-ons are essential." As a result of this expectation, hotel and airline upgrades, valet services, airport transportation, swift checkin and lounge access now are being thrown in with the negotiated deals.

Lufthansa's manager of Western India Naresh Gaind said, "Most corporates have issued advisories to their executives to opt for excursion fares. Except for the top executives, most executives are now traveling economy."

With the present market slump, airlines are offering deals in all classes, with European airlines offering up to 22 percent. In fact, according to Ind Travels national manager, Malvinder Rikhy, "airlines are willing to offer special deals with 0 percent commitment to turnover."

Interestingly, with United Airlines having pulled out its 14-weekly Eastbound and Westbound flights from India this summer, travel management companies expect competitive carriers to try and grab a slice of the UA business by offering a flexibility in pricing and more value add-ons, including extra baggage allowance, two tickets free on every 50 and upgrades.

A UK-based client of Thomas Cook said, "We negotiate fares directly. We need the agency to help us plan. Therefore, we internally review travel reports of our frequent travelers to see ways and means of increasing cost savings."

According to Sita World Travel-Woodside Travel Trust, general manager, Dhruva Mukherjee, "MIS today is used by 70 percent of clients as against only 10 percent two years ago." The key, Mukherjee said, is "to create loyal customers by giving them a domestic and international reach with offices in oft-traveled cities, automating systems used by clients and providing travel sourcing solutions."

On the payment side, American Express recently introduced India's first corporate card. However, according to the Amex survey, only 52 percent of companies issuing corporate cards require employees to use the card for chargeable expenses.

"We encourage companies to have travel policy compliance during expense report audits," said Mathur. "More and more corporates are realizing that designating a single travel agency, and specifying preferred travel suppliers and payment methods will ensure smooth functioning of the travel policy."

"Corporates are looking at the best method of data capture to negotiate," Rikhy said. "This year, hotel rates have fallen from 15 to 20 percent over 1998 negotiated rates. Last year, we negotiated US$160 on rack rates of US$250. This year, figures are down to US$130. "It is taken for granted if hotels do not reduce by 40 percent, then you are being taken for a ride."

In Bangalore, add-ons to five-star hotel tariffs as low as US$35 can include free laundry, transfer, breakfast and local phone calls. Joshi said that while McKinsey &Co has a global agreement with certain hotel chains, "we do not have a fixed brand in Asia. We go for the better deals offered and proximity to office or the airport. In India, we have a direct deal with the Taj group."

Management fees, still a rare option in India, generally are charged on the higher scale of up to 5 percent, said Mukherjee. "Commissions remain a popular option with 90 percent of corporates following the trend," he added.

Rikhy said that while the management fee concept is new, 75 percent of all new business in the past three years is on a fee. "While it is easier to sell the concept to multinationals, many forward-thinking Indian companies are beginning to go on a fee." The resistance to change, he claimed, comes from the administration departments, but "attitudes are changing with internal training."

Cost cutting also has the domestic market seeing conversion of air travel to rail travel, with senior managers taking to trains to set an example. Negotiated deals on domestic carriers are almost nonexistent. According to Mukherjee, commissions are restricted to 6 percent on private carriers, such as Jet Airways, and to 5 percent on the national carrier, Indian Airlines.

Corporates are increasingly moving their offices to peripheral areas of major cities to save costs. Eicher Tractors CEO Subodh Bhargava said, "Five-star hotels are pricing themselves out and there is a trend to use guest houses." However, many hotels, including Mumbai's Ambassador group, are on an upgradation spree. Executive director Rahul Narang said, "We are providing five-star facilities in our boutique four-star hotels. It is essential to create brand loyalty among corporations."

With corporate end-users and travel suppliers collaborating more closely and management fees the way to go in the future, resources in India now are being pooled to explore such cost-saving initiatives as teleconferencing to reduce the costs of travel.