Cortas, a group of the Netherlands' 16 top business travel spenders, scored a major victory for travel buyers, when KLM Royal Dutch Airlines agreed to refund most members nearly 100 percent after a long campaign against its decision to institute a flat booking fee.
When KLM eliminated commission at the start of this year in favor of a $29.62 flat booking payment, the members of Cortas calculated this move would cost them $11.32 million between them. Led by secretary and treasurer Albert Kilsdonk, Royal Dutch Shell business travel manager, Cortas accordingly lobbied for KLM to make good the deficit, but was rebuffed by the airline. However, dogged resistance from the powerful Dutch buyers, including Philips, Heineken and Unilever, led to a change of heart.
"It has been a long battle, but in the end the compensation was much higher than what we were offered at the beginning," Kilsdonk said. "It shows we can achieve something by acting together."
Next on the agenda at Cortas is the setting up of an international benchmarking program. Cortas members do not compare contracts with each other, but Kilsdonk believes benchmarking would help them understand how efficient their purchasing has been and where they can make improvements. Kilsdonk is looking at conferring over the project with leading U.K. travel managers, who also are starting to identify benchmarking as a subject high on their wish-list. "I think it is something for the Association of Corporate Travel Executives to take up as well since it operates in a global environment," he said. It is yet another area of collaboration that fits the Kilsdonk philosophy of achieving by working together.
Achieving through unity also lies at the heart of Kilsdonk's philosophy at Shell, where he and his travel management team have brought down average air ticket prices by 30 percent in the past four years through consolidating a highly fragmented travel program.
Today, that program provides a global toolkit of services, including a global data warehouse.
Kilsdonk joined The Hague-based energy giant in 1997, having previously been a travel manager for the Dutch government. Few of the basic building blocks of a sound travel management program were then in place at Shell. Agency and supplier deals, if any, were not even consolidated on a national basis and travelers were using cash advances instead of payment cards.
Today, Shell has begun building a global travel program that business units are encouraged, rather than compelled, to buy in to. There still is a long way to go, but the United States, Netherlands and United Kingdom already are onboard and they account for an estimated 65 percent of Shell's travel spend. Between them, this trio of countries spends $170 million annually on air alone.
For Kilsdonk, the big opportunity came in 1999, when the board of Shell issued guidelines on cost control for the entire company. Support from the top was the catalyst for change, but Kilsdonk had to plan to win buy-in from Shell's business units worldwide. He came up with a "global toolkit," which gave the units the resources they needed to build a travel program.
The toolkit includes consultancy services provided by Kilsdonk and his team, but the most important element is a global data warehouse provided by The Prism Group. This enables individual Shell businesses to compare how much they each are paying. "Benchmarking has helped us to see farther down the road," said Kilsdonk. "Some businesses weren't saving any money at all but were seeing others with similar travel patterns making savings of 20 percent. That started a little bit of competition and now they are all trying to overtake each other."
Coming to the toolkit this year will be an online booking solution. Shell will start piloting the French product KDS in April and roll it out three months later.
Kilsdonk does not expect all countries to buy into the global program. He anticipates ending up with consolidation along the time-honored 80/20 principle. "The major countries will find added value in joining the global program, but there are some countries where such issues as security standards mean only one airline is acceptable," he said. "We will have to tell them it is not worthwhile joining even if they have developed expectations that they will."
For those that do participate, the prize is the ability to more highly leverage supplier relations. "If our suppliers compare their relationship with us against five or six years ago, then they are seeing that we are giving them much better advantages, especially by delivering greater market share," he said.
Shell's three major preferred carriers are KLM, British Airways and Continental Airlines. Most tickets are purchased on a net basis, free of any restrictions other than that they cannot be interlined to another carrier, which Kilsdonk does not see as a problem at all. "How many times do travelers need complete flexibility?" he asked. "Most carriers run many flights on the routes we use, but if our travelers do need to change to another airline, they can simply buy a new return ticket, especially now that they have been given payment cards. Why should they be issued with a 100 percent flexible ticket every time?"
Kilsdonk has carried out an extensive communications program to explain to travelers how much the company saves by directing spend toward net deals with preferred carriers. There are consequently few complaints, especially as travelers continue to be allowed to fly business class for intercontinental travel. "We are not looking at changing that," he said. "We think our people still need business class. Most are frequent travelers and the difference in comfort and service is very important. In any case, we can make such good deals that the difference from full-fare economy is not that great."
Kilsdonk has not been entirely converted to the idea of single-agency consolidation, although Shell now uses Carlson Wagonlit Travel in the United Kingdom and the Netherlands. All U.K. reservations are handled from a single Carlson Wagonlit call center and the Netherlands is scheduled to move to a similar arrangement. He believes that call centers fit well with the Shell philosophy of creating awareness of policy, rather than mandating it.
"It is easier to inform travelers and move them toward cheaper fares if the message can be controlled through a single center," Kilsdonk said. "It is not necessarily cheaper, but the important thing is that travelers are saving on their airfare. Agency cost is relatively small against air travel cost. Even if we pay twice as much for our agency service but save 20 percent on the airfare, we are going to save much more."