Company: Best Buy
Headquarters: Richfield, Minn.
2007 N.A. Booked Air Volume: $22-$25 millionConsumer electronics retailer Best Buy last year saved more than $7 million by revamping its hotel program sourcing processes, developing a strategic meetings management program and using its combined $22 million to $25 million annual North American air volume to negotiate with Air Canada for point-of-sale discounts.
Richfield, Minn.-based Best Buy aimed to offset hotel rate hikes by increasing the percentage of midprice properties in its program and concentrating its negotiating efforts on high-volume markets, said Traci Tobias, professional services category lead for Accenture at Best Buy. Accenture handles indirect procurement services, including travel, for Best Buy.
In the request-for-proposals process, Tobias developed a new baseline for hotel selection that saved the company $800,000.
Historically, Best Buy used a comparison of its negotiated rate to Business Travel News' annual
Corporate Travel Index of U.S. and international per diems as the basis for selecting properties. This time around, Tobias combined the potential savings from negotiated rates—compared to various industry averages—with hotel commissions and negotiated free amenities, mainly Internet and breakfast. Best Buy receives full hotel commissions for its bookings through its travel management company, Carlson Wagonlit Travel.
"We took a market average from a number of different sources and determined the year-over-year change in each market, and adjusted the current preferred rate for the projected increase for 2008," said Tobias. "We were focusing our attention more on those key markets with the majority of our volume and calculated our savings based on our commissions and amenities."
Tobias also led the development of a strategic meetings management program that included insourcing meeting planners. That effort helped identify group travel that was booked as transient and roll 60 percent to 70 percent of the group volume into its transient air contracts.
In-house planning and booking gives business units visibility into meetings spending, she said. It has halved transaction costs, and in spite of rising airfares and an increase in group trips, group air travel has come in under budget.
Compliance with Best Buy policy language encouraging 14 days of advance air booking is at 90 percent for group travel versus transient's 50 percent, and average ticket price savings is at 8 percent to 10 percent for group air travel, compared with more than 5 percent for individual travel.
"We are able to leverage those group contracts that previously weren't in place because we didn't have the visibility that these were group transactions," Tobias said. "We are able to drive advance purchase and lowest logical fare through that process."
Two years ago, Best Buy consolidated its North American business by integrating with its Canadian travel program, which accounts for 25 percent of the company's North American air volume. After driving Canadian online booking adoption to 60 percent of eligible transactions within a year in a program that previously had no self-booking tool, further adoption growth was a struggle because of Best Buy's participation in the Air Canada Corporate Pass prepaid flight segment program, in which corporations purchase segments in bulk offline or through Air Canada's Web site to receive negotiated discounts
(BTNonline, Oct. 23, 2006).At the end of last year, Tobias negotiated with the carrier for discounts at the point of sale, including through Best Buy's online booking tool. The discount strategy yielded another additional 8 or 9 percentage points in the net effective savings rate in Canada.