It's fashionable to say business travelers increasingly are
going rogue, but that's neither new nor true in absolute. While some commentary
and certain data of late have supported the going-rogue theme, others have not.
Dozens of recent interviews with corporate travel buyers, travel management
company executives and corporate travel suppliers have uncovered almost no
evidence of a notable drop in compliance among firms that manage travel. What
may be different are the dynamics of policy compliance, in which the seemingly
endless information and tools now at travelers' fingertips can butt up against
corporate mandates supporting traveler safety and security.
Compliance always is a major area of focus as a means to
save money—particularly after buyers have done as much negotiating as they can
on up-front pricing. The biggest challenge traditionally is in lodging.
"Air, form of payment, car rental all are pretty much
under control," said consultant Andrew Menkes of Partnership Travel
Consulting. "The weak link is hotel—first, booking the hotel through the
TMC, and second, choosing the preferred."
[PULL_1]"Fifty percent compliance is not good," said
Wyndham Worldwide executive vice president of marketing Flo Lugli, a former
Travelport executive. "We'd like to see a higher level. From my days at a
GDS company, we saw that the attachment rate between air and hotels is
extremely low. I don't know whether it's the systems being used, the content
being provided or simply that people are not paying attention."
Some studies put typical hotel program compliance between 40
percent and 60 percent. Carlson Wagonlit Travel in a 2008 five-client study
found that more than 60 percent of hotel transactions booked broke "at
least one travel rule," as stays were booked outside the preferred channel
or at non-preferred properties, excluding cases where a compliant option was
not available. Yet, based on more than $70 million of hotel expenditures from
three clients, preferred hotel rates on average were 9 percent lower than those
from nonpreferreds, CWT found.
"For North American travel managers and the programs
they control, compliance is pretty good," said Hyatt senior vice president
of sales Jack Horne. "I think the frustration they have is with
counterparts around the world who are now traveling more often to North America
and are not staying in preferred properties. That's where I see a lot of
bleeding."
The causes for hotel noncompliance are many and varied. Some
content, like conference rates, is not available through the travel management
company. Issues are caused by lack of availability or proximity, rate-loading
holes and revenue management practices. Sometimes local deals are not part of a
centralized travel purchasing program. Of course, there also are more
self-centered reasons, such as loyalty program points or a traveler's
long-standing preference for certain hotels not in a program. Travelers on
projects also might have to book according to their clients' rules, not their
own company's.
Increasingly, there also are neat new consumer tools to use
for hotel bookings, including map-based websites; shopping bots like BackBid or
Tingo; Room 77, which lets travelers search by room type; and Our Upgrade, with
which travelers can engage in mini-negotiations for price and amenities for
small room blocks.
In the face of these age-old and new issues, some travel
buyers cry uncle, either paring back efforts to push hotel program compliance
or, in some cases, experimenting with abandoning the managed model altogether.
Speaking at a March Global Business Travel Association
event, Financial Industry Regulatory Authority manager of corporate travel
services Carol McDowell said she is piloting with a set of travelers this year
a program that allows them to book all travel via any means they like, rather
than being confined to a corporate booking tool or travel management company.
At the end of the year, she will compare their results against other travelers
booking through the managed program, she said.
"I'm just curious to see whether the current process we've
been using for years still has a return on investment," said McDowell. "There
are so many opportunities out there created for the leisure market that also
could apply to the business market, so we'll see how those apply and whether
people think it's easier because they can make choices."
Those travelers still will be bound by certain policies,
including spending guidelines based on the city, she said.
[PULL_2]The model is similar to that used by Google, which allows
travelers to book anywhere and bank the savings off per-diem rates for use
elsewhere while debiting any extra spending.
During the GBTA event, Rearden Commerce senior director of
sales Steve Soto said he's seen several buyers at smaller travel
programs—without negotiating leverage to obtain optimal rates in most
markets—turn to such leisure tools as Hotwire and Kayak for travel booking.
Even buyers at massive, mature travel programs, however, said these tools are
an increasing disruption to compliance. Such recent entries as BackBid, which
enables travelers to submit completed bookings so competing hotels can make a
better offer, have "made an already-disrupted space even more disruptive,"
American Express Business Travel vice president of marketing and online
management Colin Kennedy said.
Greg Whitaker, travel and meetings solution manager at
PricewaterhouseCoopers, echoed that the proliferation of booking apps is one of
the "biggest challenges to keeping [travelers] in the program." His
travelers expect to be able to book in real time, whether they are sitting at
their desks, on the road on mobile devices or at home on their iPads.
"I have to consider all of that within my program and
how I can still maintain control of that," he said.
Kathy Kaden, global travel manager at Cognizant, said that
her team has chosen "not even to bother with hotel compliance." As a
consulting firm, Cognizant's travelers often stay using client rates, which are
not available through the corporate booking tool, or find better rates
themselves.
"From our perspective, it's a losing battle,"
Kaden said. "We knew that if we mandated hotel, we wouldn't necessarily be
able to compete with a rate our customer gets. To mandate compliance would only
create frustration, so our goal is not necessarily to increase hotel compliance
but to create value. If we can get the rates into our booking tool so our
associates can do air, car and hotel in one booking, then that's a value-add.
It's not an easy thing to do."
Securing Noncompliants'
Safety
"When it comes to dealing with the now-constant flow of
information to which travelers have access, some organizations I've encountered
are taking one of the two available extreme approaches," according to a
recent commentary by CWT Solutions Group Americas senior director Joel Wartgow.
"Either they are trying to completely control travelers' access to
information by only allowing the use of certain apps and continuing to push
compliance to a lengthy travel policy document, or they are enabling a total 'free
for all,' letting travelers book whatever and however they want, and not
necessarily considering the serious implications to preferred supplier
agreements and safety and security provisions."
Some buyers are intrigued by the aforementioned experiments
and the latest apps, but question what they mean for traveler safety. Cynthia
Shumate, former executive director of travel and meeting services at Estée
Lauder, said a company could be held liable if travelers booked themselves into
dangerous situations.
"As a travel manager, part of my job is to be
responsible for my company," she said. "If we throw it out to the
universe and let them make decisions, how do we manage those decisions? They
could come back and say the hotel was not on the right side of town, was a
little skeevy or had bedbugs."
Hewlett-Packard global director of travel and meeting
services Maria Chevalier also noted the link between hotel compliance and
traveler safety. "When incidents occur, a hotel is a greater indicator of
where somebody is versus the airline," she said. "If they're booked
at a safe, secure hotel, when a crisis occurs in the area, we can manage to
that."
FIRA's McDowell said she would keep tabs on travelers, who
would have to send all confirmations to a specific email address that would
monitor their locations in a company-owned database, rather than through an
external risk-management third party. She said she was not concerned with
travelers booking subpar hotels.
"Most are going to web applications before they book a
hotel anyway to look at the ratings," she said.
"From a risk perspective, a traveler is not going to
put themselves at risk when it comes to a hotel," said Cognizant's Kaden. "Most
likely they're going to stay 'up,' not down."
Chevalier didn't buy it. "We do all these things to
ensure these are safe and secure hotels," she said. "The travelers
don't always make those good choices."
Others have pointed out that higher-class hotels do not
necessarily mean safer experiences.
During a recent webinar on hotel program risk management,
TCG Consulting senior consultant Jacquie Jagodzinski said security issues go
beyond neighborhoods and the basic quality of a hotel. Unlike airlines, there
are no central government agencies regulating hotel security. Also, there are
no global standards on building codes, she said. Hotel lobbies are public
spaces that anyone can enter without going through an X-ray machine or
pat-down, so even established-brand hotels might require some vetting as far as
security standards.
Hotel compliance also figures into overarching risk
management policies. Just as companies want to avoid having too many executives
or employees on the same plane, they might also want to consider similar
policies for hotels, though few currently do, Jagodzinski said.
"It seems like hotels are the least-compliant category
with a high risk potential and complex challenges for mitigating risk,"
she said. "How can you support your company's duty-of-care responsibility
if travelers select their own—usually unvetted—hotels or go outside your
designated booking process?"
Not one buyer at the GBTA session raised a hand when asked
if they felt "encumbered by negotiated rates," but Rearden's Soto
said the rigidness of rates negotiated for the entire year was one factor in
low compliance. "Your negotiation efforts are driving the rate you can get
at that property for the entire year, not just in New York City on a Monday
night in February when nobody is in the city. On any given day, you can beat
the corporate market with a spot buy."
At mega-account HP, "if they're noncompliant, we try to
understand why," said Chevalier. Traveler surveys have shown that rate is
rarely the reason travelers book outside of preferred channels. While she
acknowledged being "obsessed with having the best rate on the planet,"
even the better rates travelers find on their own do not outweigh the security
issues of non-preferred bookings. "We recognize that there is a cost to
safety and security. If someone has to pay another $2 so we can manage them in
a crisis, that's OK."
Communicating
Compliance Cooperation
As with so many of the most challenging elements of
corporate travel management, communication is key to compliance.
"Rather than attempting to control traveler behavior,
travel buyers should seek to harness the energy and entrepreneurial spirit of
the empowered traveler to make smart decisions while on the road," CWT's
Wartgow advised. "Put another way, rather than futilely trying to fight
the flow of information, travel buyers should be enhancing it by educating
travelers at every step of the process, making them aware of the impacts to the
organization of both good and bad decisions. Not enough travel programs are
doing this today."
Many buyers are exploring social media and gamification
concepts to better connect with travelers. Some say personally communicating
with travelers can minimize rate searching outside the program.
According to Kaden, Cognizant doesn't tell travelers not to
waste their time looking for better rates—"there's a fundamental
credibility issue with that," she said—but "frequently what happens
is they'll check one or two times and then they'll stop checking. We know that
if you go to a hotel site you can probably find a less-expensive hotel than
what's in our travel program, so we say, 'Go ahead. If you find something
lower, call us and we'll deal with it.' "
BDO USA national director for procurement and travel Cynthia
Gillen called it a "one-to-one conversation. If anyone wants to spend
enough time, they will find a lower rate. But the key issue is time. Is it
appropriate for someone making $150 an hour to spend their time versus someone
who is paid $20? So we let them try."
This report
originally appeared in the May 2012 issue of Travel Procurement.