2010 NBTA Convention Reporter's Notebook: Optimism Hot In Houston - Business Travel News

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2010 NBTA Convention Reporter's Notebook: Optimism Hot In Houston

September 06, 2010 - 09:45 AM ET

By Chris Davisand Jay Boehmer

The apparent final International Convention & Exposition of the National Business Travel Association was rife with cautious optimism that the corporate travel industry's darkest recessionary days have faded into history.

At the show in Houston—the last under the association's current name before it switches to the Global Business Travel Association moniker in time for 2011's annual convention in Denver—buyers and suppliers from every segment noted further reasons to believe that corporate travel's outlook points up, but noted that a full rebound was hardly a done deal.

CEOs representing various segments of the industry shared some flavor of Southwest CEO Gary Kelly's proclamation that, "It's heck of a lot better than it was a year ago," during a CEO-loaded general session. When prompted by a question from Trip Davis, the session's moderator and chairman of TRX, about the biggest potential risks to the industry's bounce-back, however, they also agreed that economic uncertainty and the possibilities of double-dip recession or surging energy costs could threaten to upend the rebound.

"I think the biggest risk is that we slip back into something like what we've come out of, or something maybe not quite as severe," Carlson Wagonlit Travel president and CEO Douglas Anderson said. "U.S. economic growth rates have slowed in each of the last two quarters—not a slowing economy, but slowing growth rates. We're in a highly cyclical industry. Cycles are normally reasonably long in terms of number of years, but shorter cycles are possible."

Travelport deputy CEO Gordon Wilson sees one risk to the economy already taking shape. "In Europe, in particular," he said, "we are about to go through feeling the governmental austerity measures that have been put in place. While there's been lots of talk about them, they don't actually start biting until toward the end of this year and into 2011, so that's a word of caution, because some sectors are so reliant on government business." That, Wilson noted, could foster the dreaded double-dip, though potentially on a more region-specific basis, as opposed to the more global recession from which economies continue to recover.

Starwood Hotels & Resorts Worldwide president and CEO Frits van Paasschen said he sees the very discipline in corporate spending that helped companies navigate the recession as an inhibitor to fully coming out of it. "The issue of uncertainty is really the key here," he said. "We don't know what's going to happen, but as a business that has gone through the extraordinary measures that we went through to reduce our costs, we want to maintain that structure, and we don't want to go through that pain again. We, as I'm sure is true of many companies, are looking carefully at managing that, which paradoxically is part of the problem, because persistent high unemployment is one way we could see of sliding back into a recession."

Speaking unmistakably like an airline CEO, Southwest's Kelly said ongoing risk in the volatile nature of fuel costs: "If I were to say or answer the question, 'What is the number-one risk for the airline sector,' I would probably say energy costs."

 

At the 2009 NBTA conference in San Diego, then-CEO of Continental Airlines Larry Kellner described for attendees the carrier's tortured decision to join competitors in charging for checked bags, claiming he'd "rather figure out a way to have it all in one package" than unbundle. The carrier weighed its options, saw its competitors get new revenues and eventually succumbed to what he called "a competitive move we thought we had to make." Casting Continental as a hesitant legacy carrier entering the new world of a la carte pricing, Kellner concluded, "I'm not a fan of the first-bag fee, but it was the right decision for us."

Fast-forward a year, as his predecessor, Jeff Smisek, sat in the same airline CEO general session, and a different approach to unbundling quickly became evident. Claiming that without unbundling, passengers are "cross-subsidizing one another," Smisek said, "As we've unbundled the product, we've made air travel more fair, and secondly, we're also creating products and services that are new and customers value. If they don't value it, they don't have to select it, and they don't have to pay for it, so I'm a big fan of ancillary revenue. What you'll see are more and more products and more fees."

Travel buyers paid heed to the shift in philosophy. Dominion director of travel and corporate services Donna Kelliher told Smisek his stance on ancillary services "scared me a little bit," adding, "You sound a little bit more like United and a little less like Continental."

Though Continental has grown to embrace a la carte selling, Smisek said the carrier would work to advance reporting and distribution of ancillary services to corporate clients. Asking for what Kelliher called "transparency at the point of sale, not after the fact," Smisek replied, "We would like that too. I think you need that and we want that." He added, "We have issues with GDSs, we have issues with getting the reporting with the credit card companies. We're at the early stages of this, but you and I have an alliance of interests here."

"We want to be in their distribution channel for the ancillary revenue," Smisek said. "We're working with the credit card companies to make sure they can report back to you on a more detailed basis the fees you're paying and capture that."

Not all airlines represented at the conference, however, have become converts to unbundling, and Virgin Atlantic president Richard Branson drew applause when said he was particularly averse to taking away amenities and charging for them.

"Personally, I think those amenities are absolutely essential," Branson said. "I think it's when accountants take over in a company and start cutting back on amenities that a company is ultimately doomed to failure."

 

Prism Group founder and president Michael Whitesage counted this among what he called the myths of airline contracting: "The largest companies secure the largest discounts." Attempting to shatter that bit of conventional wisdom, he said the ascendancy of share contracting—as opposed to volume-based discounts that once prevailed but largely are dead among the biggest U.S. carriers—has enabled smaller companies to play in the realm of corporate contracts. "Companies that can deliver marketshare get the most competitive discounts," Whitesage said, claiming that discounts enjoyed by disciplined small or midmarket companies can be superior to those offered to the largest multinational corporations.

Another myth Whitesage cited is the procurement view that deploying more than one preferred carrier enables buyers to secure more favorable contracts and keep airline partners in check. "That doesn't work today. All you're doing is diluting your share. You get two discounts, but two low discounts."

Whitesage said his favorite myth is that "share contracting is not allowed in Europe, Australia, Latin America and Asia. The reality is that share contracting is allowed everywhere in the world. However, if you have a carrier that is a dominant carrier in a country like Singapore, the Netherlands, France or Spain, they have routes that they have dominant positions in, and share contracting is not appropriate on those routes."

Whitesage said such carriers would likely use sales volume as a basis for discounts. "But, if I'm competing on a market like Madrid to New York, I'm going to compete like hell, because the competitors that are coming in are using share contracting," he said. "If I don't use share contracting, they'll eat my lunch."

 

The NBTA Foundation and meetings technology supplier StarCite are building a new model to measure and analyze corporate strategic meetings management program development and implementation.

When complete, the Strategic Meetings Management Maturity Model will classify programs' progress in such categories as policy, sourcing and technology implementation, and recommend subsequent steps. Officials hope to release the model by the end of the year.

StarCite and the foundation—NBTA's research and education arm, which separately announced the names of the first 29 recipients of its Strategic Meetings Management certification, among them Kesler and Wilt—based the model on a framework for software development created at Carnegie Mellon University, industry research, focus groups and white papers that were authored by NBTA's groups and meetings committee.

"This is what's going to make strategic meetings management available, accessible and possible for every company," said KK Strategic Solutions president Kari Kesler, a former corporate meeting buyer and member of the groups and meetings committee, during an educational session at the show. "This model is going to turbocharge the pace of maturity and help us all go forward faster."

When released, users would complete an online questionnaire that would request details of all aspects of a corporate meetings program, including policy, strategy, meeting registration, sourcing, planning, payment, technology and reporting. The model, accessing an extensive database of strategic meetings management concepts and philosophies, then would analyze the responses and assign numerical levels of maturity, helping to classify program aspects as "random, discovery, emergent, operative, excelling or mastery," in ascending order of maturity.

The model also would offer a "prescriptive report or action plan to get to the next level," according to Kesler. However, the model would not strictly define whether a meetings management program could be defined as "strategic," she said.

"It's less about saying you have an SMM, which, frankly, we struggled with as we were building the certification," Kesler said. "I like this a lot better, because whether you do or you don't, it helps you get there."

While the wide level of variance in corporate meetings program structures ensures there could never be a one-size-fits-all-corporations configuration, the model nevertheless assumes that there are specific, particular strategic meetings management building blocks that all organizations could embrace to further their meetings management efforts. However, there's no guarantee that a given corporation would want to advance to a higher level, said Xerox Corp. manager of global travel and meetings management Tracey Wilt, "if their internal corporate objectives are different than the objectives of the next level."

On the other hand, "it's feasible and possible that you may scale different divisions in your company against the maturity model to see who's more advanced, and how the other division could catch up," said StarCite vice president of enterprise strategy Kevin Iwamoto.

The model also will be able to provide information on best practices and case studies for companies at each of the six levels of maturity, officials said. As more users input corporate meetings data, the model's utility will expand. "Later, when there is a critical mass of data, we will be able to provide some benchmarking," Kesler said.

StarCite senior vice president of worldwide marketing Kevin Young compared the model to Capability Maturity Model Integration, a software-industry performance-improvement process "that helps software development organizations get more mature and gives best practices and guidance to get to very advanced practices," he said. "We said, wouldn't it be great if we had the same thing in the meetings world, where we could help people step their way through and gradually get to a very robust, complete, enterprise-wide program? We've worked with the NBTA Foundation to do that, fund the research and put it in place."

 

Getting a handle on small meetings remains a challenge even for mature travel programs, though companies that tackle them stand to find significant savings, according to a panel at the convention.

Small meetings represent the lion's share of events for many companies, with about 86 percent of meetings having fewer than 100 attendees, said NBTA groups and meetings committee vice chair and StarCite vice president of business development Linda McNairy. Many companies, however, still can't quantify small meetings within their company, she said.

"A lot of companies still push it off and aren't sure what to do with it," McNairy said.

Some companies also have been reluctant to devote energy and resources to controlling those meetings because they don't see it as a worthy pursuit. "Some have said the return on investment isn't enough for that particular organization," said Charlene Rabideau, senior vice president of account management and operations for BCD Meetings and Incentives.

A large portion of these meetings, however, often are planned by administrators who might be unaware of procedures to best handle the meetings, said Renee Epple, vice president of global innovations for American Express Business Travel.

Marriott International vice president of global sales intermediaries Julius Robinson said inexperienced planners often do not realize obligations when they are signing contracts and are surprised when having to deal with cancellation and attrition issues that arise later.

Those buyers who have targeted small meetings reported significant savings from their efforts. Tim Bone, director of union conventions, events, meetings and travel for Service Employees International Union, said his organization recently turned its focus to small meetings. Prior to that, the meetings often were booked ad hoc by administrators, through vendors with which SEIU did not have negotiated agreements or through improper channels.

Using data from purchasing cards, invoices and the expense reporting tool, Bone aggregated information to show senior management the cost and importance of small meetings.

"We had the policy rewritten that everything has to flow through the meetings department," Bone said. "Catching data is easy because of the expense tool, and the cost associated with those meetings are up to the departments' budgets."

Bone chose an outsourced model to handle small meetings, working through planners employed by StarCite. Individual administrators who want to keep control of small meetings can still do so as long as they go through the proper channels.

"We have an engine that can help you source and book, and you can control that yourself or use external meeting planners," Bone said. "We now can capture what we were not tracking."

SEIU's average savings on meetings ranges between 20 and 30 percent, Bone said.

Siemens director of event management services Bobby Badalamenti said her company has designed an RFP specifically for small meetings, with specific choices pre-negotiated for planners. "When you have a preferred supplier relationship, and they work with you, it's easy to do," she said.

 

NBTA during the show announced it has "acquired and taken full control" of The Masters Program, an annual corporate travel event in Washington. D.C., that through a partnership with travel technology firm Amadeus it intends to transform "into a global thought-leadership forum for C-level and senior executives and a think tank for the travel industry."

The association also named Jack O'Neill, president of Carlson Wagonlit Travel North America, as its NBTA Allied Member of the Year, and gave its President's Award to HSBC vice president of corporate events and travel services Michael Lyons.

Meanwhile, Dominion's Kelliher, a former Business Travel News Travel Manager of the Year, was one of three people elected to NBTA's board of directors. Kelliher, director of travel and corporate services for Dominion, and Christle Johnson, director of business services for Johnson Partners, each were elected to three-year terms as direct member directors at large. Maylena Burchfield, executive director of Adtrav Travel Management, was elected to a two-year term as allied member director at large.

Michael B. Baker and David Meyer also contributed to this report.

This report originally appeared in the Sept. 6, 2010, issue of Business Travel News.

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