Lots of small and medium enterprises have travel policies,
and they tackle many of the same issues as those at large organizations. Policy
at an SME might be shorter, simpler or penned with a management partner, but a
more substantive differentiator from large company policy is enforcement. Some
larger organizations have codified penalties, such as partial or complete
nonreimbursement, that SMEs trying to manage travel scarcely touch.
In SMEs, the thinking mostly goes, it can be difficult to
issue mandates. These companies often have entrepreneurial environments where
verbal trip approvals are common and visibility into planned travel spending at
the business unit level is more immediate. Nevertheless, more companies in the
SME category are putting additional force behind the policies they have,
according to Business Travel News'
research and interviews.
[Please click here to view the digital edition of the 2012 Small and Medium Enterprise Report,
featuring all charted data, downloadable as a pdf.]
SMEs grapple with program efficacy in the face of Internet
rates, smarter travelers and sways in the traditional cost-service balance.
Still, the arguments for tightly managed programs at this level are strong as
rate integrity and a growing concern for duty of care boost the case for
booking channel compliance.
According to BTN's
research, 44 percent of respondents in 2011 mandated preferred agency use, and
11 percent said they would introduce this policy in 2012. Mandates on airline
use, hotel use and corporate card in 2011 came in at 35 percent, 40 percent and
56 percent, respectively. About one in six participants said they would add
mandates in those categories this year.
But these averages hide some truths about a diverse
marketplace. "In the South and Memphis, there's no such thing as a
mandate," joked Memphis-based A&I Travel president Rebecca Martin at
The Beat Live conference last year. "It's, 'Would y'all consider doing
this?' "
In addition to regional variances, mandates were more
prevalent among medium than small firms, respondents said. The agency mandate
in 2011 was more common in finance than consulting companies, and far more
common among those where travel reports to procurement than administration,
human resources or finance. Consulting firms, though, were more likely to have
mandated preferred airline usage than were finance, manufacturing or technology
companies.
Agency Observations
BTN asked 10
travel management company executives for some generalizations about their SME
clients' tendencies.
"A lot of small and midsize companies have put
resources lately into beefing up their travel policies," said Ovation
Corporate Travel chairman and CEO Paul Metselaar. "That's even more
important if they don't have a full-time travel manager."
"It's important for them to know that their travel
program is being managed, but they're not necessarily into mandates," said
Elaine Osgood, president of Atlas Travel International. "I can think of
one or two out of hundreds of clients that would say they are not going to
reimburse for policy violations. It's sort of the 'do the right thing'
attitude."
Travel and Transport president and CEO Bill Tech estimated
the share of SME clients with a written policy at "probably half."
For Adtrav Travel Management, nearly 95 percent of clients
have a policy, according to owner Roger Hale. "One of the first things we
get with them and discuss is, 'Do you have one? If you don't, let's get one. If
you do, let's review it.' If they don't have a policy, they're not serious
about travel management."
At Casto Travel, which services many Silicon Valley
companies, "The standard thing I hear with new clients is, 'We have a
policy but we haven't looked at in four years and we need to rewrite it,' "
said president and COO Marc Casto. "The ability to invoke a mandate is
nil."
According to World Travel Inc. CEO Jim Wells, "They do
tend to have a travel policy. If they don't have one when they come aboard, our
consulting services group provides a travel policy writing service. Typically
the midmarket is not a mandated market—we find 'strong encouragement.' Those
tasked with travel have diverse responsibilities, which lends itself to people
being very busy and looking for opportunities to provide high service with cost
containment in a manner that won't inhibit them."
Broad guidelines are popular, such as lowest logical airfare
policies (used by 70 percent of SMEs in 2011, according to this research) or
the "use of nonrefundable airline tickets" (62 percent).
"The vast majority of clients have policies," said
Travel Leaders Corporate president David Holyoke. "The underlying rule is,
no matter the air policy, if there's something cheaper, they go with the
cheaper option. You see that more since the recession."
In addition to guiding travelers to the lowest airfare or
even requiring pre-trip approval, according to Wells, SMEs tend to allow only
economy class on domestic air trips, international business class over a set
number of traveling hours, compact to midsize car rentals and limited-service
hotels. Commonsense policies also are prevalent, such as encouragement to fill
the gas tank before returning a rental car.
Channel Compliance
Of course, a policy does little good without compliance.
Most SMEs seek it just like the rest of the market—and fight the same
challenges. This is particularly the case when it comes to booking through
preferred channels, whether the online booking tool or travel management
company.
Travel and events manager Christa Neau said her firm,
Infinite Campus, which annually spends about half a million dollars on air
travel in the United States, is in the midst of a travel policy rewrite and
planning to "force" the use of Concur's booking tool. "The exception
is booking conference rates directly through the hotel—they can get the rate
honored in Concur, but by the time they pay the associated agency fees, they
are not really getting a break," she said. "They can book directly
but have to let the travel manager know just so we know where our employees
are."
Leaving room for such exceptions, claims that prices are
less expensive outside preferred channels do not typically hold up to closer
inspection, TMC sources said. Surely a business traveler's own reasons for
making direct bookings are bigger drivers.
"Everyone is a frustrated travel agent—this industry
will never change that," said World Travel's Wells. "It's just human
nature. The way to deal with that is to open the communications with the
individual who feels they found something less expensive and educate them.
Almost always, it's not comparing apples to apples. It may be a fare in a
system that hasn't refreshed. A lot of folks don't understand that. Consumer
sites have come up with wonderful marketing to give that 'lowest rate'
perspective. But where you find people critical of the managed programs, it's
primarily due to a self-interest."
"You can't let the tail wag the dog," said Adtrav's
Hale. "You lose reporting, tracking, the ability to manage. We feel we
have been pretty effective on maintaining the integrity of the program with our
customers. We work with a number of them to have their accounting departments,
when people are filing an expense report, alert us if they see airline tickets
coming from another TMC or an online provider or the airline. Some of our
customers will then call those people and ask what's going on. It's frustrating
to go sell an account and then only get half of the business we expected."
On top of the beat-the-rate game, Casto Travel's tech-heavy
client base also is drawn to information and functions in new tools and apps
that are not part of their managed programs. "There's significantly less
likelihood to enforce compliance" in this segment of the market, said
Casto. "Our number one competitor is people shopping on their own with no
retribution." He said what clients do about noncompliance "runs the
gamut, but many are not willing to fight that battle. So we have more clients
with only a portion of the business, and that changes the relationship."
A self-service culture is "difficult to change,"
said Wells.
Ultramar Travel Management chairman and CEO Peter Klebanow
said the company will "match the rate, beat it or refund the difference"
if travelers find a better one. "As soon as you set up a process to manage
those kinds of individuals, the problem goes away. It's one thing to educate
people; it's another to take it on and say, 'Okay, let's go through it.' "
The execs with Ovation, Travel Leaders, and World Travel
also volunteered that they have fare guarantees. Travel Leaders' Holyoke said
that in a year it's been used less than 10 times. "Do we have a lot of
travelers trying to do our job?" he asked. "Yes. That has forced
agents to be more knowledgeable. They have written us off for how long?"
"It would seem to me that if anyone would have leakage
in their programs, it would be the SMEs," said Klebanow. "They have
presumably the least access to the benefits. Yet, the business finds its way
here on its own, and we have a strong SME following even though we're not
spending lots of time trying to find that business because we'd rather grow
with bigger leaps and bounds."
For Their Own Good
"If the only issue was consolidating data or ensuring
the best fare, then I suppose having a decentralized program where people could
book anywhere could make some sense," said Klebanow. "But it isn't
just that. There's duty of care, in which it's not enough to know where someone
is. You need to be able to take action. If you don't have access to the booking
and rights to change it, you may not know how to help them. People have come to
realize that no matter how good the technology gets, when it comes to a
disruption in travel the service recovery is largely a manual process, and in
order to have effective facilitation of that process, you need to own it."
While massive global companies were comparatively quick to
build up travel risk programs amid increased post-9/11 awareness of danger,
SMEs have come around thanks also to natural disasters, sources said.
"It's been gradual—it's all about how many other hats
they're wearing," said Travel and Transport's Tech, noting that CEO
support is a must. "A lot of them never considered consolidating, instead
letting two- or three-person offices do their own thing. But now they're
realizing they need to consolidate for duty of care, and even small accounts
need to know where travelers are. They have liability."
"They have become better employers," said Valerie
Wilson Travel co-president Jennifer Wilson-Buttigieg. "We now have that
location information to give at the drop of a hat."
"This segment is finally getting into it," said
Atlas Travel's Osgood. "I'd like to believe the TMCs had something to do
with that."
About two-thirds of midmarket firms said they would have
risk management programs in place by year-end, according to BTN's survey, versus 44 percent of small
firms. One-third of all SMEs said they had no plans for a risk management
program.
Metselaar of Ovation Corporate Travel, which serves mainly professional
services, law and investment banking firms, said, "We built our company
with clients who would never mandate the use of a TMC. But now there is a big
trend to mandate. Even though partnerships tended to let owners do their own
thing, that has changed significantly with risk management. Those people own
the firm, and those are their assets—when their assets are on the road they
want to protect them."
Partners And Service
Outside of risk, Klebanow noted that tried-and-true TMC
services, such as supporting work-life balance with smooth reaccommodation,
have grown in value based on market conditions. "In the old days with 70
percent airline load factors, it was a lot easier" to redirect a traveler
after a disruption, he said. "We have lost an incredible number of seats,
so it's a much tougher puzzle."
Midmarket buyer Cynthia Gillen of BDO USA supported the
importance of service. "Service wins compliance and adherence—it will win
the war over time," she said. "The silos on risk management and
quality-of-life issues have come down as travel remakes itself into a service
function of the company, and I think the [cost versus service emphasis] will
become more even. Companies don't buy the cheapest computers or pride
themselves on getting the cheapest healthcare program. Since IT and HR do not
allow people to buy directly, why should we allow travel to do the same?"
About two-thirds of SME respondents reported having
service-level agreements with travel management companies in 2011, with "lowest
fare accuracy" being the most popular of several aspects, listed at about
half of respondents. Policy compliance, reporting accuracy and account
management were the next most frequently used measures, each with about
one-third of respondents. Midsize firms were more likely than small ones to
have SLAs, at 74 percent versus 59 percent. Two-thirds of all respondents
indicated they hold pricing contracts with TMCs, with nearly half based on
transaction fees.
Several of the TMC executives talked about trust,
relationships and reliability as the key elements of their propositions for
SMEs, in large part because their contacts in these firms often are not
full-time travel managers. Referrals are a big part of the sales dynamic.
"One client told us they wanted to meet us first before
sending the RFP," said Wilson-Buttigieg, arguing that TMC RFPs make more
sense in the large market. "They didn't want to read stacks of pages; they
wanted to meet the people who would manage their account."
This report
originally appeared in the April 16, 2012, edition of Business Travel News.