Many global corporations are doing everything they can to cut travel expenses, and sometimes blindly, but Apple Inc.'s experience exemplifies the kind of preferred treatment that a money-making and still-traveling firm can generate from vendors.
Airlines have approached Apple mid-contract offering additional concessions on business-class international travel, according to Apple's global travel manager. Some preferred carriers provide Apple credits for unused nonrefundable tickets at year-end, as well as the so-called name changes that many buyers covet but ticketing rules generally prohibit.
Earning such perks is not disconnected from the company's appreciation of travel's place in its business mission. Asked about the return on investment of travel, global travel manager Kathleen Ramsay said, "Our CFO is very aware of the benefits of travel. I usually do twice-a-year reviews with him. He wants to stay very close to the travel program and actively participate. The company also recognizes we're going to continue to invest in the downturn; this is what we did when the economy turned down in early 2000. When the economy did turn around, we were in a position that we had new products to bring to market and that was a very successful strategy for us. We are going to continue to do that again."
Even Apple's financial filings with the Securities and Exchange Commission--which are required to disclose risks to investors in any publicly traded company--recognize travel, as they indicate that Apple would be "negatively affected by more stringent employee travel restrictions" in the event of such "major public health issues" as pandemics or other disruptions.
Speaking last month during a webinar sponsored by the Association of Corporate Travel Executives and Sabre's Travel Network, GetThere and Travelocity Business divisions, Ramsay said Apple has not made major changes to travel policy in light of the economic situation.
"We are trying to just tweak the policy, making minor changes to it--nothing drastic whatsoever," said Ramsay. "We are flying business class, and we do not look to change that piece of our travel policy. We are finding ourselves in a situation now where the airlines are coming to us offering additional discounts. They are offering this to us on current contracts that we have and to give us greater discounts and put them in place immediately. It will definitely assist us, not only to reduce the baseline for what we are paying for business-class travel but it also will benefit us years down the road, so we are very aggressive in our negotiations with the airlines. These are the best of times for us, and we have never seen this type of situation before in the airline industry."
Still, Apple has not stopped working to uncover savings opportunities. The company, which in 2003 became an ARC-accredited Corporate Travel Department, has "been very good at getting travelers to accept" nonrefundable domestic tickets "because they are the lowest fares we find in the marketplace. We have some very good processes in place to monitor those nonrefundable tickets. Some of the carriers do allow you to re-use those nonrefundables, so we manage that very closely."
Ramsay advised other buyers that the "greatest leverage is with your preferred suppliers, the ones you have under contract ... go back to them and ask them for the name change. The other thing we have been successful with doing is we bundle up these unused nonrefundables and we go back to the preferred carriers once a year and say, 'We have these unused tickets; can you guys issue us a credit or vouchers or something along those lines?' With preferred suppliers, they have been willing to do that, and it has been because of the relationships."
According to Ramsay's July 2008 presentation at a National Business Travel Association conference, Apple's five travel employees managed 29 BCD Travel-employed, on-site agents and staff plus eight BCD agents at a 24-hour Bangalore center. The company's annualized air spend was $50 million on 60,000 transactions.
Now, Apple is taking another look at its hotel purchasing practices: "Even though our policy says that if you have an overnight trip, you have to book the hotel through Apple travel, that doesn't always work very well. We don't have any teeth in the policy, so we are looking to increase the compliance there, and we are looking at various ways of doing that. We believe if we drive more volume to the preferred suppliers we can reduce our hotel rates, but it's also a security issue. It was made evident a few weeks ago with the problems in Mumbai. We're getting feedback from corporate security and also the benefits group that [they] want to know where our employees are and to be able to track them."
Approaching the latest round of lodging negotiations, Apple last fall intended "to keep rates flat and also to negotiate the amenities wherever possible," Ramsay said. "We surveyed our travelers and the No. 1 thing they wanted in the rate was Internet access. We feel like we were very successful in doing that, not only in Europe but also in Asia and in the United States. We were seeing, when we completed our negotiations at the end of December, about a 4 percent reduction in rates and about a 25 percent to 30 percent increase in the number of preferred hotels that included Internet in the amenities.
"What we have found here in the month of January is that rates continue to decline," Ramsay added. "We are going back to the preferred hotels and asking for additional rate reductions and additional amenities included in the rate, and we have been successful doing that. The hoteliers don't know where the market is in terms of what buyers are willing to pay. So we are going to continue to negotiate with all our preferred hotels to see if we can get better rates. This will set a baseline that will benefit [us] for a couple of years down the road." She said the company also has been "successful" in renegotiating meeting rates.
Another Apple initiative aims to reduce the number of one-day trips, potentially by encouraging webcasts or conference calls. "We are trying to put some reporting together that goes to the controllers and business units showing how many one-day trips that they are doing [and] challenging the business units to look at a reduction," Ramsay said.