After more than a decade of annually benchmarking the 100 biggest spenders in terms of U.S. point-of-sale airline travel, and taking several annual measurements along the way of the companies with small and midmarket air travel volumes,
Business Travel News editors this year for the first time sought a clear picture of the companies constituting the large market, those that spend between $10 million and $40 million in annual U.S. booked air volume.
Download a PDF of the full 2009 Large Market Benchmarking Report here, including all data, charts, stories and large market buyer profiles.While developing this picture of previously uncharted territory, we found some differences in what otherwise was not completely unfamiliar terrain. We also found a much smaller market segment than we previously suspected. We thought we would find thousands of companies in this spending volume range, but through our research and in conversations with global airline and travel management company executives we found that only hundreds of U.S. companies have large market travel budgets.
In the past,
BTN identified differences in travel practices employed by those who annually spend at least $2 million and those who spend less. In doing so, we found a marked difference in the use of best travel management practices for companies that spend more than $2 million. At the time, our research suggested that the top end of the midmarket was about $12 million. With huge cuts in travel spending in the past two years, however,
BTN editors this year decided to reset the midmarket ceiling, and therefore the large market floor, at $10 million. Meanwhile, the smallest of
2008's 100 largest air travel spenders spent $40 million.
The very largest buyers always can capture travel vendors' attention, but their large market colleagues have to try a little harder. Large market travel buyers don't have the most clout, but they have enough to get supplier attention. While large market companies usually don't have to work as hard as those with smaller travel budgets to prove their value to suppliers, more size only ensures an opportunity to show what they can deliver to suppliers.
"The more we manage and the better we are at managing, the more value we deliver," said one large market travel buyer. "The larger you are in air, they look at you differently, and so we can have a larger impact. I feel very responsible to put forth a commitment we can uphold. That is another reason accurate reporting is so important. It enables you to support a well-managed program and define the contracts that you need to include."
The main difference between the large and the largest buyers, according to one airline executive, is in the way they procure travel. The largest, or Corporate Travel 100, companies generally send requests for proposals from their headquarters to airline headquarters. Often, in such cases, senior executives at buyer and supplier companies have personal relationships and in some instances, reciprocal relationships involving products or services travel suppliers use come into play.
Sometimes such reciprocity and senior level relationships can come to bear in negotiations between large and even midmarket companies, but they are more common in dealings with the largest customers.
Not only do Corporate Travel 100 companies generally enjoy a higher point of entry and level of access to supplier organizations, but they also have more internal resources for analyzing and negotiating systemwide supplier deals. While the largest spenders are looking at chainwide hotel deals, for instance, large volume travel buyers generally have fewer travel professionals on staff and usually negotiate on a property-by-property basis.
While the largest buyers get headquarters attention, large market companies generally work with global account managers in field and regional organizations. For supplier representatives at that level, large market buyers often are their most important clients.
The biggest spenders want borderless teams and a single point of contact, whereas large buyers generally have fewer locations and want local service. Suppliers try to configure sales operations to match the way their customers are set up.
Large market buyers require the same degree of account management, but generally strike fewer preferred deals than the largest buyers. Most large market companies have fewer travel personnel and resources, preferred suppliers and integrated technology reporting tools, and less complex service requirements and higher T&E processing costs than the largest ones.
Despite these generalizations, size does not equal negotiating power. Some very well managed companies with small expenditures have travel patterns that enable them to strike excellent deals just as some of the largest travel buyers have internal policies and geographic locations that put them at a negotiating disadvantage. Many large market companies have the same potential for global growth as the largest travel buyers. Size also can be detrimental, such as when hotels don't want to commit too many rooms at too low a price.
Meanwhile, differences in corporate culture and travel patterns often render generalizations based on spending volume meaningless.
Not only are there differences in the way policies are formulated and enforced, but even among the largest accounts, decision-making often is fragmented. What might seem like a $60 million account actually operates like two $30 million accounts and what might seem like a company with $20 million in air spending could operate like three companies that each spend about $7 million.
Differences in company locations and management philosophy make distinctions blurry and impede clean categorizations.
Further complicating such efforts is the fact that nearly every travel supplier has different ways of categorizing midmarket and large volume travel buyers. Some lump them together. While
BTN and others in the industry use booked airline ticket spending as a measure, because such data tends to be more readily available and verifiable, some use other measurements such as total T&E spending.
One corporate card executive said her company uses total revenue and considers a corporate buyer large at $1 billion or more. It separates large buyers from those that operate in more than one country. It calls those with revenues between $10 million and $1 billion midmarket companies. By that standard, our respondents, who reported median 2008 company revenue of $10 billion and median companywide T&E volume of $93 million certainly qualify as large.
Data came from responses from 55 large market travel buyers to questions articulated by
BTN editors, hosted online and tabulated by Boulder, Colo.-based Equation Research. Nearly half of participants are based in the Northeast and one-fifth work for manufacturing companies.
The chart on the bottom of this page shows actual increases in T&E and airline spending from 2007 and 2008, despite late-year cuts, as well as cuts in 2009 T&E and airline spending projected to come almost entirely from domestic expenditures.
The top chart indicates 68 percent of 2008 spending was domestic. Of respondents, 43 percent spent less than 25 percent of their travel budget on international travel.
Business Travel News thanks the large market travel buyers and other industry participants who supported our efforts to create this baseline of negotiating and performance measures and practices.