Five years after then-travel manager Andy Menkes pioneered the launch of Republic National Bank's ARC-accredited Corporate Travel Department, the number of CTDs has eclipsed 160.
"Right now, we're seeing steady, if not phenomenal, growth, adding about 10 locations per quarter that vary in size," an ARC spokesperson said.
"Interest in the CTD leveled off when commissions virtually disappeared, but the primary benefits were never about commissions to begin with," said Menkes, now a consultant with Princeton, N.J.-based Partnership Travel Consulting, which is advising four CTD seekers. "The primary advantages are data privacy, uniqueness of the ARC number and the ability to unbundle services."
For both existing and newly interested CTDs, key themes include insourcing versus outsourcing
(see story), agency perception and quantifying cost savings, including the role of commissions. Menkes contends the program now is getting its "second wind," but opinions about the program and its growth remain mixed.
"I'm seeing the occasional conversion to CTD, but it's clearly far less than what it used to be," said consultant Mike Mary of Portland, Ore.-based ChangingPlanes. "As I talk with people about service configuration, I ask, 'Why do you want CTD? What are the benefits?' Generally, people cite cost savings, but, when you drill down, that's not always the automatic answer, and their answers vary. Still, if you're really a good travel manager, then this is what you should be doing."
Asked about the leveling off of CTD interest (see chart), new TCG Consulting senior consultant, Miami-based Barry Rogers, said, "I had that same feeling until I saw the number, and there really are a fair number of companies that have gone down that route, for a variety of reasons. Some of those reasons make sense and others were probably somewhat misguided."
"For some, it makes all the sense in the world; for others, it's foolish," said former Navigant president Thom Nulty, now a consultant with Newport Beach, Calif.-based Corporate Solutions Group.
According to a recent client poll by WorldTravel BTI, 95 percent of 127 respondents do not anticipate a move to CTD status, an increase from 90 percent in 2002. Respondents said top reasons included easier global travel management through a third party, lack of resources and/or senior management support, too many industry changes and a reliance on the agency to keep up to date through education and benchmarking and unclear cost benefits. Over the years, travel agency perception of the CTD program has influenced corporate interest in it, and the range of views remains wide.
American Express Global Travel Services president Charles Petruccelli last year said buyers "should avoid being lured by the CTD because it only replaces fixed cost."
WorldTravel is less negative, saying last year in a paper that it "makes sense" for corporations to have the choice, despite it being a "complex endeavor."
"It doesn't seem like CTD is getting more traction," said Peter Klebanow, president of Ultramar Travel Management, "and a lot of people who went down that road found there were more responsibilities than it was worth."
Klebanow said he had not heard of any CTDs giving up the designation, but some CTD users have seen reasons to reconsider.
One West Coast company last year began reconsidering after a significant two-year drop in travel volume that cut a supervisor position and, through attrition, a couple of agent spots. According to its corporate travel manager, strain on company resources, including her own time, and a philosophical preference for outsourcing among newly empowered strategic sourcing folks prompted an intensive, six-month search for a travel management provider. Requests for proposals were sent to eight agencies. After "huge analysis," the firm in June decided to stick with its CTD, which outsources only 24-hour service and has three agents handling upward of $4 million annually in U.S. booked air volume.
The buyer, who preferred to remain unidentified, said the cost comparison "wasn't even close," even after factoring in tens of thousands of commission dollars available to her agency and not to her CTD from a primary supplier, Southwest Airlines. The company calculated its CTD to cost between $6 and $9 per transaction, depending on whether it counted the buyer's position, while the agency offers it received ranged from $20 to $35 per transaction. Faced with these numbers, the firm's comptroller told the sourcing group to drop the project, reversing a view initially held by the CFO: "It's a no-brainer: Outsource it!"
Not only is the decision about insourcing versus outsourcing "purely an internal corporate decision," as WorldTravel pointed out in its white paper, but also the industry's economics are ever changing. Along these lines, talk about global distribution system incentives emerged more than once in recent interviews.
"If you cut GDS deals in 2000, you're probably looking at significant shortfall," said Ron DiLeo, Rosenbluth International strategic travel solutions COO.
"In my opinion, the GDSs won't be providing anyone the kind of incentives they have in the past, and if you look at the numbers post-9/11, you were on the hook with a GDS deal as opposed to your agency taking that risk," TCG Consulting's Rogers added.
On the other hand again, CTDs that are changing agencies appreciate the flexibility of taking their ARC numbers with them. This is particularly useful as CTDs rely more on ARC for data reporting, which ARC now is further developing. It also is offering CTDs direct connection options, though none have yet taken them on, ARC officials said.