Air Table Tipping Toward Buyers

By BTN / June 25, 2000

Air Table Tipping Toward Buyers

Business Travel News recently talked about air negotiating with travel manager Dan Baillie of Block Drug; Diane Calvert, director of travel administration for Tenet Healthcare; and Craig Anderson, recently appointed director of travel for the Universal Music Group, part of the Seagram family of companies--small, medium and large air volumes, respectively.

BTN: Craig, have we entered a buyer's market in air negotiating this year?

Craig Anderson: I think we have. I think it started before, or at least my experience as travel manager with my previous employer, Revlon, would indicate that. I don't know how it is for smaller volumes, but because ours is combined with all Seagram companies, we have a substantial volume and we've been able to negotiate very good net-net fares. I think an indication that it's a buyer's market also might be the way the airlines are improving their services, putting more seats in coach, expanding business class, providing sleeper seats in business class for international flights and so on. I think that indicates that the airlines may be hunkering down for more intense competition for the available business travel dollars.

BTN: Dan, is that your perspective?

Dan Baillie: We're in a situation where we're basically centralized in one part of the country, and one carrier is a predominant carrier there. In any market where you have a predominant or a limited market, it's still going to be a seller's market because they pretty much control it. But some competing airlines in the area are being fairly aggressive and we're taking advantage of that as much as we can. However, our travelers' affiliations with their frequent flyer programs tend to make those programs difficult to--

Diane Calvert: Mandate.

Baillie: Mandate or encourage. Carriers generally are aggressive in matching levels with people. So if one has bronze or platinum status with one carrier, even if they're not affiliated with the other carrier, the other carrier will sometimes match the same level to get the business. Still, the markets that have a very predominant carrier are less aggressive.

BTN: So, it's not really a buyer's market for you because you're in a captive market.

Baillie: Pretty much.

Calvert: I'm sort of in between, actually, because we started acquiring other hospitals and that has changed our lift, even though our largest lift is out of a hub city, which is Dallas. We have some challenges there getting lower fares and good net-net fares. I believe negotiating out of this area has been to our benefit. We're receiving at least a 2 percent higher discount here than anywhere else. We have demonstrated to that carrier that we can shift volume, and it isn't putting them on second-tier airlines necessarily, it is just changing some route structures so they are a little more understanding.

BTN: Will airline negotiating conditions continue to improve?

Anderson: As airlines continue to move costs out of distribution, we will still see aggressive negotiations, and some good opportunities to keep building relationships. The key to continuing the kinds of things that we see is to maintain good relationships with the airlines that are partners to the corporation, and to not overcommit. This is key, especially for someone like Diane, where you are in one market with a dominant carrier, but in other markets there are competitive carriers. We're very careful to structure the airline deals so we meet the commitments with each provider. As long as we do that, everyone is gaining from the relationship.

Baillie: Every vendor wants everything--and good for them. But it's up to the travel manager to know what's realistic to promise and what's pie in the sky. Every vendor--because I've been on both sides, both the travel agency side for many years, more years there than in this side--and I know what vendors come in expecting, and I look at them and I say, "who told you that?" There's nothing in place, there's no mandated program in place to give you 95 percent market share. Oh, I kid you not.

Calvert: Oh, I know.

Baillie: I am like, "what wonderful travel manager signed off on that kind of deal without telling anybody?" Their expectations are very high and the realistic expectations are nowhere in the same ballpark. So I'm very clear with vendors when they want certain markets and that sort of thing, because I do have a couple preferred carriers--I am very upfront as to what each of them can expect. I say, "you can't expect this market because I'm giving it to somebody else. I'm not going to tell you who--pretty obvious who it is, but--I'm not going to tell you, so don't ask. But I will give you this market." And, as Craig said, if you overcommit, you end up--

Calvert: Losing big time.

Baillie: You end up having a non-productive--I'm trying to be very politically correct here--you don't want to tick anybody off. You want to have a positive relationship with people because it is a partnership and if you start up shirking on your end of the deal, the partner that you're working with is not happy and then everybody loses.

Anderson: And it is becoming possible to manage multiple preferred vendors because of the analytical tools that are coming. At Seagram, we have a global database through ISP (now part of TRX) in London. We're able to watch very carefully how we're selling, and make adjustments to meet the goals that we have set with each carrier. I think that's important. Access to the data is critical in order to obtain the best result for both the client and the carrier.

Baillie: One other thing we also do with our travelers--we tell them, "when you're flying to this place, unless there's a really, really good reason why you shouldn't fly on carrier A, you're going to fly on carrier A, because this is why." And we give them a sort of nutshell description and they say, "oh, does that mean that much?" And we say, "uh huh." And they go, "okay, I'll take it."

BTN: Who is helping you to manage your data? What kind of assistance do you get?

Baillie: Not much.

BTN: You don't get it from the agency?

Baillie: I do get reports, but I tend to know more than they do.

BTN: And what about card?

Baillie: The card people help us manage as well, but it's difficult to get exactly the kind of report you want sometimes and the information you want, so you have to manipulate the stuff. And chances are, by the time you've asked for it, they've done all the paperwork to get you the report and you could've figured it out yourself.

BTN: And what about you, Diane, how do you manage your data?

Calvert: We are putting in a database, but at this time we get a lot of our information directly from the carrier that we are dealing with and we get it on a monthly basis. Our agency, of course, presents something, but it's 45 days after the close of a quarter and that doesn't help us track everything. So, that data comes in and then you really analyze different data. We do have a credit card, we have exception reports that come in because we have certain select markets that are critical in maintaining our agreements. And I will tell you for the most part, I think our road warriors, our most frequent flyers, they're very good about this. We've also had the airlines match their elite statuses so they're not out of line with anything. They're going to get points on, whatever. They might as well have them on multiple carriers.

BTN: We've been hearing about guaranteed fares offered in key city pairs, meaning more of a contract fare than a percent off a set fare.

Calvert: I've tried it in L.A. and Dallas, so far I've not been able to achieve that. I have, however, been fortunate to get fare matches where, if we find a lower fare on a like carrier or similar routing, we call a special desk and our airlines will match that fare. So, it's a lot of extra work on the agents and you're not sure how often they do it, but we trapped considerable savings that way.

BTN: That's new, or it's been there for a while?

Calvert: That's fairly new. I would say it was probably October when we started.

BTN: Does anyone else have anything similar?

Baillie: We have one major carrier that will fare match. As long as I've known them they've done that--not on the lowest, lowest, lowest fare, but if it's comparable. Yeah, absolutely they will match fares if all things are equal. And even sometimes if they're not equal, to get the business, if they're hungry enough for that piece of business. But set fares for a city pair, no. I know of it, and it would be nice to happen--

Calvert: It depends on the cities, and then you can do that.

BTN: Are you at the point now where you can get something in return from the airlines and the agencies whose costs have gone down as a result of your adoption of e-ticketing?

Calvert: Yes, as a matter of fact, they're going to present me with the new amendment to our contract.

BTN: The agency or the airline?

Calvert: The agency. Oh, and the airline--well, yes, because we're pretty much up to 95 percent usage where it is eligible now. And it's primarily because of our distribution system. We're covering such a vast area.

Anderson: That's very good.

BTN: And what is the total?

Calvert: About 13 million, 12 million plus, on e-tickets. There are just a few executives who have to have that little piece of paper. I've given it up too.

Baillie: You know the first time you give that VIP the e-ticket, the flight's going to get canceled, and they're going to have to run around from counter to counter and it's going to come back and blow up in your face. So certain people you just let them have what they want. I would say we are about 80 percent or higher for what's eligible.

BTN: Have you gotten to the point where you're getting something back for that in what you're negotiating?

Baillie: Thank you for reminding me.

Anderson: I think that e-ticketing is another one of those wonderful opportunities for educating the travelers. At my former employer, we got up to 85 percent of total ticketing on e-tickets. Aside from the fact that we would be in a position at this point to talk about costs associated with that, reductions--there was significant reduction in overnight mail expenses, I mean significant. It was something like 75 percent or more of that budget disappeared. I had a budget surplus--talk about being a cost or a profit center--just simply from switching to e-tickets. And making it the default, in my previous life.

Calvert: Ours is the default also.

BTN: Diane, before we started, you were talking about lowering your ticket prices. Could you say how much your average ticket price is?

Calvert: Our average ticket price benchmark for the first quarter of '99 was $682. It is down to $536.

Anderson: Very good.

Calvert: And it's been a quarter--well actually the third quarter was $527. And I think that was by communicating our cost-saving initiatives to the travelers. Everyone is responsible for their budget, so we have a wonderful policy that is not that strict. We give a lot to everyone, but we've had to take some things away--in-room movies being one--however we've added spa fees--I mean we are a healthcare company, so let's keep everybody healthy. We have dropped a lot of the five-star hotels or negotiated very, very good rates and gone into the middle or deluxe category, and it seems to be all right. We've been promoting a number of the suite hotels, for example the Embassy Suites, that I think is our main competition with the Westin Galleria. It offers just about everything, it's plain-wrapped by comparison but it's everything that you need.

BTN: Diane, you were saying how you lowered your ticket price principally through communication. Was that through your recently implemented travel page on your corporate intranet?

Calvert: The Web site, right, and the Web site also will house all of our travel forms, all of our travel policies.

BTN: So, is that now the principal means of communication that you use?

Calvert: That is what we are trying to do right now and this is the initiative that our senior management has set forward. They want to try to bring all of our 113 hospitals, regional offices and subsidiaries into a sort of town-meeting type of environment. Everything is on there, it's just an incredible little thing, and they've got a lot of marketing gimmicks. I think it'll be our biggest tool.

Baillie: Are you able to track how many hits there are on there?

Calvert: Yes, and as a matter of fact, if you answer these little surveys right now, for every number, someone gets a little prize. It may just be a Tenet T-shirt but whatever it is, there is something.

BTN: And do you have a travel page on your corporate intranet. Do you have a corporate intranet?

Baillie: No. Working on it. We have a Web site, but that's external.

Calvert: Even our Concur Technologies expense report management tool is right on our Web site. They go in, they sign up for it. The American Express credit card applications are there, we handle all of that and it's everything from one page. And on that page, we tell them how to register a complaint if appropriate--not just, "I had a bad experience"--but a real legitimate complaint. We have a special customer service number to handle that.

Baillie: Well, those are essential, because when that happens, you need an immediate response, not follow up after a card is sent in weeks later.

Calvert: That's right. We have a very good relationship with our agency, and when they get these responses, they e-mail all of their responses to me and then we then just sort of close the gap with the traveler, and it has diminished too.

BTN: Craig, how are you making use of the Internet or intranet?

Anderson: In today's business environment, an intranet homepage for travel is becoming the key tool to enlist your travelers into your program and connect them with the vendors. The travel page makes travelers understand why it is you do what you do, and gives them an easy channel to maximize the benefit that they get out of the relationships. The Seagram global travel team includes one member whose sole responsibility is building that intranet structure.

Seagram has it on now and the other subsidiaries will link onto that for travel. At Revlon, we even had city guides, hospitals, emergency telephone numbers, maps, airport diagrams, everything. And we can control the behavior and the usage more because we only link to the preferred vendors. So if hotel chain B is not the preferred supplier then we don't have any information on hotel chain B, but because you have information on 10 other hotel chains, you're not lacking anything if you go there.

Baillie: Have you asked the preferred vendors to help sponsor the page?

Anderson: I can't speak for Helen Enriquez, who's doing a wonderful job in the global travel office at Seagram at 800 Third Ave. This acknowledgment, however, of the power of the new technologies that are in play now is vital to corporations as they seek to build their programs with these preferred vendors and to build those relationships with the database and the electronic communication facilities. Because of our ability to channel in this way, it's going to enhance our relationships with our vendors and bring the business to them.

BTN: Is this part of the reason why we are more in a buyer's market scenario, because of the potential represented here to be able to be really a vital piece of the distribution system?

Anderson: For years we've been saying, take the mystery out of all this. Give us a good product, we'll pay you a fair profit for doing that and once we've established that relationship, we want to maintain it and build on it. I think the vendors are beginning to understand that really is true.

Baillie: You've got to have the relationship to make it work. To get your intranet site up, you've got to have people who know how to design it, you've got to have people who know how to put the stuff into it and make it fun to look at and easy to use. Online booking tools too--all this stuff comes down to relationships with people and if you don't have that, then you really don't have much of anything.

BTN: Diane, is the travel page on the corporate intranet a tool you use for fostering those relationships?

Calvert: It is, and we've tried to make it fun.

Baillie: If people don't like it the first time, they're not going back.

BTN: Is partnering the best tool that you have in negotiating in a hub scenario relationship, or are there other things that you need as well?

Baillie: If you have good relations with your vendor and your rep, and they trust you--that you're looking out for them and they're looking out for you--they'll bend over backwards for you. The moment they feel that you're taking advantage of them or not doing what you said you were going to do, then they're going to start pulling back.

Calvert: But I've had to go, sometimes, to a level above, always including our rep in the conversation, and they're pretty good. As a matter of fact, our primary has volunteered to come out and give a presentation to our senior management about where they are in the industry. So it does work, but sometimes the rep alone doesn't have the authority to do anything but listen to your sad tale or your wonderful tale and you don't know where they go with it.

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