Amex: European Policies Cut Costs
<H1>Amex: European Policies Cut Costs</H1><H3>By Cheryl Rosen</H3><I>Brussels </I>- Two new studies of European corporations illustrate how much they can save by implementing travel management practices and how airline deregulation will drive that implementation.
American Express, which commissioned both studies, presented the findings to a crowd of about 75 corporate travel buyers it brought together late last month here in the capital of the European Commission.
The first study, by Price Waterhouse Management Consultants, found that the average European company can slash as much as $5 million a year from its internal costs by better managing and automating the ways in which it books and pays for travel.
The second, by airline consulting firms SH&E and Harrell Associates, predicted that liberalization of the European airline industry, set for April 1997, will lead to a more competitive marketplace in which carriers will offer volume discounts to corporations that can document their travel patterns and prove their ability to move market share.
Price Waterhouse partner Denis Collart said that 77 large corporations in seven European countries participated in the automation study. Their average annual cost of processing travel booking and expense reporting in Europe was 661 ECUs, or, at $1.30 an ECU, $859 per traveler, which added up to almost 8 percent of the average company's T&E budget. Meanwhile, there was a broad range in costs from company to company-from $90 per traveler per year at one company to $3,730 at another.
But eight corporations in five different countries achieved a "best practices" standard of less than $195 per traveler per year in processing costs. According to the study, the key elements in holding down costs were automating expense reports and having travelers file a single monthly form, eliminating cash advances and central billing, and using electronic settlement to pay vendors directly. Taking all those steps, plus outsourcing travel booking to an agency and automating the process through online or e-mail ticket requests, would save the average company $848 per employee, which would translate into $5 million per year for a midsize company.
The second study, "Perspectives on the Likely Impact of European Airline Liberalisation," predicts that over the next five years, Europe will see much of the same scenarios that followed deregulation in the United States-and that a similar trend toward stricter corporate travel policies, better data collection and more negotiated deals should result.
Based on the report, Kyle Davis, director of Amex's Airfare Management Unit in Europe, predicted five major trends on the Continent: increased consolidation by existing major carriers, the emergence of small start-up airlines, an increasing crossover between scheduled and charter services, some development of a hub-and-spoke system and increased competition around schedules and costs.
Eric Brannan, senior vice president of travel operations for Amex Europe, said that the change in Europe will parallel the American experience. Expect new hubs for transatlantic traffic to rise, prices to fall and fare complexity to become a reality beginning next year, he said.
"Liberalization will transform corporate travel and companies will need well-planned defensive and offensive strategies," he said.
To stay ahead of the curve, European corporations need to initiate travel policy and put some teeth into the rules, so travelers "slowly get used to managed travel," Brannan said. And they need to begin collecting data on their airline spending and city-pairs.
Collart noted that while "we were told repeatedly that you cannot do away with cash advances in France, a number of our companies have done just that." Indeed, 14 of the 77 companies have eliminated central billing and moved to corporate credit cards, nine use electronic settlement to pay vendors and 18 have travelers making reservations electronically.
A number of attendees at the conference acknowledged that "corporate policy" remains a much harder sell in Europe than in the United States. Jean Idier, a controller at French packaging manufacturer Pechiney, called the conference "eye-opening" and focused on administrative savings as easier changes to make than moving travelers from first class to coach.
"We have been looking at reducing our travel expenses, but one rarely thinks about the hidden costs of the process itself," he said. Idier-who handles procurement of industrial supplies and equipment as well as general expenses like travel-is unsure about his ability to effect real change.
"We adopted a corporate credit card one year ago, but I think travelers do not exactly see the point, that we can use the information to negotiate better," he said. "It's not easy for them to appreciate, and when they do not understand, they have no motivation to use the card."
Brannan acknowledged that "telling a Swedish executive to fly economy class will be a tough job." He advised travel managers to focus on education and on service to the individual traveler, who will find fewer frills, more connecting flights, "intolerably crowded" frequent traveler lounges and longer lines everywhere when traveling in Europe.
While policy is more difficult to enforce in Europe, air deals are "much more diverse than in the U.S.," said Brannan. "Where in the U.S., corporations of the same size and in the same geographical area have similar deals, in Europe there is wide variation."
For a successful program, American travel managers need to "make your European counterparts a key part of the process, rather than imposing a program on them," Brannan said. "The best discounts are on local deals, but the best overall savings come from pan-European contracts tied into transatlantic ones, so build upon your U.S. deals. But include only the countries where you have control, and split off the others so they don't pull down your numbers.