BTC Eyes Cost Cutting Initiatives
<B>BTC Eyes Cost Cutting Initiatives</B>
By David Jonas
If a recent Business Travel Coalition study is an indicator, hurting travel suppliers are not likely to recover corporate travel revenues any time soon. The study, released late last month, polled 62 corporations with an average annual T&E spend of $97 million and detailed their methods for achieving an average cost reduction target of 28 percent for 2001.
Cost-cutting measures among the respondents include tougher trip validation and pre-trip approvals, modified air policies--including mandates for coach class, nonrefundable tickets and lowest available fares--closer travel reviews by senior management and curtailed meetings activity.
About half the respondents said they require connecting flights in place of more costly nonstops, while three-quarters require economy class on flights to Europe. "It appears there has been substantial reevaluation of corporate travel policies in this area, driven, in part, by perceived high transatlantic airfare levels," BTC said.
Though airfares are the most costly T&E element, the study revealed avenues corporations are taking to trim hotel costs, including hotel expense caps in key markets. Three-quarters of all respondents said travelers are encouraged to select less expensive properties. One respondent said its travel center only offers a few preferred properties in each market, ranked by rate, and travelers must provide an explanation for staying elsewhere.
A majority of respondents also said they have considered car pools to reduce rental car costs, though a little more than a third actually have implemented such a program.
The Business Travel Coalition identified potential cost-savings strategies not employed by most companies, including use of secondary airports and support for low-fare carriers. Among the study's recommendations for travel and purchasing executives were to question short-term versus long-term agreements, consider risk-sharing options, identify the pros and cons of flat fares in the current environment and explore investments in communication technologies as substitutions for travel.
Indeed, while video and Webconferencing options have evolved into more efficient travel substitutes, the study found only two companies that offer travelers such options at the point of sale.
The BTC findings correlate with other industry observers, stating that "travel activity reductions are not being pursued for short-term benefit only," and that corporate travel spending may not quickly snap back.
Cited reasons included hefty business fare hikes, commission cuts and fuel surcharges in the past few years; high load factors that frustrate weary road warriors; and improved technology-enabled communications tools. The study noted that if only half of slashed business traffic returns, it will be a significant concern for travel vendors.
"The prospect of an incomplete or significantly drawn out rebound in corporate travel should be of concern to every participant in the travel supply chain, including the customer who depends on a financially healthy industry," said BTC chairman Kevin Mitchell. "The implications are very serious."
Mitchell said airlines are the "fulcrum" of the industry and partially are responsible for their own current peril by denying for years problems with competition, customer service and gridlock.
BTC said that "airlines have made it easier for senior managements to conclude there must be alternatives to commercial air services for conducting company business.