Benchmarking Europe's Biggest 2009: Managing Economic Crossroads

Three travel buyers—Geoff Allwright, Airbus parent EADS UK head of travel and expenses; Honeywell corporate EMEA travel manager Cindy Van der Elst and Credit Suisse vice president in the global travel department Ben Varey—discussed transforming their travel programs during the recession and preparations for the recovery with BTN editors Amon Cohen and David Meyer in October during the Association of Corporate Travel Executives' global conference in Prague.



Business Travel News: Has the recession helped you gain control over traveler behavior?

Cindy Van der Elst: It has brought a lot of focus to our department, which wasn't the case before. The CFOs who used to own the travel policies would control the budgets but did not always collaborate. Now they are knocking on our doors and saying, hey, you guys, we need you to help us, but I don't really see it driving compliance for individual travelers. The individual still thinks he is the expert about his own travel. Demand management is the easy part. If someone tells us to stop travel, we can switch it off and switch it on, but making someone comply with your travel program is a whole other ball game.

Geoff Allwright: There is a lot of scope for deferring to local knowledge. Should you take a car or a taxi? You cannot always say one or the other, or even which hotel. Employees point out a hotel may be $10 more but is one they can walk from, so the traveler is the expert in many ways.

Ben Varey: We solicit as much as we can to try and get that input. We implemented a new hotel policy last year, and have gone global with it this year, in which we require people to stay at the lowest-cost hotel within our program. It has brought to light a lot of examples where people have asked, "Have you looked at the logistics of this hotel versus that one?" We have really had to get into the weeds to obtain that sort of information to drive the policy through and make it stick.

Van der Elst: We are trying to provide alternatives because of travelers thinking they can find cheaper hotels on the Internet. We have introduced lower-level hotels which are still safe and secure for our people. They will never find a cheaper rate than we have put in the program, so it is helping to drive compliance.

BTN: Have you changed policy regarding flying in premium class?

Van der Elst: Our travel policy for business class is eight hours, but our businesses can make this more stringent, and some of them have pushed it up to 12 hours or said economy everywhere. We tell travelers that if they are flying in economy, then maybe they should go a day in advance so they have more time to recover.

Varey: First class came out of our program completely earlier this year. We had certain instances, such as if the airline didn't have a lie-flat seat in business class, where we allowed it. As far as business class is concerned, North America had been economy class for under five hours for a number of years, and we introduced that on a global basis in 2009. Prior to that, the standard was business class, although a number of people voluntarily flew economy and used restricted fares anyway.

Allwright: Most parts of EADS are six hours for business class. There are a few parts still flying business class in Europe but we expect to spend less money on travel this year, and that is one way we will be able to do it. All the time I've been at Airbus, there has been no first class.

BTN: Has the recession impacted compliance at EADS too?

Allwright: The scandal over expenses for U.K. members of Parliament has been much more important for us. It has definitely woken people up about expense management. Maybe not so much the travelers, but more the managers regarding what they are approving and what they think their employees are doing. It has challenged managers to say, actually, I really am responsible for this, rather than just nodding through a trip before it has happened or an expense after it has happened.

BTN: Is there more concern about reporting requirements?

Allwright: Yes. There is more likely to be an audit trail. I have definitely seen managers worrying about on what they are signing off. I am going to one department's global team meeting next month to explain where expenses have guidelines and where they have policies. It's always a gray area, but renting a car over the weekend or taking your family away on holiday is definitely not in policy. One guy rang to ask if it was OK to pick up his kids from school in a rental car as it was on his journey home from a business trip. I said it sounded OK to me, as long as his manager was happy. That's the level of worry or awareness we are seeing in some areas.

BTN: What about compliance at Credit Suisse?

Varey: We had a pretty mandated and watertight policy before we went into the downturn, but it has clearly given us more air time. There are more people focused on travel now than just the travel department, such as the expense management department, which is really going down to the individual traveler level and questioning what employees are doing.

BTN: Are travelers being more restrained about the number of trips they are taking or how much they are spending per trip, or both?

Allwright: At our company, when a traveler books a trip, they receive an estimate of the total trip cost, so the manager can say, when you take that trip, it costs you £500, and you take it every week. However, if we combined it and did it every other week, it would only cost us £700, so there would be a saving. Managers and teams are looking at that level because we can give them a pre-trip report.

BTN: How long have you had pre-trip reporting?

Allwright: Two years in most of Airbus, and we are bringing it into a lot of our parent company, EADS, now. It is very valuable. Managers receive an e-mail with an itinerary as soon as an employee books a trip. Some will just click for approval, but a lot of managers are either not approving or remembering that next time this will cost £500.

BTN: Do you have pre-trip reporting in place, Ben?

Varey: Absolutely. Within the divisions, we have people looking at that on a daily basis and going to travelers and questioning them. Pre-trip authorization is now required for all non-client travel, which is the part of the budget people can really cut into and do smarter. That's been the big area of focus, especially when it comes to demand management. Can you do this smarter through a videoconference or even through an audio call? Do you need eight people going to this meeting—can you not do it with four? Those are the questions being asked.

Allwright: Do travelers have to add a reason code?

Varey: For non-client-facing travel, yes.

BTN: Once the economy improves, will you be able to retain the controls?

Van der Elst: At Honeywell, we have made the clear point that this is not going to change. If a business starts to do well, it doesn't mean we are going to let them go back to doing their own thing. The controls are now in place. Managers have been trained in this kind of compliance and cost perspective, so they understand this is part of their profit & loss and they are responsible at the end of the year too. Businesses which are now business-class-only for flights of more than 12 hours will not turn the clock back.

Varey: If you've been through the pain to get to where you are with the policy, then why would you turn back the clock?

Allwright: I would say I agree, but in my two previous travel jobs, it was very much a case of peaks and troughs, with travel freezes or not, business class or not. It was off and on. Maybe that culture has changed and the clock has moved on a bit. I would love to think that in three years we could look back and see what we have done now is still in place.

BTN: You're not certain?

Allwright: I'm not certain because of my previous experiences and because the airlines and hotels might come up with schemes to tempt travelers or buyers to spend that little bit extra. We have the tools to respond to a downturn much quicker than in the past. Before, we didn't have the tools to stop travelers flying business class to Paris, but now we can.

BTN: Do you think senior management may lose interest in travel again once the economy improves?

Varey: Maybe it will go a little further down the agenda, but I think the focus will remain.

Van der Elst: Something we are trying to do is create goals at a business manager level. We are not there yet, but we are sure that if they have this, it will keep them interested in travel.

BTN: Do you have to pack in every reform you can while you have management's attention?

Van der Elst: If you can link it to their P&L and their goals, they become more interested, because they have a personal interest.

Allwright: In some parts of EADS it is on the P&L. Every department has a budget for travel and they are measured on it. As a travel team, we provide them with forecast data on travel spend, so we can tell them, if you carry on like this, you are going to overspend by 10 percent. You don't want to be on the chart in the red area where you are forecast to overspend.

BTN: You are being proactive, but are managers also seeking you out?

Allwright: Yes. We are more like consultants to the business now. We can say we have the data to help them reduce their spend and still get their business done. One customer-facing department asked if we could add a box to the travel booking process for travelers to write in the name of the airline client they were going to visit, because an employee would turn up at an airline and meet five of his colleagues in reception who he didn't know were going. That was happening a lot, so we provided the field and they are using it not only to stop duplication of visits but also to see how many visits they have made to each airline.

BTN: Are you further adopting travel alternatives?

Varey: We have done a lot, and the executive board has led by example. There is a very sophisticated videoconferencing technology that the board uses for a number of meetings. Zurich, New York and London are the three key hubs for our videoconferencing facilities, and we have other offices linking into them. It goes back to the point that for non-client travel it is a feasible alternative. The technology has come on so much in the last 18 months.

BTN: Is it the technology or people's willingness to accept it that has progressed?

Varey: I think it is both. Preconceptions about the technology are sometimes the biggest barrier. People are surprised when they see how well it works, how interactive it can be and that you can almost create a round-the-table view in the videoconference.

Allwright: Videoconferencing used to be a frightening experience. This happens less now, but I used to ask managers why they didn't do meetings by videoconference, and they would say, "I went into a videoconferencing room and I couldn't get it to work, so I rang the help line and hung on for five minutes, so now I never use it." I said to one manager, "How long have you spent waiting at airports? You don't mind waiting an hour and a half for a plane, but you won't wait five minutes for someone to sort out your videoconferencing?"

BTN: Do you have any figures for the amount by which it has reduced travel?

Varey: That's very hard to quantify. It has certainly reduced the number of trips but it can also create travel if you are connecting with people you didn't connect with previously.

Allwright: I would guess 80 to 90 percent of our conferences are audio, but we have very good videoconferencing in Airbus and other parts of EADS. The technology works well, and we have a lot of centers around Europe. It is all linked into Microsoft Outlook, so you can reserve a videoconferencing room in your calendar just like booking a flight. We also have a link to the videoconferencing booking tool in our online travel system, so when employees go in to book travel, the first thing they see is a message asking if they can do their meeting through videoconferencing instead. If they can, one click takes them straight to booking. It works really well.

Varey: You're asking that question at the very start of the process?

Allwright: And then at the end, again, before they press "book."

Varey: Do you think that will influence them? We have been looking at where we should ask the question. We have it integrated into policy, but I think that physically asking it is a very interesting idea.

Allwright: Unfortunately, we don't know which intervention is important because we don't know when they quit, only when they book. We measure the uptake of videoconferencing rooms and it is up a lot.

BTN: Is the ability to book videoconferencing rooms online important as well?

Allwright: It is. A few years ago, the mantra from travelers was: "I don't know how it works, I don't know how to book it and there's never one available." There used to be a culture in Airbus that if the managing director's office had a videoconferencing facility, then the only way to book it would be to talk to the MD's personal assistant. We said, no private rooms anymore. They are all on the system, so everybody can see every available room. That's important because we have very big sites, and you can have a videoconferencing room in a tiny building that no one knows about. That has opened up. In the Outlook system, it will tell you how many people the room can seat and when it is available. It has been a big breakthrough.

BTN: What about you, Cindy?

Van der Elst: For us, videoconferencing is part of the IT department, so we don't get involved. We don't have facilities like Geoff and Ben have. Videoconferencing is fine if you have defined headquarters. but it's much more difficult if, like us, you are based all over the place. We are looking now, together with IT, at working with external suppliers like Regus or American Express, which is getting into videoconferencing.

BTN: What do you think of the idea of using hotel videoconferencing facilities?

Allwright: Speaking for myself, my office is in Bristol, U.K., but I live near Reading, which is about an hour and a half away, and it would be great to use a videoconferencing facility in Reading. At the moment, if I need to use videoconferencing, I have to go to Bristol.

BTN: Is there someone in your company who is taking strategic oversight of communication?

Allwright: Our strategy came out of Airbus having to cut travel by 20 percent four years ago. Our director of travel was a major part of the whole company's savings plan, and that's when it was brought together with IT at the highest level as an opportunity for creating savings.

Varey: Our global travel department rolls up into the same global reporting as media services. As part of our ISO audits, we look at the increase in audio and videoconferencing versus travel as one of the measures we use, so the data is pulled together in that way.

BTN: Who has responsibility for analyzing that data and dealing with it?

Varey: That analysis falls into expense management, a division within the bank, which looks after not only this but the pre-trip reporting. It is trying to do things proactively with the data.

BTN: Broadly speaking, do you expect to travel more next year and pay more for it?

Van der Elst: Are we going to travel more? I don't think that is the intention of our company next year. Are we going to pay more for it? That is going to depend on the capacity our suppliers put in there.

Varey: The effect of the capacity taken out by the airlines is starting to kick in. We are starting to see a price creep already. Flights are filling up because they have taken so much out of the system. On the airline side, it is going to be challenging. Regarding hotels, we are at the back end of our RFP process for 2010, and it is a very different market from one we have encountered before. You get a different view depending on the hotel chain.

Allwright: A lot of hotels are telling us that they are seeing a downward creep from, say, four-star to three-star, and obviously one way you can save money is by helping travelers to stay in the lesser-class hotels.

BTN: We hear that higher-end hotels are discounting more than ever to combat that.

Varey: They have been fighting to keep inside companies' policies.

Allwright: A lot of five-star hotels are asking whether we have rate caps in their city. I am now thinking we should have said yes.

BTN: Do you think hotel rates could come down a bit more?

Varey: Yes, I think so.

Van der Elst: There are some cities where price is going down again, but overall it is flat to down. It depends also on how you have renegotiated, because we did two negotiated rounds this year, so we have already lowered the rates.

Allwright: Did you get a big reduction in the second round?

Van der Elst: We got 12 percent.

Allwright: Did your travelers carry on staying in the same hotels so you realized the 12 percent? They didn't say, oh good, I can stay in a slightly better hotel?

Van der Elst: No.

BTN: Have you found any ways to measure a return on investment in travel?

Van der Elst: I always say if you travel, be clear how the cost you put in there is going to produce a profit that comes to the company. That is the mindset I want my travelers to have. On the metrics of it, you can compare your costs to overall expenditure or profit. Yet, if someone travels to sell a landing system and they make the sale, then yes, you can see the return on investment, yet if they don't you can't, so it is challenging to put the metrics in place.

Varey: We are beginning to see people taking in multiple destinations on one trip. It may take a week out of the office, but in that week they may make visits that they would have previously have taken in over three weeks. Definitely on the longer-haul journeys, we are seeing people going to more places to improve the return on investment. We are seeing that in Europe as well.

Van der Elst: It has an influence on the average ticket price if they start to combine their trips, unless there is a one-way fare structure.

Varey: That's right, and it takes us away from the online booking environment. If it's a point-to-point trip, you have to book it online, but you get more challenges if you try to book a multi-sector trip online.

BTN: Are you concerned about increasing ancillary charges, such as fees for using global distribution systems and corporate cards, and is there anything you can do about it?

Van der Elst: This is an additional cost and it makes our job as corporate travel managers very difficult because those charges come in as separate line items. I would be much more in favor if they just put it in the price. Why create additional unbundling that in the end will have the same result? The attitude I really don't like, and this is evident among many suppliers, is that in the end it is the corporate client who is going to pay, so they should consider us and make our job easier.

Allwright: We are getting a lot of questions about all the different fees, especially as within our system we have our own fees as well: our online fee, our expense management fee, etc. I don't mind unbundled charges where we have a choice. If you want a cup of tea on the flight, then buy it, but we don't have a choice on a lot of these charges. We are paying for them anyway, so why are they unbundling them? Just keep them within the fare.

BTN: Is it a problem for budgeting as well?

Varey: It is becoming more challenging the more costs are unbundled. Before, we were able to look at X percent of the costs, but now that figure has shrunk and we are having to shift our focus elsewhere to bring total travel costs under control.

Van der Elst: Another problem is inconsistency. They unbundle for some booking classes but not for others. How do you explain to a traveler what a booking class is?