Four travel buyers—Mark Avery, U.K. head of business services for PricewaterhouseCoopers; Bernadette Basterfield, international head of travel for JP Morgan Chase Bank, based in the United Kingdom; Else Marie Madsen, travel manager for Lego, based in Denmark; and Peter Sijbers, director of senior sourcing for airlines and corporate card for Philips, based in the Netherlands—met Business Travel News editor-in-chief David Meyer and contributing editor Amon Cohen at the Association of Corporate Travel Executives global conference in Rome last month to discuss possible responses to tough economic times: cutting back travel, encouraging smarter booking and reevaluating supplier relationships.
Download a PDF of the full study here, including all the data, charts and stories published in the print issue.Business Travel News: Is your company going to travel less?
Peter Sijbers: We will travel less, for sure. I anticipate there will be a budget reduction for 2009 of 10 to 20 percent, which is pretty significant. We have also reduced travel this year.
Bernadette Basterfield: We are definitely trending downward, but we are not focusing on front-of-office staff, because they are doing the deals. We are focusing instead on back-office and support staff. Going into 2009, we are hopeful of a double-digit decrease in transactions—it's only single-digit at the moment—and really getting across the message that people need to think about their need to travel. We have just introduced a pre-trip approval process, which I know a lot of people would find a backward step but we think it a necessary one right now to focus on travel avoidance among back-office personnel.
BTN: How much are you cutting back in Europe relative to your U.S. business?
Basterfield: Probably less than the U.S. business. The big area of growth for us is the emerging markets, especially emanating out of Near Asia [i.e. India and China]. What we are doing right now is to make sure we don't have any waste.
Mark Avery: We are not seeing a trending downward in the United Kingdom. At the moment, it is pretty flat, but there had been growth up until now.
Else Marie Madsen: We are traveling more because we are in transition as we outsource 80 percent of our production from Denmark to the Czech Republic, Hungary and Mexico.
BTN: For the year ahead, which will be the stronger influence on your volumes, the upward pressure of globalization or the downward pressure of the economic downturn?
Madsen: When we came into 2008, we were very aware of big challenges with issues like the rising cost of oil and the low dollar, and the recession had already started to a certain extent, but in spite of that we are traveling more.
BTN: Peter, what about your company? Are there certain strategic dynamics that might make you travel more, even though there are downward dynamics as well?
Sijbers: Yes, acquisitions. Philips is focusing more on healthcare and the companies we are acquiring are predominantly in the United States. We are also continuing to move production around the globe.
BTN: Take us through what you are doing to reduce the number of trips in your company.
Sijbers: Next year, we will look at policy again and provide alternatives for travel, including installing 30 more videoconferencing facilities at the locations that form the heavy travel routes within our company globally. We will also introduce a global expense management solution to ensure that whatever we do up front with channeling our expenditure is adhered to at the back.
The aim is to support our business better with actionable intelligence and make sure there is somebody at the receiving end rather than throwing solutions over the fence. We are positioning ourselves more as a consulting business, so they can make better decisions. If we are able to provide actionable intelligence for our business, and they only have to make clicks to follow up on the recommendations, that will be the most effective way either to achieve fewer trips or more trips with less budget. It puts the ownership where it needs to be and that is in the business. We are not the ones running the budget. We are providing the tools to enable them to manage their budgets better.
We are also looking at an expense management system for which the first step will be trip pre-approval.
BTN: Bernadette, how are you getting your support staff to travel less than in the past?
Basterfield: A lot of it is asking questions like, does it take three people to attend an internal meeting when one is sufficient? In days gone by, it would probably have been attended by all three.
BTN: How do you draw this to their attention?
Basterfield: Everything is data-related. We have some really good statistical data from the agency side and we can now couple that with our corporate card information, so we can show the businesses the number of people traveling that we know are in operations. Again, if they can visually see it, then we can get them on board. Going to pre-trip approval is likely to have a significant impact on the question of why people are traveling. As soon as the booking is made, an e-mail will bounce to the traveler, the arranger and the line manager.
BTN: Will line managers have to give sign-off or will they be able to disapprove it?
Basterfield: They are able to disapprove it.
Avery: What we do is slightly different. We are challenging the need for travel, particularly for internal purposes, to reduce both our carbon footprint and our costs. The two go together. Like Bernadette, we are targeting internal travel rather than client-facing travel.
BTN: Even before this downturn came along, you were encouraging your personnel to travel less for environmental reasons. Do you think the economic message is going to help boost the environmental message, or is it the other way around?
Avery: When people are deciding whether to travel or not, they take three things into consideration: the cost of the trip, the time of the trip and thirdly, probably, the carbon emissions of the trip. Those three things are business drivers that you have to balance. I think the emphasis may change. The downturn will help because people will travel less and that will lead to a reduction in terms of CO.
BTN: Might the downturn help you to introduce a permanent systemic change in behavior?
Avery: I think so. Our videoconferencing is growing. We currently have 29 video sites in the United Kingdom and we are putting another 13 in at the moment as we drive at carbon- and cost-efficiencies, particularly reducing the need for our people to travel between offices. One of the big problems with encouraging people to use videoconferencing is getting them to use it in the first place. If you can give them a good experience, they will come back and use it again. The natural reaction is to jump on a plane, not to use an alternative method.
Madsen: We are also looking at videoconferencing. We use it already, but we want to get a better system.
BTN: What helps encourage people to use videoconferencing and stay with it?
Avery: Availability, ease of use and a good experience. It needs to be easily available, so you don't have to book months in advance, which is why at certain locations where demand is high we are doubling up the kit. Our adoption is getting better. There are early adopters and champions who use it all the time, but you have to keep widening the sphere to get to those others who aren't.
Sijbers: We are finding that adoption and utilization of videoconferencing rooms is growing much quicker than for online booking. We have reached 60 to 70 percent utilization in a relatively short time.
Avery: If someone has a good experience, they tell their colleagues about it, and then those colleagues do the same, so you have make sure it keeps being a good experience.
Sijbers: It also helps to tell them they are being good citizens by being green and avoiding costs.
BTN: Mark, the very fact you are the person in your firm talking about this is also presumably important. Does videoconferencing have to be coordinated by the person who also coordinates travel?
Avery: Videoconferencing used to sit in IT in our business, but our view was that if you are going to make a difference then this isn't an IT issue, it's a behavioral change issue. With the CO2 challenge and with travel and meetings all sitting under my hat, it naturally sits there. It's not just in my objectives to reduce our travel; it's in the travel team's objectives too. IT supports us, don't get me wrong. It's on the network and they support the installation of it, but in terms of actively promoting and delivering, it sits under my service area.
BTN: Bernadette, do you have it in your organization?
Basterfield: We have it in strategic locations: New York, London, Singapore and Chicago, but it is not something that comes under my remit. It sits outside what the travel team gets involved in, but bringing the two together is certainly on the radar to look at.
BTN: To what extent can videoconferencing replace travel?
Avery: I think as the generations change, this will change, but my current view is that you don't build relationships through technology, but you can maintain them to a certain extent, even with a client. The reason I say this will change is that if you look at kids today on social networking sites, they are used to making friends online, not necessarily meeting them face to face.
Today, we use a "one in five" principle: If you have five meetings, can you do one of those by video? You don't need to meet face to face every time.
BTN: If you didn't have videoconferencing, would you be traveling even more?
Sijbers: Yes, that is fair to say.
BTN: It used to be said about videoconferencing that it was as likely to spur more travel as replace it.
Avery: There is a possibility of that, but what has got more sophisticated is that we now capture where we are saving travel. We ask every videoconferencing host how many people would have traveled to their meeting. It means we can understand whether the meeting is generating or reducing travel.
BTN: What have you learned from the data you have collected?
Avery: On average, 2.6 people would have traveled per videoconferencing meeting. That is the metric we use to measure our carbon efficiencies. We measure it on a quarterly basis.
BTN: Are you doing anything else to get people to travel less?
Avery: Within our CO2 agenda, we have introduced an incentive scheme. For every ton of CO2 each department saves on travel, we invest in saving an acre of Ecuadorean rainforest. For videoconferencing we have a points scheme, depending on whether the meeting involves people who would have traveled domestically, short-haul or long-haul. When you get 10 points, you get an acre of rainforest. We only launched the incentive scheme in July and in the first quarter we saved 400 acres of rainforest.
Madsen: At Lego, we are very much focused on balancing work and family life and this could be something else that helps us to promote videoconferencing.
Avery: The other big influence for us over the past 18 months has been the introduction of a travel champions' network. They are personal assistants and secretaries for whom we have built in clear goals regarding travel management. Each one has a travel reduction objective, an online booking objective and a couple of others. We currently have about 160 travel champions around the United Kingdom.
BTN: Let's turn to your efforts to reduce the unit cost of travel. What about downgrading class of travel? Is there anything left to downgrade before you run up against human resources challenges?
Madsen: A few years back, when we were having a very hard time, we changed our policy to economy class all over the world, but this has been changed again. Now, the first choice on flights of more than six hours is premium economy, and if that is not available, you are allowed to fly in business class. It is very hard to get the right people for jobs in Denmark. We have a very low unemployment rate, for the moment at least, so it is an HR issue.
Avery: Regarding hotels, our view is that we have the bandwidth of hotels from budget to five-star properties. It is enough to allow people to make sensible choices. If they always stay at the top end, then you can challenge them on that. We have also introduced a rate cap for hotels. It's been communicated and largely abided by, but we don't challenge it via expense reporting, which is the next step for us.
BTN: Apart from downgrading, what else are you doing to reduce travel costs? Let's start with air.
Basterfield: We are encouraging online booking and seeing some fantastic average ticket prices versus offline. When you can present that to budget holders, they really see the benefit. We have not had a mandated culture before in JP Morgan, but we have now mandated the use of the online booking tool for our top five citypairs. We have instructed our agency to take telephone reservations for those citypairs. As a result, adoption, which was fairly flat for a while at 15 percent, has risen to 42 percent, which is staggering for just one year of having an online booking tool.
BTN: Did it meet resistance?
Basterfield: No. We positioned it so people could see why we were doing it. The results speak for themselves. We are able to show great adoption, cheaper transactions and average ticket price savings. A lot of our efforts go into education about traveling smarter. We are also doing a lot of work around the benefits of advanced purchasing.
Avery: We have recently been doing some communication with the businesses to say that just by using the firm's systems and doing things appropriately in an nonmandated environment, there are opportunities to save money.
We are, for example, making sure they are buying the right types of ticket and breaking down some of the myths of travel, such as the use of restricted tickets. There are still too many people buying flexible tickets when they do not need to change. You have to educate the traveler that restricted tickets are often changeable. All they have to do is pay the fee and perhaps an additional fare. For the number of times we need to change them, it is worth buying the restricted tickets and paying the fee on those occasions.
We are also encouraging them to take action on really avoidable costs, like cancellation and no-show charges. We are starting to measure that and report back on it to the business and show them how much they can save. It's quite a big sum where people are inefficient in terms of their processes.
Basterfield: We are doing a lot of work along those lines with the assistants who make 95 percent of all our bookings. Like Mark, we have a steering group who are our eyes and ears out in the businesses. We hold a lot of education sessions with them.
BTN: What you have said is interesting. What haven't said is also interesting, because you have talked about changing internal behavior rather than dealings with the airlines. Does it indicate that these days buyers are finding the really big savings in travel are made within the business rather than outside it?
Sijbers: At this time I am testing some things with airlines. Like Mark's business, we pay for restricted tickets and we pay penalties. Ultimately, we are generating a pot of money and I don't get anything back from it. Currently that is something under discussion. I want something for my pot of money. I am talking about things like fees for changes and fees for nonrefundable tickets that have not been used. It has turned from Mickey Mouse money into real money and I want something out of it, one way or another.
BTN: Do you think you have a chance of success?
Sijbers: Yes. One thing I am testing with one airline is pre-purchase.
BTN: Where you buy an allocation of seats?
Sijbers: Or tickets. We haven't figured out the best shape or form to do it, or what the benefit would be, but we are investigating the opportunity, let me put it that way.
BTN: How do you deal with airlines telling you they would like to give you better deals but they can't because of rising fuel costs?
Basterfield: We are in the middle of a global air RFP and it's challenging because, without exception, every airline is suffering. Depending on their fuel-hedging policies, some are faring better than others. My focus is on inventory availability within our agreements. We make a big discussion point of that.
BTN: You mean a sort of last-seat availability?
Avery: On long-haul a few years ago, the airlines started yielding classes J, C and D. We want as much availability in D as possible because that is where your highest discount is. Before that, you would negotiate a discount on a route and if there was a seat available, you got that price. Then, they introduced the yielding and there was a horrendous period when one major carrier was yielding corporate clients out of D up into C or J, and we took a serious look at whether we should push our people to an alternative carrier. As things turned out, it was a bit of a slip and they have now sorted out their allocation most of the time.
BTN: With loads beginning to fall in Europe, however, presumably availability is not going to be so much of a problem any more?
Avery: It depends on how they want to work it. That is the thing about J, C and D. It is in their control. If they are not getting enough return on their flight, they could manage out D and you would have to buy a J or a C. They could open up their availability to encourage more people to fly or they could close it so they get more money off the flight.
Sijbers: The problem with airline systems is that they don't go beyond passenger level. They do not connect the individual passenger to a company. In other words, Philips or PwC doesn't have a value in the judgment of whether to make a seat available to a customer. I know it's in the pipeline for 2010. To have some corporate recognition in the yield-management system would be hugely beneficial not only for us but also for the airlines.
Madsen: SAS has grounded 11 aircraft in Denmark, so it is going to be harder to get seats. We are feeling it a lot. We are not able to get seats to Mexico and the Far East unless we book a long time in advance, yet some of our people are still trying to book the day before.
Basterfield: Another big issue is that you have your net price, but then you have to look at what your gross price is when you add on your checked bag, or if you want a meal or a Pepsi. How do you unbundle all that and know what to negotiate on?
BTN: In the United Kingdom, the Institute of Travel Management and Guild of Travel Management Companies put out a joint statement saying that if airlines continue with fuel surcharges as a permanent feature, then it is only right they become negotiable as part of a corporate deal. Do you see any realistic chance of being able to make the airlines negotiate on that?
Basterfield: It's a very resistant "no" at the moment.
Sijbers: It's the same kind of thing as with nonrefundable tickets. You should be able to negotiate on the total cost rather than simply on the ticket price.
BTN: You should be able to, but what are the chances of actually achieving that?
Basterfield: I believe we have to lobby the airlines really hard as travel managers that this is something that can be negotiated. From my experience, it is a big "no" right now, but the more lobbying we do, the more likely things are to change. It is a true and transparent cost, so it can be negotiated.
Madsen: There is lobbying among corporates in Denmark to make this transparent as well.
Avery: It goes back to when British Airways started to charge extra for using a credit card, and eventually they reversed that. At what point does a surcharge become part of the price?
BTN: We are finally starting to see consolidation of the airline market in Europe as was first predicted a few years ago. Is this good news or bad news for you as travel managers and what do you need to do to respond to it?
Sijbers: I would say it is a necessity. The industry is sick and to cure itself, it needs to consolidate.
BTN: Will that lead to higher fares?
Avery: While the low-cost players are in the market, I am not sure it will on short-haul. There is sufficient competition there to keep prices down. It will be interesting to see what happens on the long-haul routes, whether it introduces competition rather than reduces it.
BTN: Turning to hotels, given the weakness in the economy, are you finding it easier to negotiate this year, even in those markets where business is still very good?
Madsen: In most of our locations, there are normally just one or two small hotels and they are not first-class properties, but they are doing pretty well. We have also negotiated with some hotel chains and we are seeing prices going up, so we try to get added value, such as free Internet access or free breakfasts, or maybe a transfer to the airport.
Avery: We are looking certainly for no increase, if not a reduction in most markets. There are a few markets that are an exception. Moscow is a problem for us. New York, I think, is softening, having been tough, and India is still tough. Overall, I would say the trend is downward, but with a few key cities still being bullish. There are certainly some hotel companies being bullish in spite of all that has been said.
BTN: Is that bluster or genuine confidence?
Avery: We'll see. I think they are being overconfident. A different problem for us in certain locations is denied business. We are measuring that these days and some big hotel chains are giving us massive problems in that we have rates with them but we just can't get into them. There is 50 percent denial in some cases.
Basterfield: That's my big issue. You engage in an exhaustive request-for-proposals exercise with the hotels, then you end up not capturing the rates that you have spent weeks negotiating. It's a real problem.
BTN: Surely that will be less of a problem with demand softening.
Basterfield: It should be, but I haven't seen a widespread lessening of the issue.
Avery: I think there continues to be a trust problem with the hotel industry. We do these deals in good faith and try to push our business their way and give them lots of room nights, and then we find that on 50 percent of occasions—which is the worst instance, to be fair—one big chain is turning us away, so where is the trust in that? They talk about dynamic pricing—well, that for me at the moment is just an opportunity to yield-manage us down on cost. There needs to be give and take. The hotel industry is a bit shallow at the moment.