The second annual Business Travel News/Association of Corporate Travel Executives European benchmarking report builds on a baseline of data and provides a vivid snapshot of the travel buying and management habits of major corporations that each spend more than €20 million—and, in most cases, considerably more than that—annually on European-booked air travel alone.
Download a PDF of the full study here, including all the data, charts and stories published in the print issue.The 33 companies that shared their data come from a range of sectors, including aerospace/defense, consulting, finance, technology and pharmaceutical.
In addition to collecting data, BTN also staged a benchmarking session for Europe's largest buyers at the annual ACTE Global conference in Rome in late September, where travel managers swapped best practices and not a few frustrations on subjects ranging from airline negotiations to implementing U.S.-originating travel technologies in the European marketplace.
The companies involved are at the forefront of global travel management practice, with 87 percent consolidating the majority of countries where they have a presence into their worldwide travel programs. As another indicator, 73 percent have a single corporate card for European cardholders and 63 percent a single card for worldwide cardholders. However, the achievements and setbacks they experienced in managing their travel budgets in Europe will be familiar to buyers of all sizes.
Business Travel News thanks everyone involved for their cooperation in creating these measures of company practices and expenditures, and appreciates the encouragement of the Association of Corporate Travel Executives and the support of Travelport.
AIRWith the average participating BTN/ACTE European company spending €53 million annually on air travel among its European operations in 2007, the pressure to find improved savings is intense. In fact, the pressure is more intense than ever because an average of 46 percent of flights by companies that supplied data for the European Benchmarking Report are to intracontinental destinations, up from 35 percent last year.
These figures illustrate the extent to which businesses are globalizing their operations as they shift more production and sourcing to the developing world. Furthermore, destinations such as the BRIC countries—Brazil, Russia, India and China—and the Middle East are becoming increasingly important marketplaces, with their economic growth outstripping the North Atlantic region and proving more immune to recession.
The consequence for Europe's largest companies of traveling longer distances is that average fares are rising, and it is therefore little surprise to learn 44 percent of respondents have made their business class policies more restrictive this year.
The most popular constraint on flying business class is to allow travelers to move forward from the economy cabin only for trips of more than a certain number of hours—six, on average—a rule adopted by 57 percent of respondents. Other options include allowing business class either for all international trips, for certain executives, for transcontinental trips or for flights on the way to doing business. Seven percent permit no flying in premium cabins whatsoever.
Businesses also are looking to maximize their airline deals, and BTN/ACTE European Benchmarking companies received a negotiated discount on an average 56 percent of all European air tickets. Discounts achieved through negotiations appear to cluster into two bands for economy class, with 26 percent of respondents saying they save on average between 5 percent to 15 percent, and another 26 percent saying they save between 26 to 35 percent. An elite few, 9 percent, achieve savings of 36 percent to 45 percent on their economy tickets.
Figuring out how to win those savings is not easy. When BTN/ACTE European Benchmarking travel managers met to swap best practices at the ACTE Global conference in Rome, one U.S.-based global travel manager revealed she was finding the European marketplace a challenging one.
"My focus was on U.S. domestic travel. Now it is worldwide, and I am learning that the rules are very different," she said. "Airlines are more flexible negotiating on the point of sale outside the United States than inside, but it means a lot more work. We use an air optimization study. We also don't overpromise to our suppliers. We let airlines know what level of business we are projecting and we warn them that if our marketshare with them slips, it's up to them to do something about it, not us."
A common frustration of dealing with airlines is attempting to negotiate a truly multinational agreement. Many buyers still find they cannot achieve the discounts they want in certain countries, with the airline's national sales teams unprepared to sacrifice local profitability for the greater good of the deal.
"Do multinational agreements really exist?" asked one travel manager. "Airlines seem to have different management in each country."
The same travel manager said he is pursuing the idea of negotiating a fixed discount on total spend with an airline, leaving it to his discretion as the corporate client to decide how to allocate the discount among the citypairs flown with the carrier.
Yet, despite concerns about negotiated agreements, the dominant area of debate among the European Benchmarking buyers was cheap, non-negotiated fares and how to handle them in the context of a managed travel program.
This included discussion of the recent experiment carried out by Intel to give travelers in the United States the option of booking domestic flights directly via airline Web sites. The tests revealed that travelers obtained lower domestic fares than through the company's travel management company or booking tool
(BTN, Sept. 29).
One buyer pointed out that allowing travelers to book nonpreferred airlines directly via Web sites carries the advantage of not being captured in management information used for deal negotiations, which usually are predicated on marketshare. "The bookings don't interfere with the deals because they don't affect marketshare," the buyer said.
Paradoxically, another frustration felt by buyers is that when travelers do buy discounted, nonrefundable public fares from preferred airlines, carriers do not always allow these to contribute to negotiated targets. One buyer said he has managed to overcome this hurdle. "We get our airlines to produce marketshare figures based on all fares, including lowest fares," he said. "They seem to be happy with that."
Unlike in the United States, taxes on nonrefundable fares in Europe can be reclaimed, but the Euro Benchmarking buyers also found dealing with this process a challenge.
"I get a weekly report from my travel management company, then tell travelers to go and claim back the taxes on their tickets," the same travel manager said. "I have to rely on the travelers to do that because they have to be responsible for their own cost center. I can't employ another person to chase that."
Yet another challenge posed by the cheapest airfares is hunting them down when they are not available in every global distribution system. Buyers expressed irritation with travel management companies for failing to deliver on earlier claims that they would develop systems to aggregate content seamlessly from multiple global distribution system and non-GDS sources. However, one travel manager in the room had been beta-testing the HRG Source Platform, which aspires to do exactly that, and she is pleased with the results so far.
"We have had it tested in Europe and the United States, and it is better than anything else we have seen," she said.
Euro Benchmarking buyers also were unhappy with airlines that have prevented travel management companies and online booking tools from screen-scraping their Web sites, either through threatening legal action, canceling tickets or blocking site access.
"Some days they allow it and some they don't," said one buyer.
HOTELThe economic downturn is making hotel buying easier, according to figures supplied by Euro Benchmarking companies and also to opinions traded by their travel managers at ACTE Rome. "We are shifting from a seller's market to a buyer's market, which is good news," said one during the Euro Benchmarking benchmarking session. "I will achieve rate reductions in 2009, which is something I had not been expecting for another two years." Another travel manager confirmed this optimistic outlook. "We had a hotel call us as early as June to offer us lower rates," she said.
Of those companies that provided data to BTN, 46 percent said they are finding hotels more receptive to negotiating, a significant reversal from last year, when only 6 percent found hotels more receptive. Conversely, those finding hotels less receptive were reduced by nearly two-thirds, from 53 percent to 19 percent.
Agreements with hotels continue to be important to these buyers, with an average of 64 percent of their European room nights receiving a front-end discount and 61 percent of their accommodation spending going to properties in preferred hotel directories.
At the ACTE session, buyers said some previously expensive countries have started to soften, including India and post-Olympics China. However, by common consensus, Moscow remains—in the words of more than one buyer—"a nightmare." One company is resorting to building its own hotel in Moscow, set to open in 2010. The property will be managed by a hotel company, but the owner will retain 15 percent to 20 percent of rooms for its own use.
Another top buyer is conquering high rates by pre-purchasing hotel rooms in New York, but in this case from an existing hotel rather than one it is building itself. "We have managed to get 30 percent off the rate," said the travel manager. "We also do allocations [in which a hotel holds a block of rooms for corporate customers until an agreed number of hours or days before the arrival date], but we wanted an additional discount. Last year, this hotel had 99.9 percent occupancy, but since then it has seen it drop. The hotel was suffering and we were happy to fill it up. Paying up front seemed to be the one thing that made it think about giving us a good corporate discount.
"You need to be confident you can move the travelers to that property, but fortunately travelers are open to almost anything at the moment. We do well over 100 beds per night in New York, so filling 10 rooms wasn't a problem. However, it has been an administrative nightmare to get it set up. I have to pay for the rooms out of my own cost center and then charge whichever cost center uses a room."
More generally, another buyer is hoping for improved negotiating with hotels by shifting the starting date of his company's 12-month agreements from Jan. 1 to April 1. "We figure we will get better attention from hotels if we focus on the financial year," he said.
Euro Benchmarking companies are big users of the major hotel groups. Accor, Hilton, InterContinental, Marriott and Starwood are all used by more than 80 percent of respondents who provided data to Business Travel News.
ONLINE BOOKING TOOLSBooking tools are becoming increasingly ubiquitous in Europe, with 77 percent of Euro Benchmarking respondents saying they use one—up from 60 percent the previous year. An additional 13 percent are in the process of buying or implementing a tool, while 7 percent will select one this year and 3 percent will select one next year.
In terms of savings on TMC fees, the case for moving online remains compelling—as long as reservations require no TMC assistance. The average telephone booking fee paid by Euro Benchmarking companies is €26.65, while an online booking with assistance is €24. Without assistance, the online booking fee almost drops by half to €12.90.
The good news is that the percentage of tickets booked online in Europe that require no manual intervention between reservation and fulfillment has risen to 55 percent from 28 percent the previous year. Less good news is that adoption rates in Europe remain below those in the United States with travelers at Euro Benchmarking companies only putting an average 42 percent of reservations through their booking tools.
However, one of the buyers attending the ACTE Rome benchmarking session was able to share his experience of improving adoption rates within his company. It uses KDS in seven countries and has pushed up adoption from 53 percent two years ago to 75 percent today.
Initially, the travel manager attempted a "soft-sell" approach to pushing up adoption by holding a series of training sessions. However, when this proved unsuccessful, he introduced a mandate in five of the seven countries.
"We had 80 percent adoption in Germany, and we could see no reason why France and the United Kingdom should not be near the same level," said the travel manager. "We won a buy-in to mandate from senior management because it means we are able to track employees, unlike if they book online through ba.com or airfrance.com."
The booking tool has remained optional in the other two because it was implemented only recently.
The improved adoption has saved the company an estimated $70,000 to $100,000 in processing costs alone. Visual guilt helps push travelers as well. "If someone selects a noncompliant fare, it has to go to the line manager for approval," said the travel manager.
The travel team manages the tool directly, carrying out such tasks as changing the parameters for policy settings. "Our TMC wanted a lot of money to do this work, and doing it ourselves gives us greater ownership," the travel manager said.
EXPENSE MANAGEMENTAnother type of travel management technology that appears to be gaining in popularity in Europe is automated expense reporting. This year, 57 percent of Euro Benchmarking respondents said their travelers use a company-purchased or leased expense system, up from 45 percent a year ago. Another 18 percent said they are in the process of buying and implementing a system, while a further 18 percent use an internally developed system or process, thus recalling a favorite comment of Concur that its biggest competitor is the Excel spreadsheet.
Travel managers attending the ACTE benchmarking session have not had unequivocally happy experiences with expense tools in Europe. "It is not good for the tool to be selected only by finance or IT," said one bruised buyer. "It has created a lot of problems integrating with other systems. The CFO has agreed to create a team including travel, human resources, finance and IT, so we will take joint decisions in the future."
The expense tool introduced at the company in question is Concur, and it drew a mixed review from the travel manager. "Concur is good for reporting on noncompliance with preferred suppliers and for expense reporting and VAT analysis," he said. "It is good for finance and accounts, but it is not user-friendly. I have lost count of how many times colleagues have come to me because they are having problems with it. When you use a corporate card, it is great, but if you have to input expenses manually, it takes a long time. Also, I want to have lodge cards in the system, but Concur is saying no to that," said the travel manager.
Another travel manager expressed frustration with Concur over its ability to link with booking tools other than Cliqbook, which it owns. "It is not good at interfacing with other booking tools," said the travel manager. "The more corporate clients tell Concur they are not using Cliqbook and they want it to integrate with other booking tools, the more Concur will listen."
MEETINGS MANAGEMENTThe question of introducing American travel technology tools into the European marketplace also arose with regard to meetings management. The travel manager of one company using StarCite said, "StarCite is getting better in Europe, but it is not yet as good as in the United States." Another buyer said, "We are having to teach hotel vendors how to use StarCite."
The figures returned by Euro Benchmarking companies show that 46 percent of them use a third party to manage or purchase meetings.
Travel managers seem to be starting to get their arms around this area of expenditure: 48 percent consolidate their European meetings on an individual country or regional basis, up from 44 percent one year ago.
However, buyers encounter familiar problems when introducing meetings management principles. "We get our data from personal assistants and the numbers are huge," said one. "People involved in planning events are not going through any sort of procurement process. They are not even pushing back on the daily rates they are offered."
Another travel manager won over personal assistants and other planners by positioning the travel department as supportive of the pleasure of arranging events.
"We told them we didn't want to choose the color of the napkins," she said. "We said, 'We'll let you do that, we'll do the horrible stuff.' "
The strategy appears to be helping knock the company's meetings purchasing into shape because the same travel manager reported that company has persuaded hotels to sell room nights for meetings at the same rate as for transient travelers.
TRAVEL MANAGEMENT COMPANIESData returned by Euro Benchmarking companies showed that 38 percent found travel management companies more receptive to negotiating this year, while only 4 percent found them less receptive. The primary agency contract structure for Euro Benchmarking companies is a transaction fee, at 71 percent, and 73 percent are consolidated with a single TMC in Europe.