Big Buyers Mandate Hotel Use

Travel buyers at Aon Corp., Coca-Cola Co. and Credit Suisse First Boston recently added new mandates to their hotel programs in a renewed attempt to drive compliance, including room-type specifications, provisions to increase awareness and accountability and the ultimate consequence for noncompliance—non-reimbursement.

The three Corporate Travel 100 companies put extra teeth into their hotel policies as a result of cutbacks in corporate travel due to the weak national economy. With the overall number of room nights down, travel buyers are less able to meet the volume projections they have provided to hotels in return for favorable negotiated rates. Consequently, it's more important than ever to buyers that travelers book these preferred hotels.

These best practices notwithstanding, hotel industry consultants aren't expecting a radical change in policy execution. "Many of our clients haven't made drastic changes to policy as much as they've amplified what was already there," said Ruth Philpott, manager at American Express Consulting. "What they are doing instead is simply better implementing existing policy. Much depends, after all, on that basic, underlying corporate culture. Clients may strengthen policy, but only to the extent they can get away with it."

At Aon, however, travelers to five key business cities—Boston, Chicago, New York, San Francisco and London—now are subject to non-reimbursement if they opt out of policy. "We have a substantial basis of business and fairly prominent office locations in these cities," said Harriet Washburn, vice president of travel. "As a result, we have a lot of volume there, which has allowed us to leverage our negotiating strategy and get highly favorable rates. It made economic sense for us to do whatever we had to do to ensure our travelers use these properties."

In addition, Washburn noted that each city involved in the initiative has what she termed a "compressed" downtown. "Accordingly, it's hard to argue that the properties selected aren't convenient for virtually any purpose of someone's business trip," she said.

For as successful as hotel non-reimbursement has proven for Aon, however, Washburn doesn't envision expanding the program further. "It wouldn't work in an Atlanta, a Dallas or a Los Angeles, for example. These cities are so massive, there could be business applications in a myriad of locations, so many that we wouldn't have sufficient volume to drive to any particular one," she said. Instead, Aon has hotels in these cities with which it has negotiated rates in place and travelers are encouraged to use them, but not at the risk of non-reimbursement. "These hotels definitely present good values for our travelers, but we understand they may need to pick alternatives that work better for the business purpose of the particular trip."

The only other aspect of its travel policy that Aon mandates to this degree is use of the designated agency and preferred charge card. In terms of mandates, Washburn wouldn't describe the company as having a mandate culture, but the business benefit of specifying hotels in those five cities was just too great to pass up and Aon's travelers have been responsive. "The reception has actually been remarkable," she said.

To ensure this positive response, Washburn and her team took careful steps. First, the selection of hotels in the five cities was based on where Aon travelers already had stayed; the proximity to where their business appointments were located also was a factor. Plus, the company knew the category of hotels its people favored. "We weren't really trying to change behavior in the sense of forcing travelers to book alternatives that, for whatever reason, made them uncomfortable," she said.

Aon's Washburn also eliminated one potential obstacle to compliance—lack of availability. "Even though availability hasn't been as much of an issue lately because of the downturn in the market, we wanted to make sure travelers could get reservations on any given night," she said, "so we were able to negotiate guaranteed availability at the same favorable rates because we could deliver the volume."

At Coca-Cola and Credit Suisse First Boston, by contrast, the new mandates, while strengthening hotel travel policy, stop considerably short of non-reimbursement. Instead, the mandates rely on improved awareness and increased accountability. "We recently rolled out a new Travel Smart initiative and it's really put more teeth behind our travel policy," said Beth Caligiuri, procurement manager for travel at Coca-Cola. "Revising our travel policy, we've really tried to communicate to senior management that suppliers will reward tighter management of a program, even more at times than they'll reward you for volume. In other words, hotels will be more apt to give you bigger discounts if they know you're managing your program the way you should be."

The added mandates at Credit Suisse First Boston, meanwhile, have focused on room type. Specifically, travelers are being told they must book the standard room at preferred hotels, as opposed to booking a deluxe room, because that is where the company has a negotiated rate. "Reimbursement is intended for standard rooms only, unless otherwise specified," vice president of global travel Erin Barth said. "We've begun communicating this much more clearly this year and strongly enforcing it. If travelers stay outside this aspect of policy now, they need to have a reason why they're doing so. We didn't have any of this in place previously."

Barth and her team receive daily reports, which allow them to track non-compliance much more closely than in the past. "When you have a conversation with an executive about something like this, they tend to start complying with policy much more on subsequent trips," she said. If travelers don't comply, they are forced to obtain an out-of-policy authorization. "This usually means getting approval from a senior-level manager and they don't want to do that because it draws attention to themselves, so there are a lot more checks and balances in place now," she said.

Not surprisingly, hotels endorsed travel buyers' efforts to strengthen policy. "Until we have companies mandating their programs, you're not going to see the level of compliance travel managers are looking for," said Christopher Cope, managing director of worldwide sales in North America for Best Western International. "Ironically, travel managers would like to see as close to 100 percent compliance as possible, but without mandates, they're just never going to realize that."

However, hotel companies have reason to remain skeptical that buyers can add significant mandates to their travel policies. "They've heard such claims before," according to Andrew Menkes, chairman and CEO of Princeton, N.J.-based Partnership Travel Consulting. "Buyers can't just tell their travelers, 'As long as you stay within the price range of X, it's acceptable.' That isn't a policy, it's a guideline. It's going to take a firmer hand than that. Right now, everyone has plenty of lips in their policy. What's missing are real teeth."