Buyer, Suppliers Pursue Excellence In Service Delivery

Following the publication last November of BTN's original research study, At Your Service, BTN gathered with a distinguished group of industry leaders earlier this year to discuss the implications and the issues raised in the study. Joining in the discussion were Simon Cooper, president and COO of Ritz-Carlton Hotel Co.; Tom Gleason, regional vice president of passenger sales for American Airlines; Mick Lee, managing director of Credit Suisse First Boston's internal client services group; Herve Sedky, vice president of large-market travel and relationship management for American Express; Jack O'Neill, at the time CEO of TQ3 Americas and now COO of Carlson Wagonlit Travel Americas; and Scott Solombrino, CEO and president of Dav El Chauffered Transportation. The following is an excerpt from that discussion.

BTN: There's been an institutional need to reduce service on a certain level, how do you compensate for that?

Tom Gleason: As the BTN survey said, travelers and travel buyers value efficient, on time and good service overall. So our look is a little bit different in that technology's important, expanding the kiosks throughout every airport throughout the United States to make travel easy and hassle-free for the corporate customer.

E-ticketing is now over 90 percent of our system. We're looking at other different technology-based programs to make travel hassle-free. Customers are looking for value, which is getting their bags on time and their flights on time.

We're also looking to provide technology that helps them get through the hassle of the screening and all the things that happen at the airports today.

BTN: Ritz-Carlton is famous for its approach to service quality. Could you tell us what you're focusing on currently to make sure that you maintain service quality standards?

Simon Cooper: Our customers are our best service quality auditors, so to speak. They will let us know, in no uncertain terms, very quickly if we're falling down. In terms of the kind of service that they're looking for today, and the changes that have occurred during the past two or three years, we try to respond to that.

One of the latest ones is obviously with people who are flying who don't want to check their bags if they possibly can avoid it. We're willing to clean and ship your suits or clothes to the next Ritz-Carlton or to your home, whatever it happens to be. We try to make it as easy as possible.

All of our numbers tell us that business travelers are taking shorter visits, spending fewer nights, a lot of same-day trips. So we're relatively happy that we're still seeing significant business travel numbers. They haven't gone up but they haven't gone down very much, so it's not a huge growth market for us. We're seeing much more business travel on the group side than we are probably on the individual side.

We monitor and control service quality through feedback. We do about 35,000 independent calls to individual travelers annually, telephone conversations of about three to four minutes. We call about 8,000 meeting planners a year to monitor that we are meeting expectations, but also what the issues are and where the breakdowns are, what's the commonality around it and how to resolve it.

Then we put together teams to address issues that relate to an individual hotel or are companywide, which would be a more significant effort.

BTN: What do you do to ensure that the standards are in place, that they're being met?

Scott Solombrino: We had to make a corporate decision when everything began to get dicey in the marketplace that we were not going to downgrade service. We were going to tough out the marketplace.

People who come to a company like Dav El or any of the other high-end chauffeured transportation companies have an expectation level. But there are people within customers' organizations who are trying to bring the pricing in line, even though they demand the same levels of service.

So what we've had to do is get very creative internally in how to deliver the consistent levels of service that people have always gotten, and they expect, because the people we drive are so high profile, they don't understand what's happening. But the people who work for them, who are watching every dollar, do understand.

So we've seen some degradation in the people's ability to be able to use chauffeured cars. Many people have been pushed out of the chauffeured car category back into taxicabs or public transportation for the first time. So our market is a market that has changed dramatically because people are missing. A whole category of vice presidents at some corporations just don't have the ability to use a chauffeured car anymore.

It means that the expectation from our client is still very demanding, and we have to consistently deliver it because fewer people are able to use it. It means we had to find ways to improve and be better than we were, although the pricing pressures are there where people don't want to pay what they had formerly paid because of the state of the market.

We also have the problem in chauffeured car that fuel and insurance are at all-time highs, so costs have been squeezed. Companies like mine have taken a huge hit on the bottom line trying to maintain service levels and not give up any marketshare in the hopes that oil will come back into line and insurance will level out.

BTN: So with all those pressures, how do you keep the service level as high?

Solombrino: You make less money. (Laughter) You know, the advantage that we have is that we're privately held, by me.

My personal expectations in my own company are that we're going to just simply have less on the bottom line until there's some change in the commodities market with the insurance and fuel situation.

It's a real issue, so you have to work through it and make the commitment that you're not going to give up any service standards at all, which is very difficult to make but we think it was the right decision because the market's now proving us right. It's coming back, but it's been a tough two years.

BTN: Herve, how does the travel agency meet and exceed expectations of customers?

Herve Sedky: I have to admit the toughest thing that we've seen recently is that the actual customer has changed quite a bit.

Traditionally, about five years ago the customer was a travel manager. Today, the customer is a combination of a finance executive or a sourcing executive, a procurement executive and a travel manager. Sometimes they outsource and use third-party consultants, so the customer becomes a field or a group of five or six people.

So how do we meet those expectations? One, we've established what we call a transition meeting. When we win an account, at the very beginning of the cycle, we sit with our customer and make sure that we clearly lay out what we understood the customer has purchased. And we ask the customer to go around to all of these different procurement and finance people and so forth to lay out what they have purchased and what their expectations are of the program.

We log those things in and, I have to admit, a lot of times they're in conflict with each other and you will see that internal rivalry within the client's corporation.

BTN: With the growing involvement of procurement and financial people, it's very important to educate the customer about the value of superior service. Jack, how have you done that at your agency?

Jack O'Neill: We've talked about, in some cases, how cumbersome the process can be, with the multiple constituencies that can be involved at a large corporation. If I use the numbers from the survey, buyers in 2003 changed agencies 47 percent of the time because there were more attractive fees. Yet, four pages later, the survey asks buyers what's important. Price was not part of the top five services that buyers want. I see responsive staff, professional, polite staff, contact being easy, knowledgeable people, and that's the problem. Those are two arguable disconnects that you've got to reconcile through the process, and you've got to reconcile that with your clients on an ongoing basis.

All of us put a lot of effort into having our clients actively engaged in the ongoing management of a program. It's complex, it's always changing and service can become a term as opposed to a commitment.

For us, we put a lot of effort into having clients that are great references and know that quality service is important because they're getting it, but also putting a lot into the process about educating people, identifying what the expectations are.

Understanding lowest price or lower price isn't necessarily going to automatically lead to polite staff, experienced people. People that are in the business increasingly are aware that you're trying to strike a balance.

The travel management companies are trying to strike a balance of, on one hand, meeting and exceeding that client's expectations, but also to make sure that client understands what's required to do that and having the business processes and the ongoing commitment with the people who are performing the job—and with the travelers, who often get left out of these equations, frankly.

But things are being pulled together, they're being measured, they're being monitored, they're being reported and they contribute to an ongoing business process.

BTN: So there's a huge communication function that's required to do that.

O'Neill: Yes, big, ongoing communication.

BTN: Mick, how do you educate suppliers about the value of superior service?

Mick Lee: Communication is what's key in our relationships, and I think that our partnerships with suppliers have evolved a great deal over time. As for communication upfront regarding expectations, we have a much more structured and formal process with formal reviews, formal service level agreements that are put in place, in advance. That way, we both know what is expected of each other.

We look at it as a two-way street. We have very high expectations of our partners and suppliers on all levels—air, car, hotel, online booking products, all of our suppliers. Yet, we in turn ask the question back to them, "What are their expectations of us?"

One of the things in the survey I was surprised at was that a question was asked about the function that travel managers think their internal department should perform in 2003. For large corporations, enforcing the travel policy was only 47 percent, which I don't necessarily agree with because part of our success is the fact that we enforce the policy. We have less than 2 percent out of policy for air spend, and that is how we are able to sit down with our airline partners and make a commitment and stick to it.

Clearly, over the past couple of years, our ability to drive marketshare is what we have focused on, because we are not able to anticipate volumes as easily as we had in the past. Certainly, it's not anywhere near where it used to be, but we can commit and guarantee the marketshare that each of our suppliers will have.

BTN: Tom, how do you motivate employees to improve customer service?

Gleason: One of the things we've done is set up an employee incentive program to engage all the employees so that, as we provide better service and as the service levels go up, our employees are going to be rewarded. So, we're bringing in all levels of employees from management, non-management, ticket agents, baggage service people—every employee that's within the company will be rewarded as we grow and become profitable, and our service levels go up.

Besides technology, you also have to have the happy, friendly face at the ticket counter, at the gate, at the Admirals Club and baggage service, all the different areas where we touch the customer.

BTN: Simon, the perception of quality service is often influenced by the effectiveness of complaint resolution. How does Ritz-Carlton approach that?

Cooper: First, at every Ritz-Carlton, all of our employees are absolutely trained to own a problem or an issue. You do not let it go. You don't pass it off on anybody else. It is yours. You have the absolute responsibility to handle it. You have over $2,000 per employee as your sort of guideline as to what you can use, and it really gets used.

The point is, you're trying to let everybody know that it is really important to resolve an issue because you look at every guest in our hotel tonight potentially is going to be spending $500 or $600. Through their lifetime, they are going to be spending hundreds of thousands of dollars.

Because we have very high expectations, we have a number of complaints and issues. They generally fall into categories about one-third serious, one-third medium and one-third are very minor.

What's interesting is, for our guest, the minor one is incredibly important to them at the time. I have had phone calls in the middle of the night because their Pilates class was full the next morning, and that's fine.

We set ourselves up to that kind of a standard, but it is very important to try and address every single complaint we receive. That is because if we look at our disengaged customers, who are people who are not married to our brand, 75 percent of them had a problem that was not resolved.

BTN: Is there a time limit that you place on that?

Cooper: Immediate. Because by the time it gets to my office, it's escalating, emotional trauma. As long as it's an issue for the guest at the time, our ladies and gentlemen have to own it, resolve it and, hopefully, create long-term loyalty as a result.

BTN: How prevalent is it among your customers to have service level agreements?

Sedky: Very prevalent, actually, for customers of all sizes. And I would say even more prevalent today than it was yesterday. Really, companies are spending a fortune on travel. As a result, this large expense is now something that needs to be managed tightly, needs to be prioritized, and is, by finance and procurement executives.

Part of that management is the establishment of very clear service level agreements. Those range from fairly traditional things around service, like service levels within call centers, it could be complete resolution numbers.

You can go down the list of various service elements: There are some nontraditional and some new things that we've seen, like technology uptime, and some things that are getting quite complex.

Then with the growth of online travel, that has absolutely been built into service level expectations. So service levels around online, both from amount of usage as well as in terms of first pass yield, or making sure the travelers are not touching the reservation, is something that we've seen as well. So, huge growth and the changing of the economic model are creating that, and it's going to continue to create that, and it's getting quite interesting to manage.

What we learned—a point that was made earlier by Jack—is it absolutely needs to be measurable; very clear, very measurable and really actionable. As long as we can do that, it's something that we are actually quite excited about measuring.

BTN: But the measures are changing. In the old days, it was amount of seconds it took to answer the telephone. Is that still a measure that's important?

Cooper: Yes, it is. I think in a lot of contracts, service level agreements are important, but I would say there is a huge growth of other metrics, like the entire customer experience, and tying it back to what corporations are looking to accomplish, like savings, online usage and some other elements.

Although the basics are still there for the most part, some of the other key elements are equally important. Both in terms of delivering against what travelers are looking for, as well as what decision makers are looking for.

BTN: So, travel buyers and travelers, in their ratings in our survey, generally showed that there were lower marks in performance in their most important criteria, for airline, agency, hotel, car rental and payment systems. Does that suggest to you, Jack, that the industry has substantial room for improvement when it comes to service?

O'Neill: I definitely think there is room for further improvement, and I also think the lower ratings are driven by economic pressure, and what that drives in changing operating configurations.

While people understand that you go through a timeline of living in a full-service world a few years ago, a more narrow expectation span, in terms of what you're dealing with, to an increasingly complex world and an increasingly technologically driven world. We all will continue to strive to find that balance between the economics and the service.

As distribution channels become more mature, and as companies become more consistent with business travel policy, there's an opportunity for the ratings to improve. But providing quality service is a lot of work and it's a commitment.

Solombrino: If you think back a number of years, corporate travel to many people was something that people looked forward to, and they enjoyed it. It was something with which people would have good experiences because they were out of their office, they were on a trip.

The attitude is totally different now. With our client base, we find that people are looking for every way they can to avoid taking the trip.

Therefore, it means the satisfaction level, no matter what you do, is going to be lower at all levels, whether it's airline, chauffeured car, hotel—people are just irritated. And it's because their attitudes have changed, because they don't want to take the trips anymore and that's a big thing that's affecting the numbers in some of these cases.

There's been a real change in mentality in this country, as to how you travel and when you want to take the trip.

BTN: Revisiting our question about complaint resolution, Mick, mistakes happen. So what number of defects is acceptable, and how do you reduce or eliminate them?

Lee: I don't think that we have a number in mind. The way that we look at things, there are two aspects. First of all, I am very proud of our relationships with our suppliers and, in many cases, I hear about a problem from them in advance of hearing about it from a traveler, so they are able to give us a heads-up that they had an issue. The second thing is that the team of people that I work with makes a difference.

When you have a great team of people around you, what people remember is the problem resolution, not necessarily the problem.