Buyers At ACTE Debate Sourcing, Distribution

Stockholm - Two of the hottest topics in travel management dominated an Association of Corporate Travel Executives global conference here last week, as delegates debated long and hard about who has become the buyer of travel and how travel is to be distributed.

The two "P" words, purchasing and procurement, were uttered time and again. So, too, was outsourcing, thanks to the trend among purchasers to farm out travel-related functions to specialists with greater resources or expertise, such as IBM's business process outsourcing travel management program. Travel management companies also are picking up increasing responsibilities from their clients. A senior procurement chief from the United Kingdom visiting ACTE for the first time, told BTN: "I would like to outsource travel to my TMC lock, stock and barrel, including the right to sign contracts on our behalf."

One conference wag said outsourcing is popular with procurement professionals because "they like having just one neck to choke." However, Aaron Gellman, a transportation professor at Northwestern University's Kellogg School of Management in Illinois, warned delegates of the potential perils of outsourcing. Gellman told his audience that companies are bringing freight management back in-house because of concerns about data security, following reports of intermediaries selling data to third parties. "There is evidence of that happening to a limited extent in the transportation business as well," he said.

Gellman also said outsourcing impaired companies' understanding of industry issues. Citing a lack of corporate response to the merger of Air France and KLM, he accused travel agents of being unreliable advocates for their clients. "Agents are intermediaries, so they don't want to get on the wrong side of suppliers," he said. "When you outsource everything, you silence voices that ought to be heard."

The general session in which Gellman spoke, which was well-attended by the more than 800 delegates—nearly one-third of whom were buyers—included an electronic voting session. Ten percent of buyer delegates said they outsource their entire travel management function, while 63 percent said they outsource some and 27 percent outsource none. However, while 95 percent considered it possible or desirable to outsource the booking of travel, and 92 percent tracking and reporting, only 46 percent favored outsourcing negotiation of rates and 36 percent development of policy and compliance.

ACTE recognized the growing influence of procurement not only by devoting conference time to the subject, but also by revealing it is to form an alliance with an undisclosed global purchasing association. The two groups will become involved in each other's educational programs and share speakers. "Procurement people are becoming more and more responsible for travel," said ACTE president Garth Jopling. "We recognize the need to move with the change in the industry."

Much debate during the conference centered on whether a procurement-led approach is preferable to traditional travel management. Jopling was keen to prevent this becoming an aggressive antagonism. "We see our role as making sure it's not an either/or and finding a balance between them," he said. "Most purchasing people I've spoken to over the last couple of years do understand the fundamental difference between buying a widget and negotiating an airline contract."

Meanwhile, ACTE has taken steps to address a perception that it has become too U.S.-centric by announcing its first president from outside North America. Nadine Dewart will take over the top position in January 2006, following Greeley Koch, senior vice president sales and marketing for TQ3Navigant, who will assume the presidency in January 2005. Dewart, currently Europe, Middle East and Africa regional chairperson for ACTE, is the Netherlands-based EMEA travel manager for BMC Software.

ACTE announced the global conference following Vancouver next May will be held in London in October 2005.

Distribution was another major theme in Stockholm. Most speculation focused on global distribution systems' efforts to retain marketshare and whether corporate buyers will have to foot their bill. The debate was accompanied by the emergence of numerous small stories illustrating how alternatives to the GDSs are beginning to take shape. Examples included news that G2 Switchworks is working with Navitaire to try to integrate the latter's Open Sky reservations technology for budget carriers. Another was that Travelpool Europe, a Copenhagen-based travel purchasing consortium, successfully has created direct connections to two local airlines.

A second round of electronic voting offered insights into distribution questions. Asked whether costs to corporations will increase following GDS deregulation, 51 percent said yes and 32 percent said no, while 78 percent agreed mergers between GDSs and travel management companies are likely during the next three years.

The consensus of the ensuing panel debate was also that corporations increasingly are likely to pay GDS costs. Pieter Rieder, vice president of EMEA sales for American Express, said: "If it costs a little more to get at the right content, then it's worth doing that. The fees are relatively small in the whole equation." Dean Sivley, chief product officer for Travelport, added: "Corporates understand there is a value in and a cost attached to having the right content."