<B> Buyers Try CTD Tag</B>
<I>ARC Announces Its Front Four, With Eleven More In The Wings</I>
By Sarah Welt
The Airlines Reporting Corp. last month announced that three new corporations have joined Republic National Bank of New York as accredited Corporate Travel Departments: Houston-based Eagle USA Air Freight Inc., Charles Schwab & Co. Inc. of San Francisco and New York's Bear Stearns & Co. Inc. Eleven other firms have started the application process.
CTD accreditation gives travel managers total control, creates a more efficient process, eliminates conflicts of interest and ensures that all revenue streams are returned to the corporation without interference.
"The real reason for having an ARC appointment at the corporate level is to maintain control of the process," said Charles Schwab's corporate travel manager Bob Grant. When a corporation's volume is filtered through an agency, he noted, it is difficult to get an accurate number--which in turn makes negotiating with vendors more challenging.
With its own ARC number, a corporation can still use multiple agencies to handle its business, "but no matter who fulfills the service elements, the corporation still has control of the volume."
The four companies were the only participants in the first phase of the ARC pilot program that began in April, and they will remain pilots until the program concludes in December. The second phase of the pilot, which started last month, calls for a maximum of five additional CTDs to be added each month, with a maximum of 32 firms to be approved by the end of 1998.
The corporate travel department is defined by ARC as an operation for the primary purpose of purchasing corporate travel that cannot be open to the public. Before the CTD option became available earlier this year (<I>BTN,</I> March 16), corporations wanting to set up their own travel departments needed to "rent-a-plate" from an ARC-accredited travel agency, a configuration that was never officially recognized by ARC. Some corporations did become fully accredited agencies on their own, as Charles Schwab did in 1996, but doing so entailed being open to the general public.
Eagle USA Freight, with an annual air volume of $1 million, outsourced everything to a local travel agency before joining the ARC pilot in June. The freight boarding company ships all its cargo on commercial airlines, and in exchange, receives discount certificates for corporate travel.
"It was not profitable for an independent agency to handle us because those certificates are non-commissionable," said Carol Posey, travel coordinator at Eagle USA, who was hired specifically to set up a fully-accredited CTD. "They had dual loyalties--we'd set them up with our certificates and they would book some certificates and some full-fare travel."
While the process of getting its own ARCplates at first appeared intimidating, "it's really not," she said. "We filled out the application in June, ARC received it July 15, and we were accredited Aug. 27."
For now, Posey is personally handling the booking of all travel for the whole company. But once Eagle USA gets its back-office set up and everything running smoothly, it will staff appropriately. Additionally, it is looking to tap into the leisure market for employees, so the company can earn commissions.
Negotiating discounts with suppliers has also been easier, said Posey. "Handling everything in-house has definitely made an impact, especially on how hotels are willing to work with us. They know we are serious about it."
Meanwhile, Bear Stearns, with $30 million in air spending, has been a BTI Americas rent-a-plate for the past 13 years. It joined the pilot because "it's like being in the driver's seat--it gives us greater control over our travel purchases and decisions," said managing director of travel services Catherine Ellis. "We support any efforts to recognize that our corporate travel department performs the same services an outside travel agency does."
While the travel department has a new ARC number, Ellis believes the switch to a CTD will be invisible to travelers. She noted that the company has been outsourcing various travel management functions to BTI Americas for the past three years and does not expect the relationship to change. BTI offers technology and consulting services, 24-hour service, a supplemental hotel program, temporary relief staffing, some reporting, and an international rate desk.
"It is important for this not to send out a negative message. This isn't against travel management companies--we will continue to work with one," said Ellis. "Travel agencies should continue to think of themselves as travel management partners and continue to search for value-added services."
Like Bear Stearns, Charles Schwab outsources several travel management services. Its 24-hour service is handled by agency consortium Thor Inc. and it uses an agency for VIP services. The company also uses Sabre's Travelbase for back-office accounting, downloading information from a computer in Tulsa, Okla.
Grant said he has been a part of the CTD process since its inception, working with ARC and other travel managers to put the program together. He acknowledged, "I have always been fully supportive of the process and I thought at this point that I would simply convert to it because it recognizes what we are, and I think this is what corporations should be doing."
The change for Schwab has been nominal--and even its ARC number stayed the same. But it had to pay a higher bond, as CTD bonds are set between $50,000 and $100,000, compared to the $20,000 to $70,000 travel agencies pay.
CTDs must also have a Certified ARC Specialist employed by either the corporate travel department or its agency; incur their own liability for lost or stolen tickets; and pay $995 for each home office location, which includes $175 annual fee, $50 for ticket stock and an application fees of $770. Each additional branch or satellite ticket printer costs $625.
So far, Eagle USA's Posey hasn't found any flaws with the program. "I think this is a great opportunity for corporations to have a profitable department while still handling their own travel," she said. "I don't think their is anything in the program I would change."
Grant said some corporations have expressed concerns about the liability issue, and suggested outsourcing it to a contracted agency. "If I were to contract with a Rosenbluth or an Amex tomorrow and I had a CTD, I would certainly tell them part of our agreement is 'you accept responsibility for the liability of those things under your control'. That is a standard process," he said.
As for potential drawbacks, Grant noted that the program is not for everyone. "If you don't have enough volume to negotiate with the vendors anyway, if you aren't going to attract enough attention, then there is no point in doing this because you are going to spend more than you earn," he said.
While the four companies are happy with the program, their future is not yet certain. ARC spokesman Allan Mutén noted that "at the end of the pilot program, the board could vote to discontinue the program." But, he added, "that is not the likely outcome," and ARC expects the program to be a formal part of its operations in the first quarter of 1999.
For more information on the CTD program, visit ARC's Website at www.arccorp.com.