Carlisle Insources Everything

<B> Carlisle Insources Everything</B>

By Cheryl Rosen

<I>Syracuse, N.Y.</I> - When its existing travel agency contract ends on April 30, the eighth ARC-approved Corporate Travel Department will not be signing another one. On May 1, automotive aftermarket supplier Carlisle Companies Inc. will go it alone, insourcing every piece of its $3.8 million air-volume travel program.

Insiders called the switch at Carlisle one more indication that the CTD program itself, though off to a slow start, is beginning to build interest among corporate travel buyers.

Carlisle has hired a full-time travel manager and two reservationists, contracted with World-span to provide CRS and automated booking solutions, and signed up for TRAM's back-office accounting and Thor Inc.'s 24-hour emergency services. In new contracts with four airlines, it has moved from soft-dollar savings on the back end to net fares up front. Next on the agenda is a review of the possible financial benefits of switching air bookings from American Express to an Air Travel Card linked to its preferred carriers.

Without question, new ways of doing things have taken root at Carlisle this spring, and the company hopes to reap a harvest of better service and reduced costs. If it does, the credit will go to Gail Newcomb, who saw the possibility of improving the program, did the financial analysis and sold it to senior management.

"Until January, I was the travel manager, the executive assistant to the chairman of the board and CEO, and the payroll manager and the telecommunications manager for the corporate office. I saw the need to go to the CTD, but if you're going to do it, you need a person dedicated to it," Newcomb said. Carlisle's new travel manager, Rosette Locke, came on board Jan. 1, and her two staffers--down from the four who previously handled the account at the agency--started on March 29. Locke has 20 years' experience in travel agency operations and is both a Certified ARC Specialist and a Certified Travel Consultant.

Unlike many who are seeking out CTD status as a cost-saving mission, Newcomb did it out of concern that her publicly traded, decentralized company was about to lose its travel program altogether, she said. In a corporate culture that shies away from mandates, there were rumblings of dissatisfaction with the centralized program Newcomb put together in 1992. The 8,000 employees in Carlisle's 12 divisions complained that the program was delivering lower-than-expected service and higher-than-online prices. Travelers often found cheaper fares on the Internet than those offered by the agency, and they were not getting the seats they wanted on the plane.

"I knew in 1998 that we were in danger of losing the travel program," Newcomb said. "They wanted more control and were concerned about not getting the best fares--but I knew we'd lose our volume purchasing power and pay higher fees if we decentralized."

So when ARC rolled out its Corporate Travel Department designation, Newcomb was anxious to explore the new alternative.

"I spoke to airline reps about potential net fares, and I talked to agencies about costs for salaries, reports, 800 and 24-hour service--every expense we were paying for, plus the management fee," she said. "I talked to TRAMS and Thor to see if their prices were in the same ballpark as what we were paying the agency, and if there were contracts available. They were not less expensive than going through an agency, but they certainly were not more expensive. And I knew I also could achieve the savings of the management fee and net fares."

In the biggest surprise of putting together the program, net fares proved more elusive than Newcomb had expected. "Delta was very helpful, but the others don't understand CTDs," she said. "You'd think since ARC represents the airlines, and the corporate market is their bread and butter, information about the program would have filtered down more. If they want us to take this seriously, they need to get the information out."

Still, she succeeded in signing three net fare contracts, with American, Delta and Northwest, and expects to have a fourth, with TWA, closed by the time she begins plating her own tickets on May 1.

Her Delta rep, meanwhile, hooked her up with an "aggressive" Worldspan sales team, and she signed on for both the CRS and its Trip Manager online booking system, which she will roll out companywide on May 1. Her previous agency had booked Carlisle's tickets on Apollo.

While Newcomb declined to cite the exact amounts of her savings, discounts or up-front payments received in connection with the new contracts, she did say she expects to shave 4 percent off the company's total air tab in 1999.

To accomplish that, of course, she will need the support of senior management. The chairman of the board and CEO has signed off on the CTD program, and Newcomb personally presented her numbers to each division president and asked for their compliance and support. The company will mandate the use of Trip Manager for all domestic travel, though "obviously for the first few months we'll also provide support." International travelers will call in to book.

Meanwhile, other pioneers report that the switch to CTD status has delivered on its promises, early disdain of the program appears to be rubbing off and insiders are supportive. The very first travel buyer to gain CTD accreditation, Republic National Bank, has seen its travel management costs plummet since getting its own plates in August. Said global travel management vice president Andy Menkes, "Apples to apples, if I weight out the things I was getting from the agency and am now outsourcing--24-hour service, management reporting, ARC reporting and international rate desk--I'm paying 70 percent less. And our agreement has not produced incremental costs."

Indeed, Menkes said, his biggest surprise has been the amount of commissions he now is receiving from hotels and car rental companies on his "noncommissionable" rates.

"I was not aware that our 'net rate' on car rental was commissionable," he noted. But now that he is booking everything under his own ARC number, "I am assured that if the net rate and the commissionable rate are the same, the commission comes back to us. No one can accidentally pay a commission to our agency, because there is no agency of record for Republic National Bank but RNB Travel."

Also helpful has been the ability the CTD gives RNB's preferred carriers to easily track its usage data. "It's helped in our discussions with airlines, because the airlines know the data is all ours and does not include leisure. It's a pure business travel figure." For Republic, the designation also provides an end-of-the-year report from ARC that summarizes all commissions received from each airline. "That's a piece of data I never saw before, a piece of data that's traditionally been provided to my agency," Menkes said.

On the horizon--and not surprising in an environment where 75 percent of the $5 million air spend is international--Menkes is eyeing ways to make the program more global. "As the industry becomes more mature with e-tickets and the advent of the euro, I see opportunities beyond our borders," he said, declining to elaborate further.

Travel management consultant Harold Seligman, chairman of Management Alternatives in Stamford, Conn., said he is "seeing the momentum gather" as corporations examine the pros and cons of a CTD conversion. He pooh-poohed two traditional concerns about switching to a CTD: that pay and benefits for reservationists will be higher at private companies than at travel agencies, and that companies lose the override income their agencies have traditionally shared with them. "The difference in benefits is not great," he said, and a savvy travel manager "should be able to negotiate a net fare discount that's larger than a 3 or 4 percent override."

Indeed, Seligman came out firmly in favor of the CTD program for many clients. "I think we're seeing an evolution to another way of doing business," he said. "So far, I see only positive results--I haven't seen anything I construe as negative."

Over the past decade of outsourcing travel management to agencies, Seligman said, "we have seen some things that perhaps we should have kept better control over, particularly service. Most companies are getting into the CTD over service issues more than savings, but so far I haven't seen anybody that's actually spending more." Many of his clients are exploring the option, including "some that are larger and some that are smaller," and "one account that's over $100 million that felt that in three years, with the CTD combined with a self-booking system, it would be totally independent."

With such interesting decisions facing corporate customers and their travel managers, Seligman said, "I'm sorry I'm at the end of my career rather than the beginning."

Still, cautioned ARC's director of accreditation and database management Barry Lemley, "to be real clear, this is not an option for everybody. It's not for someone who likes the status quo or is afraid of taking on more control or has a pittance of a travel budget. We've approved companies in the half a million dollar to $30 million range; probably $2 million to $3 million is a good minimum volume to have."

Through the end of February, seven corporations had received the CTD designation, but Lemley declined to comment on how much volume is coming in through the new channel. Regarding Newcomb's comments about the lack of airline familiarity with the program, he said ARC has "an ongoing education program for the entire industry and certainly the carriers at the board level are supportive. They are involved now in educating their field staff," and as the numbers of CTDs grows, so too will the airlines' awareness of the program.

At Thor Inc., in Louisville, Colo., chairman Peter Sontag--who once headed USTravel, a precursor to BTI Americas--said he is getting eight to 10 calls a week from travel buyers comparison-pricing Thor's 24-hour service, international rate desk and negotiated hotel program, and has contracts with three of the seven CTDs. "The noise level has increased dramatically, and the activity is quite formidable," he said. "The CTD is the logical next step for corporations that want to retain control, that are interested in security because of confidentiality concerns, that just want to handle their travel independently or that have had mixed experiences with travel agencies."

Thor offers corporations a number of outsourcing options, said sales director Valerie Callas, ranging in price from $103 to $405 a month. These include the hotel program, which has negotiated discounts at 11,300 properties worldwide to whom it delivers 28.5 million room nights a year, and a 24-hour service that includes a given number of free calls per month and toll-free access from 70 countries worldwide.

Sontag said he predicted a shift to fee-based pricing among corporate agencies in 1983, but warned agencies that "while fees are an attractive short-term solution to commission caps, they move the industry to competing on price. Once you do that, the low-cost producer will win--and many corporations believe they can be the low-cost producer."

The growing demand for its services from the corporate market has encouraged Thor to add a new service, international airfare auditing, which will roll out in April. Targeting CFOs, the service will be priced at $12.95 per itinerary plus 15 percent of any savings. On average, Sontag said, Thor's international rate desk cuts fares by an average of 17 percent.

At Thor competitor TravelSavers in Oyster Bay, N.Y., corporate sales and marketing vice president Betty Tilton also has noted a decided uptick in corporate business. At BTN's Corporate Travel World trade show in March, she said, "80 or 90 people" stopped at the TravelSavers booth for information on its 24-hour service and international hotel program. TravelSavers already has signed contracts with at least one CTD, Tilton said, and received "six or eight" applications in March alone.

"The interest has doubled or tripled since the NBTA conference" last summer, when the CTD program was first announced, Tilton said, and the buzz "is huge--it's enormous. People who are approaching us now are not asking who we are and what we do. They pretty much know what they need; they have been outsourcing other pieces of business before, and now they are looking for prices on 24-by-7 service and a global hotel program. Not everybody's an Andy Menkes. If you're in Syracuse or Pittsburgh and your CFO says go out and bring everything in-house, where do you start?"

Starting by outsourcing to TravelSavers costs "about $6 to $10 per phone call for basic service, where our staff brings up a record, touches it, changes it and sends it to the CRS," Tilton said. The emergency service "is not just for bad weather. It's for everything from losing your ticket to needing a last-minute hotel room--anything that happens during the trip, including air, hotel, car or ground transportation."

Travel consultant Tammy Troilo, president and CEO of Troilo & Associates Inc. of Columbus, Ohio, said that 30 of her clients are evaluating the CTD option. She attributed the program's slow start to three objections: concern that the program, first billed by ARC as a "test," would in the end be canceled on Dec. 31; that travel is not a core competency and should therefore not be insourced; and that getting CTD accreditation meant the company was "getting into the travel agency business." Over time, prospective CTDs have come to see the fallacy in each of those arguments, she said. ARC did not cancel the program, and travel, while perhaps not the end product of a corporation, has a direct impact on the bottom line that dwarfs any other expense not managed internally.

"The commission caps have caused corporations to realign travel in the proper perspective, to see the core impact travel has on the whole enterprise on a global basis," Troilo said. "The caps have caused corporations to stand back and say, 'OK, we are mismanaging our travel spend,' and to look at it as something they need to bring back in-house."

The biggest issue slowing the program down now, she said, is the ARC requirement that a corporate officer sign the CTD application personally--a rule that seems reasonable for the owner of a travel agency "opening in the mall, where the owner will be one of four employees, but a bit of a complication with a Fortune 500 company." ARC has agreed that the signature is an issue and is trying to come up with a solution, Troilo said.

But ARC's Lemley said that having a corporate officer sign off on every application "has been our policy from the onset of the CTD program, as it has been for any other application. There needs to be someone in a responsible position in the company who is aware that they are signing a contract to take control of ARC ticket stock. It's an important step, and no exceptions have been made."

Lemley agreed that the interest in the CTD program is "picking up dramatically," based on the number of e-mails, telephone calls and requests for personal appearances at industry events he is receiving. The calls are coming not just from corporations, he noted, but also "from agencies asking for information on how they can work with CTDs" interested in outsourcing pieces of their travel programs.

Back at Carlisle, meanwhile, Newcomb said the management of her previous agency has been "very negative" about her conversion to a CTD, though the account manager has been cooperative and helpful in the transition. "I did ask the agency if they'd be interested in continuing our relationship by providing back-room accounting and after-hours service," she said, "but I never did receive a response.