Corporate Travel Management Comes Full Circle

<B> Corporate Travel Management Comes Full Circle</B>
<I>Through seven rich years and seven lean ones, travel professionals have fashioned, built and remodeled the corporate payment and distribution channel.</I>

By Cheryl Rosen

Once upon a time, travel managers and travel agencies vied for power in a changing airline distribution system.

A new Airlines Reporting Corp. program was about to be launched, promising to allow Business Travel Departments to write their own airline tickets and get their own commissions. At a conference of corporate travel managers, the association chair argued in favor of the "full autonomy of business travel managers as fully appointed travel departments," while the group lobbied to ensure the passage of the ARC program. Travel agencies opposed it, and most travel managers agreed that at the end of the day, writing their own tickets held little interest for them. Most companies, they predicted, "would remain affiliated with travel agencies for the good of our own corporations."

The year was 1984.

Reading the first issues of Business Travel News is at once an eerie reminder of how far we have come and of how little things have changed; how long travel managers have fought to build a distribution channel and how many obstacles they faced. Then, as now, the great majority of corporate travel was booked through travel agencies. In the very first issue of <I>BTN,</I> Rosenbluth had just won its biggest account ever, mid-Atlantic state neighbor Dupont of Wilmington, Del., which was consolidating its travel booking for the first time. Many in the industry were predicting that the free entry of low-cost carriers into the newly deregulated marketplace would focus competition on cost, pushing the major carriers to reward the most efficient agencies with large overrides and forcing small agencies out of business. TWA was contemplating allowing travelers to book tickets through their personal computers and Sabre was expanding its capabilities to include the booking of rental cars and the storing of hotel rates negotiated by corporate buyers.

More than 500 corporations handled their own travel through in-plants, which were dedicated onsites owned and staffed by the corporations themselves and paid 3 percent commissions directly by the airlines. At the same time, travel agencies quickly realized that winning a large corporate account could mean significant airline overrides--and make the account profitable enough to rebate a share of the commissions back to it. In effect, the advent of revenue sharing meant that corporations could get the same 3 percent return on their tickets without doing any work, simply by turning their travel account over to an agency. Where there had been 577 in-plants in 1979, by 1984 that had dwindled to 540.

ARC was just being formed in 1984, as a new airline settlement plan by and for the major carriers. It discouraged corporate onsite offices, and Congress almost outlawed them in the Air Travelers Security Act. The National Passenger Traffic Association, forerunner of today's National Business Travel Association, lobbied heavily against the bill, arguing that it was vital to "at last enable business travel departments to be appointed and paid commissions by the airlines, and operate without any travel agency involvement" (<I>BTN,</I> Oct. 22, 1984).

At the annual NPTA conference, president Arlene Macchia, corporate travel manager of Allied Corp., predicted that "travel managers will assume full autonomy in the very near future" and urged members to talk to the airlines about becoming fully appointed Business Travel Departments.

The balance of the news of 1984 followed the themes of travel management consolidation and airline deregulation. American Airlines offered early retirement bonuses to employees in an effort to remain competitive with low-cost startups. "Our hope is we will not have to lay off anybody," said president Robert Crandall.

In the first Travel Management section, Alan Kawalder, manager of travel & meeting services for Data General Corp. in Westboro, Mass., noted that "increasingly competitive airline prices, brought about by deregulation, are driving down travel agencies' revenue. I think the direction we are heading in is to everybody working in a fee-based environment."

The "Big Four" agencies dominating corporate travel were Thomas Cook, Gelco Travel Services, Ask Mr. Foster and American Express, and experts predicted they would continue to eat up smaller competitors. "Americans are cutting out middlemen left and right, shopping around for better services and better prices. I see many mergers and acquisitions of small travel agencies, and an increase in size of those that will remain in business," said a consultant from Yankelovich, Skelly and White.

ASTA agents were appalled at his comments, and disbelieving. "The word middleman is usually someone who adds cost, and that's just not so of travel agents," fumed one.

For travel managers, though, the future looked bright. They had found a milieu that highlighted their ability to provide good service to travelers and to hold down costs, and their CFOs were increasingly interested in the savings a dedicated manager could bring. The number of corporations with professional travel managers more than doubled in two years, from 7.5 to 15.8 percent, according to an American Express survey, and the number with travel policies climbed from 20.8 to 36.5 percent.

Meanwhile, revenue sharing became a public policy when two travel agencies sued Eastern Airlines for prohibiting them from rebating commissions to corporate accounts, thereby allegedly causing them to lose the IBM account. In sworn testimony, two former employees said IBM's new agencies, IVI and Adelman Travel, also were rebating a third of all airline commissions to the corporation. All in all, 1984 was a heady year.

<B><CENTER>The '90s: Hard Years And Hard Won Victories</CENTER></B>

By the early 1990s, though, the respect travel managers had fought so hard to win was in danger of slipping through their fingers. In an economic recession, traveler satisfaction took a back seat to corporate downsizing, and the concept of outsourcing travel fit the corporate mindset.

In 1991, BTN covered stories with headlines like "Travel Departments In Peril" (Aug. 19, 1991). "Even in good times, travel departments have proven vulnerable to cost-cutting drives. But now a tidal wave of layoffs is crashing over the corporate landscape, and travel staffs are bearing their share of the brunt," the story reported. It led with the tale of Unisys corporate travel director Robert Anderson losing his job, while American Express took over the company's travel management. Also noted were Hewlett-Packard's phasing out of 50 in-house reservation agents and Apple Computers' layoff of 20 of its 40 meeting planners amid a large downsizing.

"Corporations are being forced by competition and budgetary constraints to cut back certain positions that in some cases were designed to raise employees' comfort levels, such as those involving travel," said Audrey Freedman, counselor for the Conference Board, a not-for-profit national research organization. Noted Apple travel manager Bob Atchison, "Travel managers need to be more like process managers, focusing on the strategies of managing travel rather than just the enforcement of it."

But the transition of the travel manager role, from primarily supporting road warriors to managing the travel purchasing function of the global corporation, did not come easily. In a September 1991 survey, only 9 percent of travel managers believed strongly that their "management has a good understanding of how travel managers contribute to the corporation." More than half of the respondents (55 percent) disagreed or disagreed strongly.

At Microsoft, bemoaned travel administrator Bob Matthes, "as big as this company is, it hasn't really recognized what the travel department really does." Chevron travel manager Nancy Godfrey began consolidating travel data in 1990, but "Chevron rarely uses the word 'must' when it comes to travel," she said. Outgoing NBTA president Margie Crace noted that her employer, Chemed Corp. of Cincinnati, had no formal travel policy. "I've drafted three or four versions over the past few years, but it seems management doesn't want anything in writing," she said.

In a 1991 poll (<I>BTN,</I> Oct. 28, 1991), 35 percent of 580 travel managers said they were "underutilized" by their companies.

While senior management might have been confused--or unwilling--to rein in travel spending, though, travel managers understood what a successful program could achieve. "I've come away bloody from these discussions so many times, but I might give it another try," said an undaunted Crace.

Many travel managers still felt that corporate buyers should be dealing more directly with suppliers. Silicon Systems traffic manager Betty Lucero moved to a fee-based contract with Sundance Travel in 1991, noting that "it bothered me that we never had a say in any of the expenses being charged against our account. And since our revenue share was based on average ticket prices, as we negotiated lower fares, our revenue share kept dropping."

By the end of the year, though, proactive travel managers seemed to be losing ground. "If You Have A Job, Hang Onto It In '92," executive editor Mary Brisson wrote in the Dec. 2, 1991, issue. "As many companies gird for what may be a financially painful new year, the outlook for travel management careers in 1992 is dispiriting: There is a consensus that there will be a few new jobs and a fear that many could be cut as smaller companies trim payrolls."

Travel managers saw 1992 as a year to fine-tune their travel programs and to make sure senior management was aware of the results; to hone their job skills and to take on new duties outside of travel, just in case. But Hewlett-Packard travel manager Fred Swaffer held onto his optimism. "Opportunities are going to grow. We have more coast-to-coast travel and large travel budgets, and those command attention--particularly in troubled times," he predicted.

In the 1992 Travel Managers Salary and Attitudes Survey--under the headline "Is The Pay Enough For The Pressure?"--BTN's managing editor David McCann concluded, "It's true that travel managers' particular responsibilities help determine their salary. But the survey results indicate that overall, the average difference in salary between true managers of travel and travel coordinators is not as great as many believe."

Where those who "create travel policy" were earning an average of $36,100, those who did not were earning $33,400. Job security was the number-one career concern, cited by 32.3 percent of respondents--almost twice the number citing salary (18.4 percent). Almost half (45.1 percent) were more willing to change jobs than they had been two years earlier, and only 22 percent agreed that "management has a good understanding of how travel managers contribute to the company." Twenty-two percent said a "communications gap exists between my manager and me," and 38.3 percent said their salary was lower than that of others with similar responsibilities in other departments.

Just as travel managers were worried about layoffs, though, so were their travelers. As Corporate America downsized, many began arguing that a more sensible approach to travel by all corporate citizens could save the company money--and stave off pink slips for their co-workers. A compelling case was being put together by internal and external travel management experts of the cost savings that managed travel programs could make possible. Travel policies were formalized. First class travelers began downgrading to business class. The word "mandate" began to echo across the land.

A BTN survey of 41,000 subscribers in 1992 found that the number of corporations with a designated travel manager was up from 11.8 percent in 1988 to 18.0 in 1991--an increase of 53 percent. Eighty-four percent of travel managers said they also managed off-site meetings (<I>BTN,</I> April 6, 1992).

<CENTER><B>Technology Brings A New Mindset</B></CENTER>

By 1994, a new era in travel distribution was on the horizon, bringing travel managers concern about losing their old roles and optimism about stepping into new ones. Improvements in data collection allowed them to negotiate discounts and prove their worth--and the World Wide Web was extending its reach across the nation and the world, and in particular onto corporate desktops.

The ability to reach out and touch each others' databases offered a new vision for corporate buyers and suppliers, a way to cut the cost of distribution by ordering and settling direct with vendors.

When Purchasing magazine included "corporate travel" in a list of purchasing functions for the first time, BTN was quick to note it as a bellwether of change. "The inclusion of travel purchasing--the only service group on the list--speaks volumes about how companies are viewing travel buying in the mid '90s. For many corporations, travel is being regarded as a commodity not far removed from chemicals or computers," we lamented (<I>BTN,</I> May 16, 1994).

In November 1994, travel managers still cited "negotiating rates" and "negotiating net rates" as their two top objectives for the next five years (<I>BTN,</I> Nov. 30, 1994). "Improving the efficiency/reducing the cost of the travel purchase process" was barely on their radar screen, coming in eighth, and fee-based pricing with agencies was dead last, behind "enhancing traveler safety." But among corporate executives, 81 percent called improving travel management practices "very" or "moderately" important. More than half (59 percent) said it was very or moderately important to be able to make reservations through their computers, without a travel agent. Seven percent already were making agentless reservations, and 40 percent more expected to be able to do so within five years.

During the next two years, the travel management community began to take stock of the opportunities being offered by electronic commerce. Once again a few took up the quest for which Arlene Macchia and the NPTA had fought so hard in 1984: the corporate travel department as a stand-alone entity, with no agency behind it.

Travel managers at Internet-savvy companies quickly took a stab at a new interpretation of the letter of the accreditation law. In October 1996, Franklin Quest Co. and Charles Schwab convinced ARC that having travel booking available on their public Web sites met the ARC requirement of "being open to the public," and were certified as full-fledged travel agencies. Still, many corporate buyers seethed at the hoops they were required to go through, and the issue of direct accreditation of corporations surfaced again. This time around, ARC was more willing, and the travel agency community less threatened. ARC allowed a new Corporate Travel Department designation--though now, it seems to be the corporations that are uncertain: Only eight so far have gone through the process.

Reached last week at Allied Signal, where she now handles meetings for the chairman of the board, Arlene Macchia still believes in the vision of travel departments dealing, buying and settling

directly with suppliers. "Do I still think it's the right way to go? Absolutely," she said. "Look at all the people companies employ to monitor that they are getting the lowest rates. And nobody works as hard for your company as your own people."

In any event, she said, "We have the option now--and that was the whole point.