<B> Corps. Get ARC Plates</B>
<I>Airlines To Test Program Accrediting Corporate Travel Departments</I>
By Sarah Welt
<I>Arlington, Va.</I> - It's been a long time coming, but the Airline Reporting Corp. on March 5 finally agreed to accredit individual corporate travel departments that want to act as their own travel management companies.
In April or May, ARC will begin a phased test period during which 12 corporate travel departments will be the first to get the new ARC accreditation. ARC spokesman Allan Mutén said the group, though not yet selected, will include "a broad cross-section" of corporations. After the first three to four months, five more travel departments will be added to the test each month.
If all goes well, the ARC board of directors and its Joint Advisory Board-Agent Reporting Agreement likely will grant corporate travel departments a formal ARC classification by early 1999.
While the JAB-ARA endorsed the proposal, it clearly stated that corporate travel departments should not be accredited as travel agents, but rather should be handled as a separate category. With that concept in mind, ARC plans to recommend that corporate travel staffs not receive the International Air Transport Association cards that travel agents show to receive discounts on their own travel.
"Corporate travel departments are not to be regarded as travel agencies for the purpose of extending industry discounts. There is a precise distinction between a travel agency professional and a corporate employee, and one shouldn't be forced into the mold of the other," Mutén said.
Under the new arrangement, corporations will not have to be open to the public to hold ARC plates, as they have been required to do in the past. While some companies--like McDonnell Douglas years ago, and Charles Schwab and Franklin Quest more recently (<I>BTN</I>, Oct. 28, 1996)--have been willing to go that route, the requirement forced most to continue to use a travel agency, even if only to "rent plates."
To get accreditation now, corporate travel departments (CTDs), having no credit history with ARC, will have to post financial performance bonds of $50,000-100,000 (compared with the $20-70,000 bond that travel agencies post); ante up an application fee of $850 to $1,000, plus about $150 per location; and assume the cost of producing ARC traffic documents and having a staff member qualify as a Certified ARC Specialist. CTDs with their own certification still will be permitted to outsource certain functions--such as 24-hour service and staffing and fulfillment--to a travel agency.
ARC's decision came but two days after BTN's Corporate Travel World trade show, where ARC vice president and general council Kathleen Argiropoulos said a decision was likely this month.
Buyers who spoke to BTN were enthusiastic about having a new option, though few felt ready to take the leap.
Fred Fischer, corporate travel services manager for John Hancock Mutual Life Insurance Co. in Boston--who has managed his company's $5.5 million rent-a-plate operation for 19 years--said that while he is still comfortable working with American Express and has no immediate plan to go the total self-management route, the possibility could well factor into the bidding process at a future date. The new ruling has "opened the door where we can bypass the travel agency partner and work directly with ARC if we choose, and I think it's a wonderful thing. It gives us the option to present our management with a different philosophy," Fischer said.
Charles Schwab corporate travel director Bob Grant said he doesn't think his company, which already has ARC plates, will switch to the new CTD appointment. "If this was available two years ago, I'd have done it, because I think it's simpler," Grant said."But we already qualified as a full-service travel agency, and I think I have valid reasons for staying that way. "
Having its own plates helped Schwab end 1997 with an excess of $1.4 million above its operating costs--a "significant savings" on a $12 million air volume. And Grant advised other corporations in the rent-a-plate mode to consider the new option. "The biggest fear in corporations opening their own travel operations is that they lack the core competency or skill sets--but a rent-a-plate clearly has that," he said.
Andrew Menkes, global travel vice president of Republic National Bank in New York and one of a dozen travel managers invited by ARC to offer advice on the CTD program, told Corporate Travel World attendees that, "This is not reinventing the wheel, but it will improve the auditability of funds, reduce our processing time, and offer cash-flow benefits and flexibility without adding cost to the process."
Menkes warned travel managers not to get involved in the process simply to turn their travel operation into a corporate profit center, and cautioned that this could be a short-term program if net fares and electronic ticketing continue to increase over time.
But he added that while his interest is "certainly not for the huge profits," cash does enter the picture, as does the float on that cash. In today's settlement process, a traveler who boards a plane on Jan. 1 pays his credit card bill on Feb. 8--but the commission on his ticket does not get back to the corporation until May 15, Menkes noted.
Response from the American Society of Travel Agents, meanwhile, was swift--and negative. Said spokesman Steve Loucks, "It chips away at clients' travel agency relationships if suddenly corporate travel departments can receive accreditation even though they are not technically travel agents. Where does it end?"
Mega-agency heads on a Corporate Travel World panel for the most part seemed blasé about the new competition. Said Ed Gilligan, president of American Express Corporate Services, "Our role is to provide support for corporations, and the transaction is only a small part of that." Maritz Travel Co. president and CEO Mike Boland cautioned about the inherent danger of getting too close to a CRS, but added, "Why not have a free market? If you can do it better yourself, more power to you."
But Hal Rosenbluth of the eponymous mega-agency cautioned travel managers about "falling into the airlines' trap" by "letting them know exactly what you buy." And Carlson Wagonlit Travel president Travis Tanner said flatly that if travel mangers do get their own ARC plates, "I don't think we'll be the right partner for you."
Harold Seligman, CEO of Management Alternatives Inc. of Stamford, Conn., said the travel business, like many others, is looking to eliminate the middleman and use self reservation to drive down costs. He predicted an initial rush of companies dissatisfied with the service or price of their agencies--especially mega-agencies. "If the first are successful, others will follow," he said.
But Tom Wilkinson, president of the Travel Management Group in Alexandria, Va., cautioned corporations to "carefully weigh whether the headaches and the work can be balanced by significant cost savings.