Cos. Tighten Travel Policy

Travel buyers of all stripes have been putting in place innovative and proven polices in the past several months that have slashed spending, while supporting employees' essential trips.

With more corporate scrutiny on travel spending than ever before, companies increasingly have embraced tighter travel policies, including mandates, incentives, executive approvals, online booking and the use of less expensive airfares, which have lowered overall volumes as well as average ticket prices.

Evidence of the proliferation of travel policy in Corporate America is clear from conversations with travel managers from more than a dozen companies, travel agents and from industry research.

The research shows the significant numbers of companies adopting tighter travel rules. A January poll by the National Business Travel Association of more than 220 travel managers showed that 74 percent were using new measures to reduce travel spending. Moreover, a survey of 1,000 travel agents by the Airlines Reporting Corp. showed that 41 percent of corporate clients that have suspended travel did so because of new restrictive policies.

The percentage of international coach fares used by 245 of Carlson Wagonlit Travel's biggest clients rose from 34 percent in January 2001, to 53 percent by the beginning of this year, according to a white paper the agency published in January entitled: "How 9/11 Has—and Has Not—Changed Traveler Booking Behavior." Additionally, the use of nonrefundable fares rose from 51 percent to 62 percent during the same time period. According to Tom Ruesink, manager and project leader at the Minneapolis-based mega agency, these changes in behavior resulted from policy changes that induce travelers to take lower fares.

Tim Bone, global travel manager for San Francisco-based Gap Inc., said rollout of the company's new, tighter travel policy was prompted by both economic and security concerns. "Business fell off and we reevaluated our travel," Bone said. "We came up with the consensus that 50 percent of our travel would be cut—and it worked."

Under Bone's watch, travelers must get vice president-level approval for any trip, although he expected to eliminate this mandate soon. "But we're not loosening up on the policy, we're just loosening up on the mandate of VP approval for air travel," he said. "We're not loosening up on the mandate that travelers use preferred hotels or airlines, book through our agency American Express and use our online booking provider GetThere."

Bone used incentives as well as mandates to drive traveler behavior. "If employees book 14 days in advance and stay over Saturday night, we'll pay their weekend at a hotel and a cash incentive, because the company is still saving money," Bone said. "We've seen a 45 percent increase in our advance bookings because of these incentives."

Rick Altman, travel procurement manager at Atlanta-based E-Trade, since last year has cut annual travel spending from $10 million to between $6 million and $7 million. "You only go if you really need to go," he said. "We do have pretrip authorization where travelers must have officer approval." These ongoing cost-cutting measures began in May.

"We have also cut our spending drastically because people are using Internet fares," Altman said. "If employees can find a lower fare on the Internet, they'll take it, even if it is out of the policy. Plus, Internet fares are useful for comparison, so employees have a reality check when they use the self-booking tool or our agency, Carlson Wagonlit."

John Smith, president of Chicago-based Tower Travel Management, said the prices travel buyers pay for air mileage have fallen off "big time." At Tower, average airfares for the fourth quarter of 2001 were 28 percent lower than average ticket prices a year ago, he said.

Ann Widay, travel analyst at San Diego-based Qualcomm, said average ticket prices for her $20 million domestic air budget are down by 15 percent in 2001 over 2000. She attributed the drop in prices, in part, to more effective purchasing.

Widay provides the heads of Qualcomm's business divisions with information on employee travel, including data on the use of preferred suppliers and restricted fares. "Managers can see average ticket cost by business unit," Widay said, "and the competition between units encourages managers to bring down costs."

One business unit leader has been asking employees to take coach one-way on international trips.

Doug Schneider, global travel manager for Houston-based Compaq Corp., said his domestic air budget for 2001 was $42 million, down from $80 million in 2000. This year, Schneider said, air spending would be reduced again, due to cost-effective management as well as some reduction in travel.

"Corporate leadership wanted a vast reduction in travel spending, and they wanted it fast," Schneider said. "There was pressure on cost center managers to reduce overall spending by specific percentages. Travel was part of the equation."

That leadership became even more involved as the policy tightened. Since the middle of 2001, international travel required approval from a vice president, rather than from a manager.

In response to corporate pressure, Compaq's Schneider has lowered travel costs 30 percent on a year-to-date basis compared with 2000. "The dropping average price per mile is due to higher compliance to preferred suppliers and the use of restricted fares," he said. Cost per mile has dropped as well: One month, travel cost was down 36 percent, but trip mileage was down only 18 percent.

Stephen Thomas-Schulere, COO at New York-based Stevens Travel, said travel buyers in 2002 are "much more interested in finding the lowest fares," and managing costs through aggressive travel policies.

Kristin Sullivan-Crowell, corporate travel manager for Enterasys Networks in Rochester, N.H., recently has taken a new proactive cost-cutting approach to her $8 million air program. "We rolled out a new agency, a new policy and a new online booking system in January," she said.

Until this year, the company was serviced by an American Express onsite staff of 13 people. Today's leaner program has no onsite support and is managed with the help of WorldWide Travel, a Little Rock, Ark.-based agency.

"We decided to mandate use of our new agency, WorldWide Travel, and our online booking tool, WorldWide Travel's Quality Agent," said Sullivan-Crowell. The results were impressive. "We had 72 percent adoption of online booking within three weeks, and with every online booking, we save $23 in transaction fees."

Ron Powell, vice president of travel and meeting services at San Francisco based-McKesson, has reduced the company's $42 million annual air spend by 10 percent through more aggressive travel management. "We've mandated the use of our agency, WorldTravel," he said. "If employees are not taking the lowest fare offered, the booking must be approved by a senior vice president."

The directive to cut costs comes from the top. "Corporate interest in travel has certainly increased," Powell said. Leadership "looked at each business group and evaluated their travel," and in many cases decided to push for higher adoption of videoconferencing and Webcasting. McKesson also cut back on the number of employees sent to offsite events.

Chattanooga, Tenn.-based SI Corp. similarly cut spending and implemented tighter policy, said travel manager Valerie Green. Green, an employee of Omega World Travel who works onsite, said SI has cut its $1.5 million air travel budget by "encouraging advance fare ticketing and using the most cost-effective airports." The payoff has been an 18 percent drop in average ticket price since April.

Lisa Meehan, director of travel services for New York-based Merck Corp., said Merck's top brass had a renewed focus on the company's $77 million annual air budget and the return on investment in travel. "Merck is examining both the cost of agency services and the cost of travel services and products, such as air, hotel, etc.," she said. Meanwhile, compliance with travel policy is improving thanks to top management's encouragement of employees.

Meehan further has reduced Merck's travel costs by adjusting staffing levels, increasing the consolidation of meeting-related air spending and by "keeping management apprised of noncompliance to preferred suppliers," she said. "Additionally, several of Merck's major divisions have implemented travel guidelines that supplement existing policy." The supplemental directives encourage advance fare ticketing, the use of nonrefundable tickets, the use of preferred suppliers and hotel booking through Merck's travel agency, Rosenbluth International.