Downturn Empowering Buyers To Tighten Travel Policies

The deteriorating economy and growing corporate cost-consciousness are empowering travel buyers to enact more stringent travel policies and tougher enforcements, travel managers and industry sources said this week during the Masters Program in Washington, D.C.

From shifting business class to coach, trading down from full-service hotels to select-service brands, tightening policies or putting demand management in action by encouraging alternatives to non-essential travel, buyers are reporting more success in cutting trips and curbing expenses.

"The economy has really enabled these buyers and their respective teams at their organizations to change around some policy and make changes that, quite frankly, have never been achievable in the past," said TRX vice president and general manager Dan Pirnat during a panel composed of buyers illustrating actions that are reducing trips and costs.

Travel buyers from Visa, Schering-Plough and PricewaterhouseCoopers during a panel discussion all noted a reduction in travel transactions by double-digit percentages and newly introduced actions to curb travel costs.

Schering-Plough director of travel Christopher Allen said, "We looked at everything from policy to supplier agreements and service providers, and I think the environment being what it was, we got a lot of support form very senior levels. We have made some changes," including new policies, supplier changes and shifts in marketshare agreements.

Allen said the company is vetting trips that "are not business-critical," in addition to trading down in some hotel tiers and classes of air travel. Allen said in April last year—"somewhat ahead of the economic curve"—the company changed its business class policy.

"About 86 percent of our travel was in business class to Europe. In the very first month, that number went down to 6 percent in business class," Allen said. Though he noted what he called "exception creep" has more recently brought that number closer to the "40 percent range in business class," the company is "still significantly lower than where we were."

PricewaterhouseCoopers director of strategy and continuous improvement for U.S. travel Kim McGlinn described a cultural shift where "some of the things that we many not have fully embraced in the past are now being implemented."

McGlinn said, "People are really following our preferred policies and going along with our preferred suppliers more so than ever. It's been a really fantastic thing that we've been seeing. We've always had tremendous compliance, but even more so because every traveler out there realizes the impact, and we're doing everything we can to save headcount. People recognize that, and they're doing everything they can to make sure they're using preferred suppliers and following policies."

Among other effects of the economic environment, McGlinn noted a "greater exposure of data to senior leadership," which has taken heightened interest in travel expenses—and increased support for curbing them.

Visa senior business leader of travel services Ann Kloepfer said management has taken a more active role in meetings and events. "Senior management has taken a very active role. We have an attendance report that goes up to senior management every Friday for upcoming trade shows and events and they're actually looking at how many Visa employees are attending an event, whereas a year ago that never would have been the case."

Several buyers discussed demand management in action, as they have modified booking tools to ask travelers about the necessity of a trip or offer alternatives to the journey before proceeding to booking.

Among those in attendance during a breakout session on change management, several said they have recently put such enhancements in place, including PricewaterhouseCoopers' McGlinn. "When you go into our online booking tool and someone puts in their destination, it will pop immediately and ask them could they potentially be using one of our virtual meeting tools instead of taking the trip," McGlinn said.

Even before the company instituted that change, PwC said virtual meetings increased 79 percent, which in some cases have helped curb travel. "Our virtual meetings have increased significantly over the last several years and our travel transactions have been declining—not at the exact same rate, but there is a correlation."

Schering-Plough's Allen said the company also has been pushing remote conferencing options, though he has seen more evidence of those options supplementing, rather than supplanting, travel.

"We've had a push for alternatives to travel in the last three years," Allen said. "The interesting thing is we wanted to see if there was an inverse relationship where the use of those alternatives goes up and travel transactions come down. What we found was, even though those alternatives were going up, our travel transactions were going up as well. I think it's a good thing. I don't know how much of that is offsetting travel or just increasing interaction between our colleagues."

Though Pirnat noted that newfound empowerment among buyers to change and enforce travel policy is "great news from a buyer perspective," he noted, "From a supplier side, it's disconcerting."

Several suppliers presenting at the conference shared that view, as representatives from Travelport, Continental Airlines and Marriott all discussed the corporate demand hit and its impact on deteriorating transactions.

Schering-Plough's Allen said increased scrutiny is not limited to what are considered high-ticket items like air tickets, but filtering into every component of the trip.

"Air only makes up 20 percent of our T&E costs," Allen said. "To look at air only would never get us to our goal, so we certainly look at every piece, and our partners are helping us take a look at all components across the board and what a total trip cost really looks like." Allen said such actions include "pushing people towards" lower-tier hotel options.

"Through policy changes, we've eliminated some car services previously seen as an entitlement within our organization," Allen said. "Even our restaurant spending—we're taking a real close look at where people are eating and what we're spending on it because it's a large component. When you put that number in front of the CFO and look at how much you're spending at restaurants in our industry—and it's necessary to some degree—it's a big number, but it's also a big opportunity."