Ford Polices Hotel Preference

<B>Ford Polices Hotel Preference</B>

By Cheryl Rosen

<I>Dearborn, Mich.</I> - Ask a group of corporate travel buyers if they mandate the use of preferred hotels, and many will say they do. But virtually no one follows through by actually refusing to reimburse travelers who check in outside the official hotel directory.

That's no longer the case at Ford Motor Co., which six months ago put some teeth into its hotel program with a new policy suggested by the travel department. Now, travelers must make their hotel reservations through the corporate travel agency and stay at a preferred property--or pay the bill themselves.

The point of the policy change was twofold: to maximize the use of Ford's negotiated hotel discounts, and to lay the foundation for deeper discounts in the future by guaranteeing increased business to these hospitality partners. Ford executives expect that the program will translate into a savings of $10 million a year on a hotel tab that topped $74 million in 1998.

To the same end, the number of hotels in the directory has been cut to 530 in the United States, down almost a third from a one-time high of 750, and to about 300 in Europe.

"It doesn't take much to sell people on the idea that if you can control your travelers and move market share, you can save significant dollars. We do that with our air purchasing program," said corporate travel and events manager Robert Magnus. "This is basically just applying the same principle to hotels."

While Ford has had a preferred hotel program for a number of years, it has been "taking it more and more seriously" of late, Magnus said. By 1999, "the mood was right. Everyone has recognized that we have to continue to improve and institute best practices, and travel is being looked to as a department that can save more dollars for the company. Although Ford's profit last quarter was $1.2 billion, we're looking for every way we can to control costs and keep our products competitive."

When it came to actually instituting the mandate, though, Magnus understood that travel policy cannot be allowed to get in the way of a mission-critical business trip. While exceptions are allowed, travelers "have to go to significantly senior-level managers to get a deviation." In Ford's six-level management pyramid, only managers at level three or higher can approve stays at hotels outside the program.

The point was not lost on travelers. After an initial 60-day grace period to let them adjust to the idea, only 0.7 percent of hotel stays involved exceptions approved by managers.

That's not to say that there was no resistance to the dreaded "M" word. When the mandate was first introduced, "you'd think the world had come to an end," said Magnus. "We probably had a couple thousand rebuttals on it."

Still, "nobody jumped out the window"--in large part because Magnus had done his homework. "It helped that we had support from the vice presidents of human resources, finance and public affairs, and our vice chairman," Magnus said.

Also important was the role the travel team itself played in the care with which it chose the properties in the first place, and in listening and responding to complaints.

"We're not trying to inconvenience our travelers, but to provide them with a fairly priced product," said corporate travel specialist Steve Wilkes. "We tried to select an appropriate number of hotels per market based on our volume, and we found that logistics is the key, especially with a manufacturing facility on one side of town and an office on the other. We tried to pick places that were convenient, so travelers wouldn't have to cross town. We considered safety and security, the condition of the property and the amenities. We tried to put them in good properties."

The hotel directory lists hotels in Ford's top 150 destinations in the United States, 25 in Canada and 45 in Europe. Once those were negotiated, a preferred chain was added to cover the smaller destinations. Another chainwide deal is being negotiated this month. "In a location where there is a selected property, travelers are going to use it. But if you're in Cedar Rapids, Iowa, and we don't have a property there, you stay at the chain," Wilkes said.

Participating hotels offered discounts up to 26 percent off 1998 published corporate rates in some areas, and 30 percent off rack, according to Magnus.

When the policy was done, it included an explanation of the parameters used to choose the hotels, and asked travelers to advise the travel department if the list did not fit their needs. Hotels requested by travelers were reconsidered, and some properties were added or deleted based on the feedback.

One unexpected stumbling block came at the travel agency level, where the sudden surge of hotel reservations "put a strain on the agency because they were not as prepared as they could have been to handle the volume, and some of the hotels we chose were not loaded in the CRS." Eventually, American Express "was able to move people around and pick up the slack. They wanted to be paid extra, but I wouldn't agree to that," Magnus said.

At American Express Consulting Services, director of hotel consulting Julie Hylton said she was unaware of any other company that has taken its hotel program so far as to refuse reimbursement--but she is not totally surprised by the trend.

"I see customers taking a much harder look at their hotel programs, doing more up-front analysis to make sure they have the right properties in the right places. They're finding that the more analytical they are up front, the easier the program is to enforce," she said. "And the current merger and acquisition environment is changing the way people do business. Instead of just going back to the same hotels every year, many are thinking this is a good time to step back and take a look at their utilization."

And indeed, Magnus's utilization numbers look quite good, compared with the more typical 85 percent compliance rate of most companies with mandated-but-not-enforced hotel programs, Hylton said.

Ford obviously agrees. Now, six months after the transient policy first came out, Magnus is thinking about consolidating its group travel as well. But he knows that meeting sponsors are a different breed of hotel customer.

"I think there's potential for meetings. We'd like to have our meetings in our corporate properties, but meetings have different needs," Magnus said. "We'll never be able to merge it all, because we don't really include resorts in the transient program--but we are going to work toward it in 2000. We are going to put together a team to look at how our transient properties match up with our meeting properties, and certainly encourage people to use the preferred properties for meetings."

In the meanwhile, his team this month will launch a centralized conference planning Web site, where administrators can share materials, attendees can register and data relating to meetings and conferences can be centralized. Also on the travel department agenda this quarter is an effort to begin prepopulating Ford's automated expense reporting system with booked air and hotel data.

Down the line a bit, Magnus has bigger plans. He hopes to fully automate the hotel program with direct connections to preferred suppliers that will pass bookings directly to suppliers and folio data back to Ford. But while he wishes he could get full folio data that breaks out each expense separately, rather than just downloading a hotel expense total, he is not ready to pay extra for it. "Even $1 a day more would cost Ford a lot of money," he noted.

Instead, he is talking to hotel chains like Marriott about prepaying for hotel rooms, "so travelers don't even have to fill out an expense report for room and tax, but just bill it directly. It cuts to the chase, plus it absolutely validates that we get our negotiated room rate, and travelers only have to expense incidentals."

As the travel business meets technology, he quipped, "You have to have a good millennium idea or they'll put you out to pasture.