Ground Co. Heads Discuss Corporate Negotiations

By BTN / May 20, 2001

Ground Co. Heads Discuss Corporate Negotiations

International networks in the ground transportation industry enable corporate travel managers to better consolidate their chauffeured car services needs. In a recent BTN roundtable, the heads of the four leading networks spoke to contributing editor Lynn Woods about new developments in the industry and how corporate clients can better manage this piece of their business. Participating in the discussion were Scott Solombrino, president and CEO at Dav El Chauffeured Transportation Network, based in Chelsea, Mass.; Rick Anderson, executive vice president of sales at Carey International, based in Washington, D.C.; Russell Cooke, president of BostonCoach, based in Everett, Mass.; and David Seelinger, president and CEO of Empire International, based in Norwood, N.J. 

BTN: What portion of the overall corporate travel spend does ground transportation comprise?

Scott Solombrino: We estimate that approximately 4 percent of total travel spend trickles down into the chauffeured transportation segment. That's an inconsistent number, but it's a good starting point. People are more conscientious of how they use corporate ground transportation than they were 10 years ago. Many more companies are able to offer a complete package of high-end ground transportation services. The corporate manager today is in the driver's seat when negotiating for these types of arrangements.

BTN: What must travel managers bring to the table to negotiate with you?

Rick Anderson: Obviously, some revenue and the best information you have on your spend. City pair is obviously important to us, as is most frequently traveled cities. Also, the type of road service you require, whether it's road show, meetings and events, board meetings or meet-and-greet services.

BTN: Do most corporations track their spend?

David Seelinger: We have a fact sheet of items for travel managers when they're consolidating a national program, because needs vary from office to office. A midwestern office may not have the same needs as the East Coast office, and we find out sometimes that we are being blind-sided by some needs that were not considered in the beginning. It is important to do that investigative research, and it's a tool we all provide.

Solombrino: Everybody tries to have a national program. But their enforcement capability within their organization usually is limited. If they have a $2 million spend, are they going to drive $1.8 million of that spend into your organization? Chauffeured ground is one of the most difficult things to enforce. The travel manager does not have the authority to tell the senior vice president who he's going to use. Unless you can enforce it, your contract is really nothing. To us, it's important to understand how well the policy is going to be enforced through implementation.

BTN: A top executive may prefer a supplier because the person likes a particular driver. Is that mindset a major obstacle for companies attempting to consolidate their ground transportation with one vendor?

Solombrino: We're in an economic slowdown. Companies are more willing to make people follow the policy because the spend is being monitored. They're going to get their discounts for the corporation by forcing those executives to use the preferred supplier. It's when the spend is not being monitored that they start to say, "I want Joe in New York, Sam in Boston and Jim in St. Louis." From an implementation standpoint, it's very complicated when people have those types of needs.

BTN: What percentage of your business is meetings and events?

Seelinger: As a percentage of our business on a national scale, meeting and event work is probably close to 20 percent. On a technology level, we provide meeting planners with real-time information: When we are doing a meeting, the local vendor that's providing the service and our corporate offices here in New York are on the same reservation platform. In some cases, we provide meeting planners with wireless devices so they can communicate with our people in the field and at the airport.

Anderson: Carey has set up a dedicated department to handle meetings and events, ranging from board meetings to the Super Bowl. We've developed a mobile dispatch unit that we take onsite as a way to separate the meeting or event from the local operator's regular business.

Solombrino: We're very involved in large events on a regular basis. But we never want a major event to distract from our corporate day-to-day business. No matter what's happening, our corporate client will get the service for which they have contracted. Our meetings business will never exceed 25 percent to 30 percent of our total revenue for that reason.

BTN: Can corporations leverage the individual travel piece and their meetings business?

Solombrino: Obviously, the total spend is an important factor in how well you negotiate the deal. However, when you get into details of your meetings business, it might have a negative effect on your overall negotiation. It depends on the company. In many cases, meetings and corporate business is separate. The company actually might use a destination management company for transportation, which is the most ridiculous thing. I have a lot of DMC clients, but I think companies have not understood that the end cost is always going to be better with a transportation provider.

Seelinger: For years, all of us have gone after the business traveler. But as we got into the meetings and events business, we found that at many corporations, the events piece is greater than the transportation piece for the business traveler. It's an education, in terms of who we call on and, yes, we do include total spend for the company in our negotiations, even if corporate travel and meetings and events are two separate departments.

BTN: Some ground transportation companies are offering real-time booking through the GDS, their Web site or through a direct link with the corporate client. What role do the advances in booking technology play in the corporate market?

Seelinger: All of the companies here today provide corporate travel management companies with standardized reservation technology, whether it's a Sabre or Apollo interface and a Web tool. We recently did a deal with a national company based in Texas. It turned out our rates were slightly higher than a competitor. We discovered the corporation had seven people sitting behind a desk calling their current limousine provider. Through some of these electronic interfaces, they can eliminate a great deal of that cost. It's important to look not just at that hard-dollar spend, but also at inefficiencies behind the scenes.

Anderson: It's no secret that a Web-based reservation is about $1, the GDS is about $3 and a phone call is about $7. Obviously, there's a cost benefit to drive the transaction down to the $1 range.

Russell Cooke: We've got about 30 percent of our reservations coming through the GDS. There's a cost benefit to us. At the same time, it's primarily a one-stop shopping tool for the end-user. We have an extensive investment in mind to further extend that capability.

BTN: Traditionally, booking a car service through the GDS was a laborious process. It could take hours to get a confirmation, but that's all beginning to change. There are third-party companies, which use the GDS to create a booking with near-instant confirmation. Some of the GDSs themselves are developing Web-based technology that is allowing for much quicker transactions. This is the beginning of a huge change.

Seelinger: There are third-party reservation tools that most of us have been forced to interface with because the clients demanded it. But, ultimately, the corporate travel manager will pay for that third-party fee. We've created technology that interfaces with the Sabre and Apollo GDS. We've designed a script that fits the needs of travel management companies and interacts with them on a real-time basis, providing the confirmation back literally within seconds. It's much more rapid than picking up the phone.

Cooke: Automated booking is one way to offer significantly better customer service, aside from the cost-saving issues. Not too many years ago, it wouldn't be uncommon for the traveler or his or her assistant to call the corporate travel office and verbally give the ground transportation order over the phone. They, in turn, would call us. We would enter the booking into our system and then fax it to the service provider in the destination city. They would enter it into their system, then the dispatcher would call the chauffeur on the radio and verbally give the booking to the chauffeur. With automated booking, the arranger puts that order in and, other than the quality controller, nobody touches it until it reaches the chauffeur's beeper. The likelihood that the order will be accurate is much greater.

Solombrino: In the foreseeable future, it might be in our best interest to work on a common platform for the industry. We don't want to make the mistakes of the hotel and airline industries. We could probably build a better system, because we're 20 years later in the cycle.

BTN: What kind of data can you provide a corporate client?

Seelinger: We warehouse data for corporate travel managers so they can analyze the data on a frequent basis. Usually, when we start a negotiation process with a client, we don't have much data. A lot of times, once we get started with them and start reviewing the data on a quarterly basis, we find that they think the bulk of the spending is here, when in reality it's over there. They've tried to apply their discounting to a place where it doesn't belong. So, warehousing the data is very important. We'll provide it any way they want. In some cases, we're downloading it to their back-office accounting system.

BTN: When you're putting your executives in a car, you want to make sure that they're in safe hands. What kind of safety and driver training programs do you have?

Anderson: We use the Smith system in our corporate-owned locations, which has been around since the 1940s. It's a defensive driving course, involving time behind the wheel. This is a big issue on a national level. The National Limousine Association is coming up with a standardized program for driver training. With the affiliates and the licensees, we have audit controls in place to make sure that some type of defensive driving training is being done. In many cases, I talk to companies that want to be affiliates, but have no driver training program.

BTN: Because the industry is not regulated?

Anderson: It's not. A lot of corporate travel people look at their spend, do an RFP process and take the information they got back as fact. It's very important to do the homework to make sure the information is accurate.

BTN: What should corporate travel managers ask in the RFP to make sure they're covering all the bases?

Solombrino: They should ask, "What is the rating of your insurance company? What are the limits on your insurance?" You don't want a supplier that's insured by a flim-flam insurance company, which is a common practice in the chauffeur transportation business. Check the ratings of the workmen's comp program. "What's the drug-testing policy of the company? What's the DMV rating on drivers that come to work for you? Is it company policy to know how many points they have? Do you do a background check to see if prospective drivers are convicted felons?" In some states, it's illegal to do background checks, so you don't know if they're a convicted felon if they lie on the application. But there is a definite safety procedure that corporate travel managers need to focus on. You need to do an investigation to make sure the information is accurate. Make sure people have the right insurance coverages, licensing and that they meet local regulations. It's very common for people to skip over that part of the RFP process.

Cooke: Ask the ground transportation provider for a certificate of insurance. You should also ask that your corporation be additionally insured.

BTN: How is airport congestion impacting your business? Can travelers expect the pick-up process to be different than in the past, because of limitations on curb space for chauffeured cars, for example?

Cooke: Our solution has been a meet and greet program, which we've rolled out across the country. On average, we can get the traveler who doesn't have checked baggage from the gate to the car and on their way in under 10 minutes. It's an issue of asking passengers if they want to walk to the car with the driver or wait at the curb, which might mean you have to meet and greet them all over again.

Solombrino: Dav El founded its airport concierge program back in 1966. Until 1999, it was complimentary. Well, the airports in this country have deteriorated to the point where we can no longer not charge for it. Huge numbers of people work full-time at airports just connecting the passenger with the driver. Sometimes, the airport meet and greet person can meet the passenger at the gate, sometimes they can't. It depends on the airport's security regulations and even the time of day.

We're putting a lot of resources into this, but it's costly and the problem is getting worse. We're hoping that in the future, the airport authorities and the airlines will come together to relieve this congestion by changing the patterns in which people embark and disembark onto airplanes.

Cooke: We've found that flight-tracking technology helps and we have close to $700,000 invested in coordinated labor annually at Logan alone. We're also trying to educate not only the customer but also the port authorities on providing better signage.

Seelinger: We have a $300,000 greeter budget now at Newark. A lot of customers in the past would say, "I don't want to be met in baggage claim, just pick me up at the door." Well, sometimes the car may take 20 minutes just getting up the ramp at Newark. So we preach, "Be patient."

BTN: What kinds of new technologies are you investigating?

Cooke: As we increase our expenditures on IT and bring it down to the licensee and affiliate level, we'll be able to provide you with more global reporting. We'll be linking in-car GPS navigational systems with our dispatch departments and eventually to the online reservation system on our Web site, enabling travel managers to locate the chairman's vehicle. Obviously, we would provide security controls on that function. Telematics, where we'll bring such external information as stock reports and faxes to the passenger in the back of the car, is an up-and-coming feature. The vehicle will become a mobile office.

Seelinger: Technology through the GPS and an integrated GPS within the dispatch functions will help utilization. Reporting tools for the passenger, administrator and travel manager will be critical. Wireless will come into play, enabling corporate customers to modify, cancel and check on the vehicle status on their Palm.

Anderson: We're in the process of beta testing Internet services in the back of the car for the traveler. We're also launching Internet products for the administrators, enabling them to check on the location of a vehicle.

BTN: Any expansion plans overseas?

Anderson: We're purchasing some of our licensees in Europe, including Paris and London. We're also interested in forming partnerships with companies in the Pacific Rim.

Seelinger: Part of our strategic plan is to build up the European market and provide our services on a global basis. Also, we plan to acquire some of our licensees or affiliates in other markets.

BTN: How can travel managers be assured they're getting the same standard of service at all your locations?

Anderson: Many of us conduct audits of our licensees and affiliates during the year to make sure they meet the standards that we've set.

Cooke: A lot of the aggregators and switch-net groups coming into play are underestimating the whole network and fulfillment side of what we do, providing consistency across the board. We have an extensive due diligence in place for all our tiered affiliates.

BTN: How do you monitor locations from a customer service perspective?

Solombrino: More of these national companies are taking back their franchise and affiliated operations through acquisitions, so they're delivering the service themselves. We all own many more companies today than we did before. Part of the consolidation trend is to be able to be the end-deliverer of all services and not have to depend on that franchise or affiliate relationship in major markets.

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