HFS Takes Travel In-House

In a new twist on the emerging corporate trend of taking business travel in-house, HFS is leveraging its corporate travel and leisure business operations in a new travel group with air sales of more than $200 million.

A number of companies, including Franklin Quest, Microsoft, The Walt Disney Co., Charles Schwab, Universal Studios, Southern Living Magazine, Polo/Ralph Lauren and Advanced Micro Devices launched their own agencies last year as a way to better control their destinies. However, it is rare for a company to leverage leisure business operations against corporate travel. Of course, other than Disney, there are few organizations that have $160 million of air sales against which to leverage corporate travel.

The bulk-$120 million-of the travel group's air volume comes from a timeshare exchange business called Resort Condominiums International Travel. HFS agents book air, car and sometimes even hotels for timeshare owners who opt to exchange their time for vacations at other properties. The company's leisure operation, Preferred Holidays, is a wholesale tour operator owned by Avis that generates $35 to $40 million in air sales a year.

Based on his experience consolidating corporate travel for Avis, which HFS purchased last year, Frank Terranova, president of the newly formed HFS Travel Group in Indianapolis, expects to achieve savings of 10 to 20 percent by consolidating business travel for all entities. Today, he calculates that air spend at $27 million. Terranova emphasized the "today," as HFS has been on an aggressive buying spree, bringing in Avis, Coldwell Banker, Resort Condominiums International, North American Travelodge and Electronic Realty Associates in 1996. The merger with fleet management firm PHH Corp. is expected to close soon. Other brands include Century 21, Days Inn, Howard Johnson, Knights Inn, Ramada, Super 8, Travelodge, Villager Lodge and Wingate Inns.

Leisure Adds To Leverage

"The concept is simple," said Terranova in explaining the business travel consolidation. "We have a number of different companies, all using a variety of different travel agencies. It will help our negotiating position, even on the leisure side, to combine it all."

As the dust began to settle on all the merger activity last year, HFS executives began focusing on ways to better leverage travel operations. They began working on the plans in December but didn't tap Terranova to run the new enterprise until March. Terranova will report to HFS vice chairman and chief financial officer Michael Monaco.

Executives developed and distributed a new travel policy that mandates use of the HFS Travel Group. The in-house agency is currently out to bid on a global distribution system that the 550 to 600 travel agents will use. Between 35 and 40 agents will be dedicated to the corporate travel needs of HFS' 30,000 employees. Franchisees, which number more than 450,000, also may use the services of the travel group, Terranova said.

The dedicated corporate agents will use software provided by its GDS that allows the company to check policy compliance at the time of booking, Terranova said. Employees will carry the American Express card for travel expenditures. By the end of 1997, Terranova hopes to select an automated expense reporting system. He also is looking at automated booking systems but is not ready to buy just yet.

Employees will use HFS hotel and car brands whenever possible and will receive the lowest rate available. However, contracts with other travel agencies prevent HFS from offering its own employees lower rates than anyone else can get, Terranova said. For air, HFS has a number of preferred agreements in place with all the major airlines that are city pair or region specific. He will continue to negotiate such deals based on the higher volume.

Careful not to offend agencies who book a substantial number of HFS' 500,000 hotel rooms, Terranova emphasized that HFS has no intention of soliciting other corporate business or selling its services to the general public. In fact, HFS opted not to cancel agency contracts for corporate travel, instead bringing corporate business in-house as contracts expire; WorldTravel Partners' contract expires this week. At least a dozen other agencies are preferred vendors of HFS' 13 major brands, with another three or four dozen being used occasionally.

Four major reservation centers are located in Fort Lauderdale, Virginia Beach, Indianapolis and Grand Rapids, Mich. Smaller centers are in Las Vegas, Chicago, San Francisco and at HFS headquarters in Parsippany, N.J., and Avis headquarters in Garden City, N.J.