Large Company CTDs Reaping Benefits

Large companies that have embraced the Airlines Reporting Corp. Corporate Travel Department designation in the past few years have found tangible benefits from having the accreditation, citing faster commission payment, operational and negotiated savings and complete financial control.

Charles Schwab, Home Depot and Occidental Petroleum Corp. were the first three large companies to earn CTD accreditations seven years ago, and Bear, Stearns & Co., Chevron, Federated Department Stores, International Monetary Fund and Wal-Mart have since joined the program. There currently are 197 accredited Corporate Travel Department locations. Average sales per location in 2005 exceeded $60 million.

The ARC designation enables companies to function as agencies do in settling U.S. airline ticketing financial transactions, making them privy to all travel supplier commission and override payments.

"With accreditation, our processes are more streamlined and time-efficient," said Teresa Asbury, corporate travel manager at Wal-Mart. "We have more flexibility in process improvement and data ownership was very important to us. We saw the accreditation as a way to be more efficient and cost-effective with our business." The accreditation did not fail to meet Asbury's expectations. "I can tell you it did represent a nice savings for our company," she said.

"Nothing changed except that IMF now receives all commissions directly," said Caro Cook, chief of transportation at the Washington, D.C.-based International Monetary Fund, which earned its CTD in 2001. The accreditation made her department so successful, Cook ventured to call it a profit center. Though she declined to provide any figures, she said once commissions began directly rolling back to her department, it "covered the cost of our operation and a little more. We cover our cost, our salaries, and we make money," she said.

With $100 million a year in travel and entertainment expenses—99 percent of which is international business-class travel—Cook had the leverage to negotiate directly with suppliers. "We're much more in control of our business with this model," she said. "The business model where commissions flowed through to the agency—that wasn't in the best interest of the IMF. To me, negotiating to suppliers directly made more sense than having an agency perform that for you."

Cook lauded the CTD program, though she admitted the concept wasn't an easy sell to senior management. That wasn't the only opposition she faced: As IMF applied for the CTD, Cook said some travel agencies also initially resisted the idea. "Things have progressed a lot, and I've spoken to some of the same people, and they are more open now," she said.

Jeannine Rehel, managing director of national accounts at ARC, said she's seen companies of various sizes applying for CTDs, but pointed to one reason it may appeal to large companies in particular: control. "They want that relationship with ARC," Rehel said.

"As a CTD, companies can hold onto their ARC numbers, and when or if they change their travel management company, that number doesn't change" allowing commissions to go directly to the CTD. "Thereby the data stays and is accessible," she continued. "The supplier identifies that corporation with a number and solidifies the relationship."

When the Airlines Reporting Corp. officially launched CTD accreditation in 1999, small companies were the first to sign on, many insourcing agency operations entirely. Others and the larger companies that eventually started using the accreditation, however, continued to outsource most if not all travel management company functions, except for collecting all data and commissions.

Andrew Menkes, president and CEO of Partnership Travel Consulting and founder of the first CTD, said all large companies outsource the 24-hour service and estimated 80 percent to 90 percent outsource the labor to travel management companies. "It's just not cost-effective to have 30 to 40 agents on payroll," he said. "Companies with CTDs can use TMC A for one thing and TMC B for another and retain their ARC number, providing flexibility and savings."

Carol Ann Salcito, president of Norwalk, Conn.-based travel management consultants Management Alternatives, said companies need only ask one question before deciding to apply: "How fragmented do you want to be? The risk is taking on more responsibility and working with more travel suppliers," she said. "Unless you hire a supplier to watch your CTD; but then it's sort of like the fox guarding the henhouse." Salcito added that companies who don't participate in the CTD program aren't missing out on any perceived benefit.

Several large companies have been pressing for a global CTD program, but a huge obstacle is that every country has its own bank settlement plan, similar to ARC. Rehel only would say that ARC has had some internal discussions about going global. "Everyone is curious to see how it will work," Salcito said. "The European Union helped alleviate some rules across countries, but not everything."

One benefit of the ARC Corporate Travel Department accreditation concerns hotel commissions. Menkes said one global hotel chain, which he did not identify, revealed that it is developing a central hotel commission payment system that would involve ARC. "All commissions would be collected in a single payment with Web-based backup every week," he explained. A third-party company already is working on an automated hotel commission process, Menkes said, where notices are sent to hotels for commissions not yet paid.