Latin Am. Travel Advances

<B>Latin Am. Travel Advances</B>

By Sarah Welt

Corporations and their agency partners have moved travel management forward in Latin America during the past 12 to 18 months, and have paved the way for even more rapid advances in the near term.

EDS, Oracle, Praxair and Siemens are among the growing number of buyers bringing Latin American countries under the umbrella of multinational agreements for the first time and American Express, Carlson and Business Travel International are among the agencies putting new infrastructure in place.

According to several mega travel management companies, the gap between technology in Latin America and the rest of the world is closing somewhat, making consolidation more attractive. The heightened interest in Latin America also can be attributed in part to an increase in competition between new airlines, as well as a growth in competition among U.S.-based carriers.

"Increased competition by new airlines in that marketplace is putting more focus on Latin America than ever before," said Steve PowerAmerican Express vice president and general manager of multinational accounts.

But corporations that have looked into centralizing operations in Latin America have faced a number of challenges--countries have lacked the infrastructure to handle travel management technology, corporate cards have not readily been embraced by travelers and companies accustomed to highly personalized customer service haven't wanted that to change, despite the obvious economic benefits of moving to call centers. Electronic tickets are also still a relatively new concept, and the use of personal computers is still not pervasive for many companies.

Additionally, for many companies, Latin America tends to be one of the smallest regions within the corporate travel portfolio and, therefore, not the highest on the priority list.

However, things are improving. WorldTravel Partners-BTI Americas executive vice president Tom Lacny said the desire by clients to get their arms around Latin America has happened faster than for any other region, and that global strategic sourcing initiatives are helping drive the consolidation.

Due to technological innovations, Carlson Wagonlit executive vice president and general director of Latin America Ross Mersinger noted that changes that took 10 years to happen in the United States likely will be compressed into a two-year timeframe in Latin America. So far, about 25 of Carlson's multinational clients have completed travel consolidations there.

Mersinger said that in the past 12 to 18 months clients that want a global program have begun to require that travel be handled in a certain way, whereas in the past, "local management of these global companies pretty much had the freedom to decide which agencies to use," and this trend is "certainly strongly influenced by the global headquarters of that company."

Some travel management companies are investing serious dollars in developing call centers in Latin American countries to support the growing trend to consolidate there.

Carlson Wagonlit, for example, plans to launch call centers in Mexico, and in Argentina, Brazil, Chile, Columbia and Peru this year, so that by the end of 2000, calls will be able to be routed between locations.

And American Express is expanding its BTC in Mexico and its other major Latin American markets-Argentina and Brazil, to create giant call centers called "Galaxy Centers" because clients are "moving away from local onsites into large call centers," said Power.

Meanwhile, the corporations that have begun to consolidate travel in Latin America have faced numerous challenges, but are making headway.

Siemens Shared Services LLC, for instance, also has been active in consolidating travel in Latin America, with 16 countries under its belt. Director of travel management Hanna Murphy said that consolidating to one agency in that part of the world is not necessary, but getting agencies to abide by certain standards is a huge issue.

Rolling out a corporate payment system has not been a problem. "Corporate cards are widely accepted for air, hotel and car." However, Murphy said one "rampant" problem in Latin America is agencies refusing to eliminate voucher systems for such things as hotel payments. She said that travel agencies are binding their customers to voucher systems in order to collect commissions on these vouchers. This makes it difficult to form a clear payment path that is created when a traveler pays with a corporate card, because the hotel bill goes on the voucher and the agency is then direct billed by the hotel, instead of the traveler. "We don't get hotel volume on our corporate card and don't see how often people stay in these hotels because there is no clear payment trail," Murphy said.

She also noted that Latin American agencies are much more geared toward commission collection than the United States has been in years, and "it is similar to the way Europe used to operate 10 to 15 years ago. It is an interesting phenomenon I didn't think would happen in the year 2000."

Another difficulty in Latin America is the fact that agency reporting of supplier volumes is still a "very manual process," Murphy said. "I can tell you the megas have manual processes in many cases."

While online booking has yet to be embraced by Siemens travelers in Latin America, the company does have a worldwide intranet. Online booking will have to wait until triple net agreements are allowed. Murphy said they are not allowed by law in Latin America, and until those laws change it doesn't make sense for Siemens to broach online booking there.

The Buffalo, N.Y.-based Praxair Inc. also started consolidating in Brazil a year ago with WorldTravel Partners-BTI Americas. Global procurement manager Jack Flood said the company wants to bring together a global program under one agency network where it makes sense. The company next wants to consolidate in Venezuela and Argentina and it also is in discussions with several banks about launching a corporate card.

One challenge is simply the differences in regulations in the marketplace. He said back-end rebates still are common in South America and that he is waiting to see what the impact will be from the most recent commission cut by American Airlines. Effective Jan. 15, the airline cut commissions from 9 percent to 6 percent for domestic and international travel booked in South America, the Caribbean, Bermuda and the Bahamas for travel booked on American Airlines and American Eagle. Beginning Jan. 1, the base rate for Central American commissions also became 6 percent.

At press time, it was confirmed that United Airlines matched the cut in all of its Latin American markets except Uruguay and Mexico. Continental Airlines also cut commissions to 6 percent in Central and South America, but not in the Caribbean. British Airways also matched in South America and the Caribbean, but the cuts do not go into effect until March 1. Varig also matched the cut. Spokespersons for Delta would not comment on commission cuts.

Another hurdle is getting technology in place that will enable agents around the world to share itineraries, so that if a South American traveler is going to the United States, a North American agent can pull up the information and make changes if necessary. "I don't know how this is going to work," Flood said.

Oracle Corp.also has been consolidating travel in Latin America with five countries up and running, but hadn't approached the task until last year because, "basically it is our smallest piece of business in terms of T&E spend," said director of corporate travel Valerie Cordell. "We wanted to hit our big volumes first to get maximum savings, so this is really the last frontier for us."

However, Cordell said that despite the fact that it has been the area of lowest spend for the past decade, it has become one of the fastest growing regions in the past six months to a year. She attributed this trend in part to more willingness by the airlines to do deals that mirror traditional arrangements found in the United States.

On the payment side, Cordell said that one Latin American country still is locked into invoicing, and it is still uncommon in a lot of restaurants to accept credit cards. Additionally, merchant fees, which are readily accepted in the United States, have been an issue in Latin America because fees are still a new concept. "They see it as an extra cost they have to pay," she said. That hasn't stopped Oracle from beginning to roll out the American Express card and glean fairly good supplier data, however.

Now the company is concerned with consolidating to a shared services platform in Latin America, and is working to consolidate other areas, such as accounts payable and purchasing. The company also plans to implement E-Travel in Latin America by May. Cordell noted that Rosenbluth has the infrastructure at this point to handle that. While it is good, it is "not as good as it is elsewhere, but it's close."

Because the company is requiring the use of corporate cards and a specific travel agency, it has decided to continue to use onsites, at least for now. "That is what they had before and we are trying to spread out the pain a little bit," Cordell said. "Over time, we do intend to consolidate into call centers as that becomes a more predominant option."

In turn, Electronic Data Systems has consolidated the majority of its Latin American business, using the BTI Global network for 90 percent of its travel spend worldwide.

While travel manager Jack Witherspoon said that corporate card acceptance has not been a problem, he noted that the mega agencies still have difficulty delivering consistent data country by country. The company also would like discounts at the point of sale instead of the back-end, as well as "directional discounting," getting the same discount whether departing from the United Sates or Brazil or Argentina. Additionally, Witherspoon wants to be able to negotiate hotel rates that can be shared worldwide.

"We are running up against different cultures and different business practices," Witherspoon said. "There are going to be those nuances until it is a purely electronic world in which my traveler in Argentina is interfacing with the same or similar system as a traveler in the United States.