Mandate Of Nonrefundables Yields Big Savings

<B> Mandate Of Nonrefundables Yields Big Savings</B>

By Jay Campbell

<I>Redwood Shores, Calif.</I> - Marking the one-year anniversary of a policy that made nonrefundable fares mandatory whenever they are available, Oracle Corp. last month celebrated by counting the $8 million it has saved and by automating the administration of ticket exchanges.

In just 12 months, the company's usage of nonrefundable tickets has doubled, from approximately 20 percent in March 1998 to a monthly average of 38 to 41 percent now. Oracle travel manager Val Cordell said management is "very pleased we made the change, even though there have been some challenges."

Among those was the realization that some travelers, particularly Oracle's SWAT- team of consultants, should be exempt from the policy, because they change their plans too frequently. Cordell's department determined by interviewing travelers and agents that they find ticket exchanges time consuming and counterproductive. So, an incentive system was set up whereby agents are offered bonuses, both on an individual and a group level, for handling such exchanges.

"The ticket bank that holds our returned nonrefundables had been getting more deposits than withdrawals," said Cordell. "That was a red flag to us that said, 'Uh oh, we're spending more than we're saving.' But we've reversed that. Now we have about $1 million worth of tickets in there on a given day. It's a lot, but it's a lot less than the $8 million we're saving."

Consultant John Heilner of Management Alternatives was impressed with the savings. "When you consider Oracle's volume, it's definitely believable," he said. "I think the policy could apply to other companies. I can see that there would be some administrative burden and reluctance by the agents to do so many exchanges--but companies are paying the fee now anyway."

As for the details, "what Oracle did in segmenting the consultants is really smart," he said, suggesting that another category to exempt would be people who travel only once or twice a year.

Heilner said he couldn't think of any other companies that have mandated the use of nonrefundables, though a number of companies are encouraging their use. But Portland, Ore.-based Topaz International's audit figures from the past year indicate that increased use of nonrefundables is not a major trend. In fact, their usage was down compared with other ticket types, from 15.8 percent in the first quarter of 1998 to 15.0 percent in the same period this year.

Cordell said the Oracle policy went over so well in part because travelers were given the option to central bill only nonrefundable tickets on the company's ghost account. Travelers had said in surveys that the main reason they did not buy nonrefundables was that they did not want to carry the balance of canceled tickets on their individual bill corporate cards. Still, Cordell had suspected the real reason was to improve their chances for an upgrade by buying higher-priced ticket types (<I>BTN,</I> May 18, 1998).

But reconciliation of the ghost account proved difficult because there were sometimes several exchanges on one ticket. As a result, Oracle in June will move to centrally paying, but individually billing, all charges when it signs a new card contract.

In terms of relationships with airline vendors, Cordell acknowledged that, "We don't go to them and ask for too many favors, like maybe a voucher for when a traveler leaves the company and his banked tickets become useless. The airlines aren't exactly thrilled about this."

Heilner said that in some extremely rare cases, airlines have been kind enough to credit corporate clients for returned nonrefundable tickets, particularly when a rarely traveling employee makes a cancellation for a legitimate reason.

Another unexpected, yet positive, result of Oracle's mandated policy was the increased awareness travelers gained about travel management itself. "The downside of that was that travelers started thinking they could do back-to-back tickets, which we don't condone," she said.

Cordell said Oracle Travel's increased visibility within the company, stemming from this and other policy changes--as well as the implementation of net net fares and charge-backs of the cost of travel processing to the departments--culminated in Oracle's recent purchase of E-Travel (<I>BTN,</I> March 22).

Airlink Systems of Fremont, Calif., provided Oracle's new automated tracking system software, which took longer than expected to implement, Cordell said. It finally went live last month and the travel department scanned in all new tickets from the past 30 days.

The software offers a number of features, including automatically queuing the profile of travelers who have tickets that were neither deposited in the bank nor used, and notifying travelers by e-mail when they have nonrefundables in the bank that are about to expire. The main goal is to reduce the workload for exchanges.