Moving To Mandates

<B>Moving To Mandates</B>
<I>Buyers Brave The 'Required' Frontier, Give Policies Bite</I>

By Cheryl Rosen

<I>New York</I> - Travel managers are reporting success with that most dangerous of corporate travel policies, the mandate--and the buzz at Corporate Travel World hinted that many more are considering taking the plunge. While insiders noted that in the current tough labor market, where valuable employees are harder to find than ever, there is great risk in alienating the road warrior. But still, talk of mandates was in the air.

"We don't call it a mandate--we call it a requirement," said Cindy Heston, manager of corporate travel worldwide Thomson Consumer Electronics in Indianapolis, whose travelers have been "required" to use an online booking system for simple roundtrips out of headquarters since 2Q99.

In a single quarter, Thomson moved 48 percent of its reservations onto Worldspan's Trip Manager booking system, saving $28 per ticket. Her online bookers also are saving money by choosing lower-price alternatives. While the average ticket price booked online is no longer 20 percent below that of tickets called into the travel agency, as it was in the first blush of excitement when Trip Manager rolled out, the savings on Thomson's $60 million global travel budget is still significant.

"Hey," said one travel manager in the audience, "I'd be happy if I could lower my average ticket price by 1 percent."

Meanwhile, mandates, while still not the norm, are not limited to the use of technology. One travel buyer told BTN that her company last year mandated that all travel--air, hotel and car rental--be booked through the travel agency, which in turn directs reservations to the company's preferred suppliers. A copy of the traveler's itinerary showing all segments must be attached to the expense report in order for reimbursement to be approved.

"We have no doubt at all that it was the right move," the travel manager said. "We got 100 percent compliance on hotel, and saved $1.5 million on our $10.7 million hotel volume. Before the policy, about 33 percent of our hotel volume was going through the agency--we had 250 hotels in our hotel directory and our travelers were using 6,000 properties."

At Monsanto Co. in St. Louis, the pharmaceutical group two months ago mandated that all domestic travel--air, hotel and car--be booked online. "We saw our electronic bookings plateau in the 5 to 10 percent range, and had some conversations with senior management about how to push that number up," said strategic sourcing manager Bryant Wales. "I showed the controller the business case and our CFO said this is the way we're doing domestic travel. We were in soft-sell mode to allow people to get through training, and now we've gone to a hard sell."

Where before "a couple hundred reservations a month" were coming through online, the mandate pushed usage to 200 in its very first week.

At Credit Suisse First Boston, Michelle Lee is not at all shy about using the M word. The point of a good travel program, she noted, is to walk that thin line that moves market share to preferred suppliers while not getting in the way of a traveler's business mission. And that's not an impossible task, she said, even in the banking industry, long regarded as a bastion of travel policy laissez-faire.

"We're pretty proud of our mandated program," Lee said. "We mandate all preferred vendors, but our approach is that we have intelligent travelers and when they go outside policy there's a reason for it. Where people have failed is where they made it difficult to get out-of-policy approvals. We orchestrate the exception approval process to make it as easy as possible for them--but if they do not comply and do not have exception approval, they don't get their airline ticket and they don't get reimbursed."

Pushing for a mandate "was definitely important to the travel department at the same time the firm was looking at cost reduction where it makes sense," Lee said. "We don't want to jeopardize traveler comfort, convenience and safety, but we're trying to create a balance with cost containment."

Online booking mandates are sometimes conceived in the executive suite, especially if the company itself is moving into e-commerce initiatives. But most mandates begin in the travel department--and they do involve risk for travel managers who step too boldly, insiders cautioned. All agreed that mandates are not even conceivable without senior management support at the highest levels.

"We barely survived," said one travel manager of the policy mandate she wrought. "Of course the travelers were annoyed, and we in the travel department got hit left and right. But we dealt with every single individual. If they said a hotel in our program was not up to par, we went out there and looked at it, and considered whether to take it out of the directory."

And her reward? "A lot of local hotels said we'd never pull off a mandate--but when we went out to bid for our 2000 hotel program, they saw how we moved market share and we got some really deep discounts." Now, she added, "we're going to mandate online booking too, I think. My proposal's in management's hands right now and I'm hoping to see our policy changed by the end of April."

Travel managers looking to put in a mandate first must outline the overall financial return to the company in a formal proposal to senior management. But CSFB's Lee suggested that they also need to sell individual executives on what's in it for them.

"In 1999, we improved compliance by reporting back to the division heads each quarter on their total travel spend and savings, plus each got one consolidated report of the full impact of each of the individual exception approvals in their division," she said. "We also give them consultative industry information quarterly. For 1Q00, for example, we're going to advise them about the airline fuel surcharges and fare increases so they'll understand the adjustments to our travel spending based on those industry current events. We negotiated guaranteed fares in our top markets, so we don't expect fare increases, but the fuel surcharges are something else."

Indeed, she said, management buy-in is but the first communications step to a successful mandate. "Ensure that you have a vehicle to properly communicate policy to all your travelers, but especially to your top internal clients, and make it as clear and as easy as possible so as not to encumber their business. But most important is one-on-one communication with division heads. To them, your saving $35 million for the firm just doesn't have the same impact as saving $2 million for their division."

For a technology mandate, added Monsanto's Wales, be sure the system can handle the load before scaling up a small pilot into a companywide rollout. "One hiccup we had at the start was the saturation of our T-1 lines," he said. "We had to move fast and rectify that, because you can turn people off very quickly, and then it's extremely hard to win them back. Also, be ready for resistance, and audit exceptions carefully in the beginning. You can't let travelers open too many holes too quickly."

While some corporations worry that mandates will make it harder to retain top people in a tough job market, Thomson's Heston noted that knowledgeable travel agents who understand customer service also are hard to find--and that an online mandate can help alleviate that labor shortage.

"I started selling the idea of online booking in 1997, when the commission cuts started, as a way to lower our agency operational costs. I sold it on cost savings and the fact that a simple roundtrip, especially a repeat trip, wouldn't take any longer than a phone call," she said. "Our operational costs to the agency were down 25 percent in 1999 and I'm estimating 35 to 40 percent for 2000. That's valuable. But it's very difficult to get staff--and online booking allows us to manage the staff that we do have a lot better.