<B> NBTA Goes Global In D.C.</B>
<I>Washington</I> - Travel managers, take notice: The company president can be your best friend in implementing a global travel program, or your worst enemy. It is up to you to give him the information, education and travel savvy to do his job better.
Such was the sage advice offered by Greg Barrett, president of emerging markets for Boston Scientific of Natick, Mass., to the 200 participants at the National Business Travel Association's Going Global conference in Washington, D.C., last month.
In a keynote opening session also headlined by Robert Gates, former director of the Central Intelligence Agency, Barrett offered a knowing glimpse into the mindset of a company president.
Barrett said he relies on his travel manager, Mary Mahar, to "help me understand what's going on within my business," offering quarterly management reports showing costs versus budget, costs per employee, costs versus industry benchmarks and policy compliance.
"Communication is critical, but don't tell me about the past," Barrett said. "Tell me about future savings opportunities, problem employees, technical advances that can help me improve the efficiency of my organization." Travel managers especially need to convey travel spending projections to those developing annual budgets, Barrett said. Boston Scientific had a total 1998 T&E of $72.3 million, half of it international.
As travel programs go global, Barrett urged managers to sit down in face-to-face meetings and to customize policy manuals for each country. And when it comes to setting global policies, travel managers must change their perspective and focus on understanding the company's overall strategy. For example, a program with a national carrier is useless without an accompanying in-country preferred vendor program, he said. It may be worthwhile for a traveler to gain four hours of work time by spending $1,000 more on a ticket--and while "a three-hour layover is okay; five to 12 hours is not okay," he said.
Remember too that the president is "black and silver, gold and platinum, priority or executive, #1 Gold, VIP, 1K Premier or DIS/AAdvantaged. All operations guys think they're special," he said. In the end, travel managers shouldn't get so focused on costs that they forget the mission behind the trip.
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In a spirited discussion on the current state of airline-corporation relationships, British Airways vice president of sales and marketing Pat Terrion gave travel managers a behind-the-scenes look at the carrier's perspective on corporate discounting. In addition to the "more obvious" factors, BA looks at brand mix, origin and destination travel patterns versus BA's capacity share, yield and volume on flights, profitability on flights versus percent of flights discounted and alternative use of money.
Kevin Iwamoto, air and car supply manager for Hewlett-Packard, expressed the frustration of many travel buyers over the state of international deals, where the airlines' local salespeople often offer lower fares than the "global" contract. "We would like to see shared risk. If some local yokel salesperson undercuts the rate, that should become the new default rate for our global contract," he suggested.
Terrion acknowledged these inconsistencies and said BA would honor any such lower local rate. He also apologized for a recent BA promotion that offered a $500 American Express debit card to travelers booking a Business Class ticket, which some in the corporate market viewed as undermining the preferred programs of travel managers. The promotion, aimed at unmanaged travelers in the middle and small markets, unfortunately was mailed to all customers in the BA database, he said.
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Discussing remedies to the harmful effects posed by airline alliances in Europe, Anders Jessen, the European Union's delegation councilor for transportation, energy and environment, said one area of concern is agency overrides.
"The agent-incumbent relationship is a barrier to entry," Jessen said. "Therefore, there is a proposal to disallow overrides on certain routes in question." While Jessen said that those routes vary from alliance to alliance, he did pinpoint a few transatlantic markets in the AA/BA partnership that may be subject to such regulation, including London-Miami, London-Chicago and London-Dallas/Ft. Worth.
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Hogg Robinson-BTI chief operating officer Mike Platt said that when it comes to managing travel globally, it is imperative to get senior management buy-in and to remember that "a global deal is not a USA deal rolled out around the world." He cautioned against expecting too much too soon or going for global airline deals, suggesting instead point-to-point deals with national carriers.
American Express vice president of multinational accounts Peter Buckingham said the agency is establishing additional mega centers within each country in Europe and "fine-tuning, unbundling or menu pricing internationally." Only one American Express customer is on a flat rebate worldwide.
On the agency level, Woodside Travel Trust senior vice president Alan Slan stressed finding locally excellent agencies tied to the strength of a global travel management company that can consolidate data and help reduce spending. "I don't believe you want uniformity throughout the world," he said, suggesting flexible service-level agreements and an RFP process that drills down to determine local service providers' best practices and pricing. "Global pricing agreements are an impossibility," he said.
The U.S. fee-for-service pricing model is not uniform and in Latin America, "they not only get commissions and override commissions, but over-override commissions--and they are not likely to revert any time soon to a fee-for-service pricing model," Slan said.
In discussing commission cuts, moderator John Caldwell, president of Washington, D.C.-based Caldwell Associates, asked the agencies how they handle the fare increase. Platt said, "With British Airways, when they cut commissions 2 percent, what they took away from the agent they gave to corporate direct to keep them happy." In Scandinavia, Hogg Robinson has gone to transaction pricing and "every invoice has the whole equation worked out--giving back commissions so the traveler sees up front which airline is paying more."
Audience members also stressed the difficulty of getting European travel managers to embrace the cost center mentality.
On overrides, Platt said he believes agencies should be paid a management fee by airlines for providing value, rather than a commission. Buckingham said he believes "overrides are very close to disappearing completely from the face of earth."
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Travel manager Phil Dunphy said the recent cap on international commissions "took $1 million off the table" at Pfizer in New York--a fact he will consider when he renegotiates the company's agency and airline contracts in 1999. On the airline side, Dunphy praised the Atlantic Excellence partnership as being "absolutely on the right track," simplifying choices for transatlantic travel and making it easy for travelers to understand the value it offers to the company. United's Star Alliance teammates seem hesitant to offer the same across-the-board discounts without gaining additional market share, he noted, adding that Pfizer hopes to move 60 to 80 percent of all air segments to one alliance.
Dunphy then articulated his vision for the future, which includes Web-based reservations supported by high-quality professionals, checkin point-of-purchase, electronic receipts and direct payment. He also noted that travel managers can utilize frequent flyer programs to help move market share from one carrier to another.
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In a session on international deployment of online booking systems, Steve Reynolds, chief operations officer of Travel Technologies Group of Dallas and a member of the NBTA Technology Committee, compared the international market to that of the United States in 1997, in which such systems were more a curiosity than reality. However, as in the U.S. market, overseas usage is expected to grow dramatically in 1999. Among the issues travel managers need to consider is whether to establish a Web server in every country from which there are bookings, or to sacrifice some speed and have travelers access a remote server. The lack of standards, as well as access to all global distribution systems and the Internet, also could pose challenges for global distribution of booking systems, he noted.
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Carlson Wagonlit next year will open reservation centers in Mexico City, Bogota and Sao Paulo, in an effort to improve data collection in Latin America. Alexander Maggio, Latin America communications manager, said the agency also is looking to implement self-booking tools, new corporate travel policies and compliance monitoring for clients south of the U.S. border.
The spread of technology to the far north also could use some focus. Pat Haygarth, associate vice president of AIM International Management in Canada, said no Canadian company has an end-to-end automated solution and consolidation of spending data from different sources is not yet being addressed.
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American Express Travel Services Group International president Charles Petruccelli cited a recent Amex study in which over three-quarters of companies surveyed reported adopting global purchasing programs on some level, with 83 percent of respondents saying this enabled them to negotiate better prices without limiting supplier choice.
Airline deregulation has not reached many international markets, he said, predicting the introduction of the euro will bring "a gradual leveling out" of international travel costs, particularly of business airfares. But he also noted that there is concern among corporations and agencies that airline alliances will reduce competition and choice, and drive up business travel costs. Travel agencies had best prepare for a future where "diagnostic skills will be essential. Our consulting staff will be financial analysts, modeling experts and leading-edge users of computer technology."
"In order to ensure success in international corporate travel management, there are four prerequisites," he noted. Companies need access to accurate and comprehensive data from a single source, understanding of how to apply new technology market by market, readiness to adopt global purchasing and the right partnerships.
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In a session on multinational travel programs, Luc Dendievel, director of European travel management for Johnson & Johnson, said a 1991 consolidation from 400 agencies to only American Express has yielded huge savings. In 1997-98, the company's average ticket price fell by 13 percent, from $740 to $640, while cost per mile fell 6.4 percent, from 47 cents to 44, and average sector price fell 13.2 percent, from $340 to $295.
E.J. Hewitt, global supply manager for Pilkington PLC, shared her company's 10 critical success factors for a consolidated global program: maximize leverage through purchasing, create effective alliances with key suppliers, have purchasing involvement from the beginning, have access to a data warehouse, measure delivery against total acquisition cost, have organizational acceptability and functional clarity, focus on the development of employees, apply supply management tactics and have effective communication throughout the company.
Hewitt said each business unit can access information in the company's data warehouse. And in a notably hard line on noncompliance, she said deviance from corporate policy is considered breaking a contract and can lead to dismissal.
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Hewlett-Packard's Asia/Pacific travel program manager Fred Swaffer said H-P, which always has chosen to manage its own data, now is in the process of deciding to outsource data management. The company is not looking for a single travel agency for the region, but does want transaction-fee pricing--an unusal request, it seems, in a market where H-P currently operates on a handshake basis in six countries. He said the challenges of managing travel in the Asian market include the lack of a dominant CRS and noted that in China, "credit cards are nonexistent."
Two trends Swaffer sees in the region are, "shifting from a profit center and acknowledging costs that are there, and secondly, net fares, which now are almost unheard of in Asia/Pacific.