Procurement Practices 2009: Demanding Pre-Trip Management

Once firmly in the business of facilitating travel, corporate travel buyers and procurement professionals increasingly are finding themselves deploying methods to curb it. Whether companies are dialing down trips that don't generate revenue and bolstering pre-trip mechanisms to measure the value of travel or offering remote conferencing options as alternatives to getting on a plane, the procurement practice of demand management has taken a front seat in the management of corporate travel.

Travel buyers, travel management company executives and technology suppliers said managing demand has risen to a priority as companies attempt to reduce discretionary spending, while also preserving the business objectives that travel can facilitate.

Advito vice president Bob Brindley said among the highest savers of travel dollars is the cost avoidance that comes with a trip not taken. "All corporations are pulling way, way back on the number of trips they're taking, and that's always the biggest mover," he said.

Companies are turning eyes toward reducing what they deem nonessential trips—examples ranging from limiting the number of employees sent to the same event, cutting travel for internal meetings and in some cases offering up more travel alternatives.

"Travel people are being asked how to not travel," said former Association of Corporate Travel Executives president and Bank of America travel buyer Greeley Koch, now director of strategic development at management consulting Acquis Consulting Group. Koch noted that companies have run the gamut in addressing such needs—from the "soft-sell approach" of sending e-mails, asking employees "to think about travel" to employing pre-trip authorization systems and mandating that "unless it's a revenue producing trip, you just can't go."

Koch said companies are aiming to cut travel expenses "in a way that's not draconian, but that supports the business mission."

Increasingly, Koch said, companies are seeking new data streams for answers to different questions about their travel: "Who is traveling, why are they going, and what's the actual return on investment of that trip?"

American Express Global Advisory Services vice president Frank Schnur concurred: "In order to answer those questions, you need to have a robust infrastructure that most companies do not have in place. It's an opportunity for many companies to improve the infrastructure of the data."

Schnur said to get at such data, companies "either need a robust pre-trip approval process or a robust expense reporting process in place that actually captures the business purpose of each trip."

Once deployed, companies can make wiser use of their travel dollars, funding trips that demonstrate value and trimming those that don't—instead of deploying a slash-and-burn approach to expense reduction. "Every year, as budgets get tight within companies, you could always predict in December or November the message that says you can't travel any more because we don't have money," Koch said. "There was always a 10-month budget for travel, even though it was built upon a 12-month calendar. What we're starting to see now, instead of doing those blanket-type actions, people are starting to be smarter about the policy changes they make so it better suits their business needs. The broad brush of no travel for the last two months of the year has changed into managing it better throughout the year."

Companies continue to employ a variety of mechanisms to manage traveler behavior—from e-mail communications and mandates to business unit report cards. However, there has been a rise in the number of companies deploying some form of pre-trip notification or approval in efforts to curb what companies deem to be nonessential travel. Among the respondents, 71 percent said their companies have rolled out some form of pre-trip notification or approval.

"It's definitely been on the uptick for probably the last two years within North America," according to Schnur. "With the level of insight that senior management wants now, most companies are going to want to have something either on the front end or the back end to capture that."

Several buyers during the Masters Program in Washington, D.C., in February said they have modified booking tools to ask travelers about the necessity of a trip or offer alternatives to the journey before proceeding to booking.

Executives from companies that provide self-booking tools, including Amadeus and Sabre, noted a growing appetite for pre-trip notification and approval tools. Several buyers told BTN said their companies are installing, refining and advancing pre-trip processes as a way to manage demand.

"The big value of an online booking tool is to manage the behavior of travelers long before they get on a plane," said GetThere vice president of corporate market strategy and solutions Suzanne Neufang.

GetThere is in the midst of rolling out its Demand Management suite, which ties several pre-trip components together with the aim to help companies curb unnecessary trips and facilitate "the right travel," Neufang said.

The suite—largely composed of previously available modules—includes trip requests, travel validation, dynamic messaging, cost center validation, booking notification and pre-trip approval, as well as expense tool integration. "I've been joking with my team that this is the GetThere don't-go-there suite," Neufang said.

The suite also signals a shift in pricing for a tool that derives much revenue from transactions. "We've traditionally been a transaction-based-cost tool. The intent of this is actually to lower transactions, so we're pricing it out in a way that we think corporations will win because of their savings on the travel costs," she said. That means an annual fee for every profile in the GetThere system on top of transaction fees for bookings. Sabre said it is piloting the suite with "a handful" of clients.

"GetThere all along has been all about visual guilt. There's been the notion that there's visual guilt about the price, but it's really not all about the price," Neufang said. "It's also now about whether the reason you're going is even valid, and you can create some of that visual guilt even upfront."

During the Masters Program, several buyers said they have recently put such booking tool enhancements in place. "When you go into our online booking tool and someone puts in their destination, it will pop immediately and ask them if they could potentially be using one of our virtual meeting tools instead of taking the trip," said Kim McGlinn, PricewaterhouseCoopers' director of strategy and continuous improvement for U.S. travel.

Even before instituting that change, PwC said virtual meetings increased 79 percent, which in some cases helped curb travel.

"Our virtual meetings have increased significantly over the last several years," McGlinn said, "and our travel transactions have been declining—not at the exact same rate, but there is a correlation."

Koch said, "Since the technology now exists in online booking to ask those types of questions to help pause the booking process, if somebody goes through the gauntlet, so to speak, and gets out the other side, then it's probably an appropriate business trip. The company needs to fund that, because there's a return on investment, a revenue potential on that trip."

As companies attempt to cut nonstrategic travel, they also are turning to alternatives to fulfill the mission of some business trips from the comfort of the office.

According to the 2009 Procurement Practices survey, usage of videoconferencing grew last year at 43 percent of the respondents' companies, while half of the companies responding said they would increase videoconferencing this year. In 2008, 37 percent of the respondents said they saved money by relying on videoconferencing as an alternative to travel.

Though some companies have seen a correlation in remote conference usage and travel savings, others said it was difficult to quantify the exact savings remote conferencing usage has yielded.

Schering-Plough director of travel Christopher Allen said he has seen more evidence of remote conferencing supplementing, rather than supplanting, travel.

"We've had a push for alternatives to travel in the last three years," Allen said. "The interesting thing is that we wanted to see if there was an inverse relationship where the use of those alternatives goes up and travel transactions come down. What we found was, even though those alternatives were going up, our travel transactions were going up as well. I think it's a good thing. I don't know how much of that is offsetting travel or just increasing interaction between our colleagues."

Even travel management companies are helping their clients curb trips with the help of remote conferencing capabilities. When Travel Solutions moves to new office space in June, said CEO Tammy Troilo-Krings, the space would include two telepresence meeting rooms, videoconferencing rooms and other spaces equipped with various remote conferencing technologies. Troilo-Krings said the facilities would enable clients to cut some types of travel—specifically internal meetings, employee recruitment and other forms of non-client-facing travel—while preserving the business purpose of meetings.

"The areas where you want to be spending your money are internal to external," she said.

According to a report released by Forrester Research, entitled "The ROI Of Telepresence," companies can reap a variety of benefits from such remote conferencing systems. They include reduced "travel costs, increased productivity, a reduced carbon footprint and increased collaboration leading to faster decision-making."

According to Forrester, Procter & Gamble "was able to shave 20 percent off its global travel budget over the previous year by using telepresence, Webconferencing alternatives and other strategies." The demand management strategy is resonating with the upper reaches of management. CFO Jon Moeller said during P&G's second-quarter earnings call in January, "We are reducing travel costs by relying more heavily on video and phone conferencing. There are a lot of proactive choices being made to reduce costs and improve productivity."

Forrester noted that the "upfront cost of technology is high, but, once installed, telepresence is stable."

The report notes that hardware for each telepresence room can range from $120,000 to $350,000, depending on the setup. Considering that a company would need "two rooms to get started, and many companies implement three rooms in order to have multipoint conferences," Forrester estimated the "price tag quickly mounts to more than $1 million for a three-location multipoint telepresence setup," plus annual maintenance costs, but said discounts are "substantial" and can range up to 50 percent.

To gain the return on investment and justify the expense, Forrester said companies must achieve high use of telepresence rooms by reducing travel and fostering the perception that using the technology is "just as good as an in-person meeting."

Suppliers of telepresence suites continue to extol their virtues and claim continued traction in their usage. Polycom chairman, president and CEO Robert Hagerty in the remote conferencing company's fourth-quarter earnings call in January said many companies consider corporate travel to "be one of the most, if not the most, discretionary budget line item. In fact, organizations of all sizes appear to be essentially eliminating intercompany travel and significantly reducing the number and frequency of individuals traveling for customer facing meetings."

Hagerty said such telepresence systems as those offered by Polycom "not only decrease the out-of-pocket cost of travel, but also substantially reduce the opportunity cost of travel. In other words, a two-hour meeting takes two hours, not two days." Furthermore, Hagerty noted the "green agenda" also serves as a "critical driver" for corporate adoption of such systems, particularly in Europe. "This is becoming a priority for the North American market as well," he said.

Cisco Systems in February said 312 companies have adopted its TelePresence system, representing 65 new clients that have ordered the technology in the past quarter. The system, which attempts to mimic boardroom meetings through virtual, high-definition conferencing technology, is helping Cisco reduce its own travel, the company said. Chairman and CEO John Chambers during Cisco's second-quarter earnings call in February said "discretionary spend," including travel, was down 15 percent from the previous quarter, thanks in large part to travel alternatives like TelePresence.

Though the high-def, high-priced telepresence systems have caught some companies' imagination, any number of options—from Webcams installed on computers to audio-based systems— are available to enable remote conferencing.

"Teleconferencing is still probably the biggest alternative to travel," according to American Express' Schnur. "As better and more pervasive videoconferencing options become available, there will be more uptake of them."