Profiles In Travel Management - 2005-05-16

Estee Lauder's Hotel Program Smells Like Success
Companies: The Estee Lauder
Headquarters: New York, N.Y.
2004 air spend by U.S.-based travelers: Approx. $18 million
2004 hotel spend by U.S.-based travelers: Approx. $20 million

When Cindy Shumate joined The Estee Lauder Companies as a travel consultant in January 2003, she quickly realized that the cosmetics and fragrance conglomerate was overlooking tremendous opportunities for cost savings. With 22 brands under the Estee Lauder umbrella, a presence in roughly 130 countries across the globe and more than 22,000 employees worldwide, the company maintained a loosely managed, regionally diverse travel program. Within three months of her arrival, Shumate officially signed on as travel manager and began revamping the company's program, focusing on driving use of agency booking options and containing hotel spending.

"When I came in, I took those three months to sort of assess the scenario and realized that there was a huge opportunity here, not only to reorganize a program to define the areas where we could avoid cost and bring in cost savings, but there was also a challenge to present a program that would give our travelers direction and some parameters," said Shumate, noting that her efforts began to take shape in 2004, when she finally obtained a full year of corporate card data following the company's 2002 card program launch.

By examining agency data on travel policy compliance, Shumate realized travelers were booking with more than 150 agencies, including independent Web-based booking systems. "There were no mandates and that was the issue. In April 2004, we launched a new travel policy and gained a clear mandate that all of our travel activity would funnel through our designated agency," she said, noting that Estee Lauder now employs the services of 10 dedicated counselors and an online booking tool through one of the three largest U.S.-based travel management companies. "Over 2004, the number of transactions that went through the agency went up 220 percent. Prior to that, they had less than half of all eligible bookings."

With the agency piece in place, Shumate focused on the company's hotel program, which prior to 2004 could best be characterized as a collection of loose property recommendations.

"I started seeing overlapping contracts with three or four of Estee Lauder's brands," she said. Initially, Shumate reached out to the Estee Lauder's domestic regional offices to develop the company's first directory of preferred hotels.

"Having a year and a half of data from our charge card made all the difference. I was able to send it out to our hoteliers and say, 'Here's our top 25 cities; here's our spend.' I could, for the first time, support my request for proposals with actual data," said Shumate. "We started out this year with our 2005 preferred hotel directory and we're monitoring those properties. I'd like to see some alignment with key hotel chains and I'm hoping that if we can align with those hotel groups, that should help us consolidate even further."

Shumate said Estee Lauder has doubled its volume at key U.S. properties, and global expansion of the overhauled hotel program is now in sight. "In our hotel RFP, we included our top five international cities and that was our first foray into operating globally. We recently started rolling out the charge card internationally and are looking for the power of that global charge card data in future negotiations."

The real savings from Estee Lauder's revamped hotel program likely will be felt at the end of 2005, but Shumate said in the first four months of this year the company captured more than $70,000 in previously untapped hotel commissions. "The more we support and inform our travelers of what they have to do, the more successful the program is. Our travelers were used to calling the hotels and making reservations themselves and we were losing commissions," she said. "You wouldn't think such a small change would have such a big impact."

Working with only one other travel professional and reporting into the company's office services division, Shumate said senior management buy-in was critical to the program's recent success. "I had unbelievable senior-level support here. This all came at a time when William Lauder was coming into the organization as CEO. He was doing a review of the entire company and identifying areas for cost savings and was incredibly supportive of these initiatives," she said, adding that Estee Lauder's commitment to remaining a family company also played an important role in management's investment in the necessary changes and travelers' acceptance of them.

"I had a very interesting conversation with William where he said, 'Three things are important to me: the first is safety, the second is cost savings and cost avoidance and the third is service.' Even though we represent luxury-level products, we still have to run a travel program that's cost-effective," said Shumate, who also said that the company's travelers, in turn, want to be good corporate citizens and "When you give them direction that has logic, and when you convey to them that their safety is important, that service is important, and that it's not all about cost, they overwhelmingly tend to listen."