Put Down Your Microscope, Pick Up A Telescope

<B>Put Down Your Microscope, Pick Up A Telescope</B>

The travel industry has always been unique in a variety of ways. Not only can your competition sell your product at the same price that you can (airlines), ours is the only industry that provided a service to a customer (travel agency) and then gave the customer money after the service was provided (rebate).

In the "Roaring '80s" rebating was rampant. In fact, it was the most effective sales weapon in obtaining new business for agencies. The huge rebates had many travel managers bragging that they were in fact operating "profit centers" within their corporation, even though the profit came at the expense of other "cost centers" within the corporation. In some cases, the year-end bonus for the travel manager (and sometimes his/her boss) would be based partly on the level of "profit" generated by that rebate from the travel agency.

The next decade (the Capping '90s) caused a shift in focus as both commissions and rebates dropped like rocks on the heads of travel agencies and travel managers. As the trend of declining commissions continued, the focus shifted from the internal "profit center" to identifying and micro-managing the travel management company's costs (notice how they no longer were called travel agencies once rebates evaporated).

Many an RFP was generated demanding that the agency open "their kimono" (and in some cases drop their pants) so that the customer could understand the agency's costs, both direct and indirect. For the first time, our travel agency "partners" were now under the microscope and, in some cases, a scope of deeper meaning.

Once again our industry has showed its uniqueness because we are demanding complete disclosure (exposure) so we can know all of the agency's costs. The recent Op-Ed by "name withheld for obvious reasons" (BTN, Sept. 18) unfairly blamed the consultants; it is the clients who pay the bills and set the direction of the "scope" of the analysis. I commend such consultants as Carol Salcito for drawing focus on the agency's costs, but the real emphasis should be on the price paid for service provided!

When your CIO selects a software company, I doubt he or she demands to know the software company's internal HR costs, rent and senior management compensation. When you buy a car, you don't ask how much it costs to make the radio, you simply accept the radio that comes with the car, upgrade the stereo or look for another car. Try asking one of the fast-food chains for their component cost of a "Kid's Meal." If you don't think it is a value, simply order a burger and fries, and go across the street to get a container of milk or juice.

As buyers, we have a right to know price, product (service) and performance metrics. The line-item costs of our suppliers are their business, not ours! Instead of placing the agency (travel management company) under the microscope, we should simply compare their price/service/quality metrics against their competitors and chose the best combination for our corporate objectives.

It is well known that I am a big proponent of Corporate Travel Departments. A primary benefit is that we (corporations) can outsource to one or more entities and, therefore, select the best individual service component for the price quoted.

Knowing the agency's costs is their business. Knowing the corporation's cost of business travel is my business, including the impact of productivity in concert with price. It is time that we shift the focus (and blame) of process costs from the agencies to ourselves (travel managers).

Technology is truly a driver of process costs reduction. A visionary can look to the stars (our future) and identify an e-commerce strategy that can effectively reduce a company's total T&E costs. To change our industry structure into one of more professional business-to-business relationships, I suggest we put down the microscope and pick up a telescope.

<I>Andrew W. Menkes, CTC, is vice president of corporate travel for HSBC Bank USA and the 1999 Business Travel News Travel Manager of the Year.