A growing number of senior executives are employing favoritism in supplier selection through reciprocity with customers and partners, removing negotiating responsibilties from travel and purchasing managers. Ironically, this is happening as some senior managers marginalize travel specialists at the bargaining table in favor of the purported objectivity of procurement methodologies and people. As a result, travel managers need to be more attuned than ever to changes in relationships within their companies and industries.
Reciprocity is nothing new in travel management, but tough times make it a higher priority. "We've seen it more during the past year or two," said David Ogilvie, vice president of global corporate travel at Starwood Hotels & Resorts Worldwide. "It's coming up more often, and it can be difficult to manage your way through it."
One travel buyer said his accounting company repeatedly has violated its own stated policy on reciprocity, which dictates doing business with clients only if all else is equal. "They are just words," said the nine-year veteran buyer who declined to be identified. In one recent example, he said, the company held out a travel-related contract until the would-be winner selected it for accounting.
"I think it's mainly happening when times are tight," said WorldTravel BTI president Danny Hood. "Everybody is controlling costs pretty well, so you're almost looking at every leverage point you can. 'You do business with us and we'll do business with you' is a good business principle, though I'd like to think that, with an objective process, it would only be a tiebreaker."
According to a 2001 interview BTN conducted with Hewlett-Packard CFO Robert Wayman, the tech heavyweight's policy was to avoid favoring customers, availing all bidders of equal opportunity. Wayman said he tried to avoid getting involved in travel vendor selection "since some of these travel suppliers are also customers, so we always try to keep things as separate as we can."
An HP spokesperson did not respond to multiple recent requests for comment on whether that philosophy had changed. While one insider said it had not, HP nevertheless is switching its global distribution provider to Sabre—a major client of HP's recently acquired Compaq—dashing the prior, merit-based sourcing of Galileo for that need.
"People cutting deals at the executive level—reciprocity—used to be veiled, but now it's blatant," said one travel manager familiar with the HP example. "This morphs the travel manager's role. Does it mean I now need to capture data from elsewhere? Now I need to have a relationship with HR, with sales?"
The short answer is yes.
"Given the economic downturn and resulting pressures on profits, senior management's priorities as they relate to travel are simple: cost savings," noted an Association of Corporate Travel Executives study presented in October. According to travel manager participants in the study, senior managements by and large are placing higher priority on cost savings than they are on either traveler perks or supplier relationships.
This is where companies risk the danger of viewing travel too much as a commodity, the usual knock on procurement. Even a rare success story like Deloitte & Touche's alignment of procurement and travel
(BTN, May 12) can be qualified because of that company's line of business, its population of road warriors and the resulting emphasis on traveler service.
"Travel at professional services firms is unique," said Pam Witt, managing director of Mesa, Ariz.-based Embrar Enterprises and a member of the advisory group that produced ACTE's study. "With the Deloitte example, where the travel manager retains some key roles, you have to look at the context. It is a different animal. There's greater opportunity there in the travel manager's function and in her identity. There, brain power is how they make their money, so traveler communication and service are critical."
"The role of the travel manager is so much more than just cost savings," said Gabriel Eshaghian, manager of airline and car rental programs at PricewaterhouseCoopers, a D&T competitor. "The unfortunate part about strategic sourcing is that often it's purely focused on the bottom line. One can say a seat or room is a commodity, but the value of travel to a company is more than that. It's emotional, it's about traveler comfort and it's about the way you do business. Sourcing takes out all the soft aspects of travel management."
Travel managers in other industries are put at risk when their negotiating power is reassigned to the purchasing department, even though that can be a good practice.
"From a positive standpoint, a good purchasing organization can put a sound structure around the bid process so you get a more objective than subjective perspective," said travel management consultant Mark Walton of Consulting Strategies. "I think it's not as much about minimizing supplier relationships as it is that we in travel have inherent biases just from being in the industry for awhile."
On the other hand, noted AT Kearney global procurement director James Haddow, procurement often has broken key vendor-buyer relationships. Others said companies have fallen into a trap of thinking they can outsource everything to the travel management provider, resulting in lower value. Even companies with travel managers have found that working too closely or for too long with one travel management firm can build up excess costs, noted consultant Ralph Brown of R.D. Brown Co.
To defend against the humbling effects of reciprocity, procurement or other threats, sources said, travel managers need to improve their lateral as well as vertical collaboration. This can help travel managers ensure their value and influence through improved compliance monitoring, demand management, resource allocation and better awareness of the implications of mergers, acquisitions, alliances and new customer relationships.
According to Embrar Enterprises' Witt, such communication can occur in regular departmental meetings, on conference calls with divisional directors or in one-on-one meetings with business unit heads. Keeping up on company documents, news and plans also helps, she said, particularly when it comes to being ready for, if not ahead of, consolidation or alliance activity.
While they did not differ on the importance of communication, industry pundits are mixed in their view of one of the ACTE report's conclusions: "Since our findings suggest that senior management is more narrowly focused on cost savings tactics, we believe the opportunity for travel managers to play a more strategic and integrated role is at risk."
"There's a major shift in terms of the importance of procurement to managing travel programs," said Travel Analytics president Scott Gillespie, who is providing a detailed scorecard for travel buyers to rate their programs, known as Stages Of Travel Management Excellence. "It's been happening for the past five years or so, but it's been very noticeable the past two. It will get stronger, and travel managers need to learn how to deal with it.
"Frankly, I disagree" that travel managers need to play a more strategic role, Gillespie continued, "if they can develop strong communication, business-case and education skills. Those will propel them farther than anything else. A lot of travel managers are finding themselves in reactive or defensive modes, but what separates the well-respected travel managers from the rest is that they are proactive and anticipate changes. I wouldn't go so far as to say that's strategic, it's just a broader view of what their responsibilities are."
He added that buyers need to learn "the ins and outs of building solid business cases," to talk credibly with numbers to procurement and senior colleagues and become skilled and diplomatic educators on "the very important and unique attributes of the travel category."
Witt—who sells TE Valuator, a service that roughly is similar to Gillespie's—agreed with a lot of what he said, but she critiqued his scorecard for focusing too much on procurement and too little on strategy. "Am I managing, or am I simply buying?" she asked.
According to the ACTE study, senior managers typically see a strategic role for travel managers as being less operational and more entrepreneurial, efficient and commanding, but even supporters think this can be taken too far.
"Don't strut your stuff," Witt said. "There's not a commodity business whose value has not been lowered, and you're seeing that in travel now. This is where humility comes in. We're asking tough questions, and we have to look in the mirror and ask them of ourselves."
As one buyer put it, "Travel managers need to face the fact that they are not running the organization."
See The Changing Role Of The Travel Manager, Part III, in the June 23 issue.