Smaller Companies Embrace CTD

<B> Smaller Companies Embrace CTD</B>

By Sarah Welt


The Airlines Reporting Corp. last week released the names of the 10 Corporate Travel Departments that have been approved since March, bringing the total number of accredited business sites to 18.

Several of the new Corporate Travel Departments have air volumes of under $4 million and according to the seven new CTD travel managers with whom Business Travel News spoke, the most common reason to seek accreditation was to reduce costs following the most recent round of commission cuts. The other trait common to most of them was a decision not to outsource anything except 24-hour service.

ARC's director of accreditation and database management Barry Lemley said there are another 25 companies still in the pipeline and "there is no sign of it slowing down."

The companies that received Corporate Travel Department accreditation from the Airlines Reporting Corp. last month were: FHC Health Systems of Norfolk, Va., Boston-based CGU Insurance, Home Depot Inc. of Atlanta, Information Handling Services Inc. of Englewood, Colo., and Pino Training Organization of Orlando, Fla.

Previously, ARC accredited Corporate Travel Departments at Galileo International of Rosemont, Ill., Agdata Inc. of Charlotte, N.C., and Banner Pharmacaps of High Point, N.C., in April; and approved Quad Graphics Inc. of Sussex, Wis., and Norfolk Southern Corp. of Norfolk, Va., in March.

Information Handling Services, with $2.5 million in total travel spend, under its agency contract received a small percentage of commissions based on total volume. "When the airlines began to cut commissions, the agency passed on the cuts to us," said senior manager of travel and meeting services Paula Upton. "We were faced with the situation of not getting any money back and owing the agency." She said going the CTD route was "my decision and the executives of IHS were 100 percent behind me."

Upton said IHS, whose CTD just got up and running June 14, is "not outsourcing anything. We have a very good travel policy and very educated travelers. If they need after-hours service, they are directed to call the airline directly or we have an emergency pager number with our staff handling the calls."

Banner Pharmacaps, with under $3 million in air sales, decided to apply for CTD approval for the same reason. The company had a stable travel program with Greensboro Travel but, after careful analysis following the international commission cuts, realized that bringing the program in-house would provide the company with "much better control of finances and we would have much better control over the travel agents having them as our own employees," said corporate director of administration Nell Stone. "There is simply no comparison as to the level of service."

Stone was assisted in the CTD quest by her travel agent and certified ARC specialist, whom the company hired from its former agency. While the agency was sorry to lose the Banner account, Stone said agencies are going to have to get used to it. "I think this is the wave of the future and we are going to see more and more CTDs."

Pino Training Organization's corporate travel manager Karin Gray said the company, with $600,000 in air sales last year, also wanted to keep commissions in-house in order to reduce overall travel costs. When Gray first joined the company last year, it was using a small independent agency that was keeping all commissions. The decision to pursue CTD accreditation came from president Larry Pino. For Gray, who started as travel manager last August but has 33 years of travel industry experience, the process was completely new. Since being approved in May, Gray took ARC's test to become a certified ARC specialist and has become the company's only travel agent.

Gray is responsible for all reporting, back-office accounting and after-hours service, and travelers "have my home phone number."

Before knowing that the CTD option was viable, FHC Health Systems, which has grown significantly in the past year through an acquisition, considered becoming a full-service agency, like Charles Schwab was prior to its CTD appointment. "For years, the company tried to decide whether to open its own agency or continue to use an outside vendor," FHC vice president of special projects and travel division president Rick Krupnick said. "We didn't know about the CTD until we started investigating."

If the CTD hadn't become an option, Krupnick said the company probably would have become its own agency. "We would have had no choice." However, "ultimately we don't want to be in the travel business. We want to serve the company as best we can and this was the mechanism to do that."

Becoming a CTD was a joint decision between senior management and the travel team. Both Krupnick and director of travel Rita Tassone, who reports to Krupnick, were responsible for looking at choices and reporting back to the chairman. "In a previous life, I was part owner of a small chain of retail travel agencies and Rita handled the corporate fleet, so we were not going into this as neophytes. This was very well thought out," Krupnick said.

Like Banner, FHC Health Systems hired agents from its former agency to beome FHC employees. Krupnick said the company chose to retain its agents because of their familiarity with the account and the fact that they all had six years of industry experience. Because of that, "when we officially open our doors early next month, there will be no real noticeable change," he said. "Overall, that has been the biggest plus."

The company has decided to contract with Thor Inc. for 24-hour services and is using Trams for its back-office reporting. Worldspan has offered it point-of-sale agent technology and FHC expects to beta test Worldspan TripManager next quarter.

Meanwhile, General Accident Insurance Company of America, which does business under the banner of CGU Travel, became a CTD on May 26 in order to save money, improve customer service and get better policy compliance. Travel manager Rick MacKenzie was recruited from WorldTravel Partners, where he was an account supervisor, to manage the CTD.

While the company has 13 regional offices throughout the country and each does its own travel right now, "the ultimate goal is to bring all the regional offices under one roof," MacKenzie said. "We hope to have that all done six months to a year from now."

MacKenzie, the company's certified ARC specialist, is assisted by two agents who were hired June 14. The company signed a contract with Worldspan and Trams for back-office accounting, and is outsourcing 24-hour service to Travel Helpline Inc. It is also in the process of negotiating with major carriers for its own airline contracts.

For Quad/Graphics and Galileo International, the switch to the CTD is pretty much business as usual. The $3 million Quad/Graphics was a rent-a-plate for nine years and decided to become a CTD for "more control," manager of the travel department Joanne Sherer said. Since getting approved, the company has contracted with Sabre on its own. For 24-hour service, it has contracted with Travel Helpline Inc.

Galileo International, as both a global distribution system and a technology company, is certainly unique as a CTD. It can save money on both resources and technology because it develops agent tools in-house and most employees book their own travel on the company's agent point-of-sale tools.

Before becoming a CTD and having tickets printed on ARC ticket stock, "we used United ticket stock and reported directly to United Airlines," travel supervisor Jan Wagner said. United still owns 15 percent of Galileo (see story, page 4). The decision to switch was prompted in part by the fact that Galileo sought to have more global negotiations with other airlines. Other carriers would want to use their own ticket stock or ARC stock.

"It was to our advantage to have ARC stock so that when we negotiated with other carriers they were in a position to ticket immediately," Wagner said.

As is true for most of the new CTDs, cutting costs was definitely an issue. The company measured what it cost to produce a ticket internally and then solicited RFPs from agencies asking what they thought they could offer on a per-ticket basis. "We are seeing cost savings over and above what we anticipated had we outsourced," Wagner said.

The CTD accreditation does have some drawbacks, however, according to several participants. Some of the CTDs are concerned that Southwest Airlines' decision not to pay commissions to CTDs (<I>BTN,</I> June 7) will have other travel vendors following suit. Gray "may steer away from Southwest" and is worried that the other carriers and even car rental or hotels might jump on the bandwagon. "A lot of major players are not recognizing the CTD as a buyer and seller of travel. I have no more IATAN privileges and I don't do anything different than working in a retail agency. I still provide customer service, I still sell airlines, cars and hotels, and I think we should be recognized as travel agents because that is what we are."

MacKenzie also worried about Southwest's decision not to recognize the CTD, noting that Southwest is a carrier the company uses frequently.

Buyers also voiced concern that Marriott International Inc. is not paying commissions back to Corporate Travel Departments.

In response, Marriott's vice president of intermediary sales and marketing Fred Miller said the hotel company prefers to work with corporations on a net basis. Its position has been to pay travel agencies commissions because "it is a form of income for the travel agency to go out and sell travel on our behalf. They are in fact sales agents on behalf of Marriott. They incur expenses as it relates to servicing corporate clients and therefore they have to make a profit." CTDs on the other hand, "don't do any of that. Basically they are buying travel services from us. Our commissions were never intended to be a form of rebate back to the corporate client."

The point of closer links is to shift to net pricing instead of commission rebates "so we don't have to play this huge accounting game," Miller said.

Wagner said one concern has been "divesting ourselves of our method of handling tickets. Reporting to United was far easier than reporting to ARC because tickets are scrutinized far more. I think it is just part of the learning curve of becoming an ARC entity."

Stone said "there was a tremendous amount of red tape involved in just getting accredited." Gray also said that she wished that ARC would simplify the CTD application process.

According to ARC, there also may be some confusion about the difference between a retail travel agency and the CTD designation on the part of the airlines. ARC spokesperson Allan Mut&eacute;n said that carriers have the discretion to appoint CTDs automatically or on an individual basis, using ARC criteria or adding their own, and it varies carrier to carrier.

US Airways sent Pino Training its own accreditation paperwork. Gray said it was "just as detailed as the ARC application" and the airline "didn't know the difference between a corporate travel department and a retail agency.