Taking Control Of Travel Automation Is The First Step Toward Self-Management

<B> Taking Control Of Travel Automation Is The First Step Toward Self-Management</B>

By Tom Wilkinson



<I>Tom Wilkinson is president of the Travel Management Group, an Alexandria, Va.-based travel management consulting firm.</I>

I was flattered that Dr. Michael Whitesage--in an otherwise cogent Forum page submission (<I>BTN,</I> April 12)--questioned my advice that travel managers should reduce costs by controlling automation contracts. "Reservation automation is the agency's business," he stated, encouraging companies to focus exclusively on corporate discounts. Michael, I agree completely that negotiated discounts are the ultimate goal. Our firm defines "travel management" as creating and managing processes to negotiate and use corporate discounts, and we deserve your friendly chastisement if we appeared to suggest otherwise. But reconciliation of this apparent dichotomy lies in the message artfully delivered by Tammy Troilo on the same page.

Travel managers need to pursue all options for cost reduction. That has to include the cost of booking travel in addition to vendor negotiations. While migrating to fee-based agency contracts in the midst of commission cuts, travel managers have been painfully aware of how expensive the booking process can be. Yet travelers don't like automated bookings even though they are cheaper and provide more information faster than the telephone.

For years I have maintained that when management becomes aware of the true cost of the agency process (in other words, as the commission subsidy disappears) it insists on reductions, in part by driving increased usage of online bookings.

The point of my article (<I>BTN,</I> Feb. 22) was to have travel managers question whether agencies create as much value in handling an automated PNR as they do by telephone. If not, managers should negotiate reductions in the cost of those transactions. A recent article on "tiered pricing" (<I>BTN,</I> March 8) described how some managers are attacking that problem.

CRS and back-office contracts also can yield substantial financial benefits for corporations looking for other ways to reduce process (agency) costs. Michael, you are right that automation traditionally has been the exclusive domain of agencies, but that doesn't mean it always will be.

Back-office systems can now be deployed on PCs for individual accounts, and can be run by travel managers with even modest IS support. Total costs can be much lower than agencies often charge for IS support. Thus, I encourage travel managers to question whether agencies create significant value from managing that part of a travel program, just as they should question the value of the agency's contribution in an automated booking.

<B><CENTER>Leveraging Agency Service</CENTER></B>

Controlling automation tangentially gives the corporation leverage with the agency. If a corporation owns the CRS contract and the back office, it's much easier to change agencies. This will keep agencies focused like a laser beam on traveler service, which is their real core competency.

That is why we encourage some clients with established travel programs to take control of automation as a first step to self-management. Control is a key issue. Some organizations are interested in ARC-accredited Corporate Travel Departments, rent-a-plates and even full accreditation almost exclusively because they want to own the process. Some have worked with a series of agencies and never been happy. Some travel managers with operations experience believe they can do a better job of meeting internal customer expectations than any agency can.

Larger companies, however, are focused more on the dollars. They often pay hundreds of thousands of dollars each year in management fees. They also have the resources to insource key agency functions cost effectively.

For companies focused on the economics, deciding whether to go down the path of self-management requires careful review of all the financial factors, including overrides, to assess the impact. The analysis must include an evaluation of automation issues, and particularly a comparison of how much the company pays the agency for automation support versus the cost of obtaining and managing that support directly. If a company negotiates a good CRS deal, the answer may be surprisingly positive.

Self-managed travel requires a very serious commitment. For companies seeking a "middle road" that would achieve 80 percent of the financial benefits of self-management with only 20 percent of the headaches, taking control of key automation contracts can yield important financial benefits.

It also can transform the travel manager role into a relationship manager. As Tammy pointed out, management of day-to-day operations and other specific services can, and usually should, be outsourced as appropriate.

"Aha!," you say, "What's so great about a self-managed program if some, most or even all of the tasks are outsourced anyway?" The key difference is outsourcing specific functions versus outsourcing the entire process. In self-managed programs, you outsource where you identify the best value. In most cases, the more targeted approach saves money for the corporation.

The middle road we suggest, taking control of the automation, is an excellent first step for many travel programs. It does not mean that you should ignore vendor deals. However, the evolutionary step toward self-management offers considerable opportunities for operational savings--crucial to the coming commissionless environment.