Tech Line Enters Travel Budgets

<H1> Tech Line Enters Travel Budgets</H1>By Cheryl Rosen

To travel managers, coping with change in travel budgets from year to year is nothing new-from boom years to bust, from commission caps to management fees, budget fluctuations come with the travel management territory. It's not often, though, that travel managers are called upon to consider adding a new budget line altogether, as they are this year. If ever a new entry were called for, many industry insiders are saying, it's in 1997-and it belongs under the heading of "Travel Technology."

What precisely to put on that line is a question without a simple answer. The figure depends on the state of existing technology at the corporation, the number of pieces it wants to automate and the integration required-and even on the willingness of the travel manager, the IT staff and the travelers themselves to be co-developers of the systems.

Whether the goal is a booking engine or an expense reporting system, an end-to-end solution or an Internet page, many suggest that even travel managers not ready to buy at allshould at least set aside funding for research. They need to examine the potential of technology to cut the costs of travel booking, processing and reimbursement, to move market share and improve traveler services in 1997.

If the travel industry follows the traditional software development model, early adopters and beta-test sites will get technology products cheaper than later customers, but it will cost them in time and effort spent working out technical glitches. As vendors attempt to recoup their development costs, prices will then rise through 1997 and probably 1998 before leveling off.

"The pricing of travel technology products at this point is profoundly confusing," said Tom Wilkinson, president of Travel Management Group, a consultancy in Alexandria, Va. "Price is a function of supply and demand, and since until now there has been no supply, no one knows what these products are worth. But the economics of any software are that the first copy costs the whole development budget, and every copy after that costs $1. The trick is to spread the development cost among enough copies to penetrate the market and make a profit."

Wilkinson predicted that as many of 25 percent of corporations will start a budget line to automate either the travel booking or expense reporting process in the next few years, and suggested a $50,000-to-$100,000 figure to cover licensing fees and training.

A number of travel managers already have succeeded in wrangling six-figure budget lines from their corporations-or in having lines thrust upon them. And many already have determined that with the promise of a full return on investment in a relatively short period of time, the question is not whether they can afford a technology line but rather for how long they can afford to let the cost-saving opportunity pass them by.

At TravelNet Inc., whose Voyager automated booking system is being marketed and integrated by Carlson Wagonlit and Mutual Travel, sales and marketing vice president Jim McNellis noted that travel automation offers a unique opportunity in financial management: "For less than one percent of the volume of their annual air budget, corporations can achieve a 15 to 20 percent savings over their previous year's cost," he said.

National Security Agency travel business chief Chip Mahan said he has a budget "in the $500,000 range," for which he expects to get "a full-solution software product." But he considers the outlay more of a loan than an expenditure. "This is a one-time start-up cost, not a figure we'll have to budget every year," he said. "On top of the price, travel managers will have to budget for upgrades, training and support-but in some companies, the savings will cover the costs in the first year."

Bob Grant, corporate travel manager for Charles Schwab & Co. in San Francisco, received a $200,000 technology budget for 1996-and ended up using less than 10 percent of the money as Internet technology supplanted last year's distributed solutions.

Grant had allocated the money for Travel Technologies Group's ResAssist software, which he had planned to purchase in January. "But then I ended up using a simple site that Internet Travel Network private-labeled for us and that links to my CRS," he said. "I spent about $15,000, and even if I torpedo the whole thing tomorrow and buy something slicker, I'll have gotten my money's worth."

For 1997, Grant has asked to retain the $185,000 left over in the technology line, "with the promise that I won't spend it unless I need it." If he succeeds, he will tackle the expense reporting piece.

The challenge for the early adopters lies as much in the lack of hard financial data as in the newness of the technology. Insiders caution that there will be no ROI figure to offset the development expenses unless and until travelers actually use the system in sufficient quantity to allow for negotiated discounts, net fares and head-count reduction. Therefore, the first entry on the new technology budget line, some buyers said, should be for market research-into the kind of system they, their travelers and their senior management want; the up-front costs and how much of those costs they can expect to recoup; and what pieces of the solution already exist in-house.

"Without a firm grasp of the projected costs as well as the usage, a 'close second' strategy may not be a bad position to take," said Mike Prado, travel manager at United Technologies Corp. in Hartford, Conn.

But where his own company is concerned, Prado is convinced that automation will save more than it costs. UTC's travelers take 15,000 to 20,000 trips a year from New York to West Palm Beach, where the Pratt & Whitney unit's government engines group is based. "If I can move those trips to an online booking system, I know there is going to be a cost saving both in hard dollars and in UTC employees' time," Prado said. He added, however, that "until the system is working and I quantify the usage, I can't tell you exactly what those savings will be."

Early Adopters Need Support

Pam Boies, travel coordinator at Duke Power Co. in Charlotte, N.C., who installed TTG's LAN-based ResAssist system in January, cautioned that travel managers need to be prepared for the work that being an early adopter necessitates.

"I underestimated what it was going to take in terms of me being the person to contact with technology problems, the training and the need for a help desk," she said. "We now are where we had hoped to be two months into the process; only 3 percent of our tickets are coming in on ResAssist, and we haven't yet realized the savings we projected when we rolled out the system."

Still, Boies noted, she has not given up on the promise the technology holds. "Our travelers average almost 5 calls per transaction, and if we can eliminate those shopper calls, it will reduce our costs," she said. "Now we are shooting to get 10 percent of our tickets automated by year-end, and I think we'll achieve that."

American Express senior vice president of marketing and multinational accounts Jud Linville suggested that even travel managers with no technology budget for 1997 should begin nudging travelers toward automated bookings, which they can do at little cost through Internet-based systems via their corporate agency. "As long as you use an Internet solution and actually make bookings that don't need a human answering the phone, it's not going to increase your management fee line," Linville said.

Linville said companies can save 10 to 15 percent merely by getting travelers to book according to policy. In addition, he said, "we've looked at several large accounts and found that using an automated system takes $6 off the transaction fee. One account we looked at took 32 minutes per transaction-and we can be fairly certain an automated system will reduce that time."

At some companies, however, travel managers have received technology without any budget line at all. Bob Lichtman, travel manager at Bay Networks, is taking advantage of his company's IS savvy and his status as an early adopter in a partnership that exchanges his time for a product. Edmonton, Canada-based CEL Corp. will develop booking software for Lichtman's Intranet site at no charge, and then offer the system to other corporate customers.

"I think travel technology developers have determined prices based on the ROI they offer, and that's unfortunate," Lichtman said. "These are very significant fees, and the providers haven't come to a complete understanding about what they are providing and what is a fair pricing structure."

Another travel manager at a major corporation said he wouldn't even consider using a booking product unless he got it for nothing. "I want a product that will eventually allow us to book direct with vendors and circumvent the CRS," he said. "But we are not going to buy technology. I'm going to get one free from them, or I'm not going to do it.