Lockheed Martin global travel and event services manager
Mark Stansbury offers the following as his email signature, a truism for many
an experienced corporate travel buyer: "Managed travel is a paradox; the
more it succeeds, the less important it appears."
It's such a reality that the defense contractor's 95 percent
online self-booking adoption rate, amazing for a program that in 2012 handled
about $205 million in air travel, no longer raises an eyebrow among senior
management. It saves tremendously on transaction fees and pushes lower fares
through visual guilt, but "they're like, 'Tell me something new,' "
said Stansbury. "So we're bleeding the turnip."
That means working harder for savings in its air and hotel
programs as well as toying with ideas like gamification and such lower-profile
categories as dining, car sharing and virtual conferencing.
Lockheed Martin has enjoyed remarkable success with the
arduous process of tracking and reusing unused nonrefundable tickets. Though lots
of managed travel programs have mechanisms in place to identify and alert
travelers to soon-to-expire nonrefundable tickets, few have automated and
formalized the process as thoroughly, according to sources.
"If you had to cancel a nonrefundable ticket, it used
to go into a pool where you'd see in your profile that you have one unused
ticket you can use," said Stansbury. "But quite a few only travel
once or twice per year, and these were expiring. So we approved a process in
which, when these are down to within three months of expiration, the traveler
will get a note that if they don't use it within the next month, it will go
into a pool in which any traveler in Lockheed Martin can use it. It will only
be used if it makes sense—you do have name-change fees and all these other
things—but if it's to the advantage of the company, it will be used.
"It's pretty much an automated process," he added.
"We worked with [preferred travel agency] Travelocity Business to do that,
and we're already seeing huge dividends on it because almost all our unused
nonrefundable tickets are getting used now. Of course, you're not going to see
Integral to the process were negotiations with Lockheed's
primary air carriers, each of which agreed on an ongoing basis to waive
name-change restrictions and, for a fee, allow Lockheed Martin to apply the
credit from one employee's canceled trip to another employee's booking.
Consultants said airlines allowing name changes, even for a
fee, is not a standard practice.
"I have seen it on rare occasions and usually only on
an exception basis to help a very large client work through a large bank of
unused tickets," according to Bob Brindley, vice president at BCD Travel
consulting unit Advito. "I don't think this is common practice for any of
the major carriers."
"Each airline has somewhat different policies toward
this," noted TCG Consulting's Barry Rogers. "The big U.S. carriers
will do it for a fee, and several have programs where companies can earn points
or soft dollars to cover the fees. Non-U.S. carriers are more reluctant to do
it, if at all. There are some that will do it, even without a fee, for their
[PROFILE_1]Travel management company sources described the practice as
falling under soft-dollar or "service credit" programs in which the
TMCs' relationships with airlines earn them points that can be exchanged for
various kinds of waivers and favors.
Such exceptions are "fairly routine," said
Ultramar Travel Management president Peter Klebanow. "But we're not aware
of a company that is programmatically managing this as a matter of course on an
ongoing basis. It's more common when people leave the company."
Corporate buyers from such firms as Booz & Co. and
Autodesk said they have been successful in negotiating name-change exceptions
with carriers. Booz director of global sourcing and travel Doug Weeks said his
firm uses a service credit program to activate waivers, though because his
company tends to buy higher-end, flexible tickets, it averages just six name
changes per month.
The situation is quite different at Lockheed Martin, where
four in five trips are taken for government work and cost reduction and
affordability now are primary drivers.
"With the turndown in government business and us
looking to tap markets we haven't been in before, a big focus for us was
affordability—not necessarily reducing travel, but reducing travel cost,"
said Stansbury. "So we were tasked with identifying areas in which we
could show better travel behaviors and save money. We generated monthly reports
to send to the executive vice presidents of our five business areas. We point
out to them areas where they could improve.
"On advance purchase, a couple of business units had
extremely high purchases within the zero-to-six-day timeframe, with 30 percent
to 40 percent of all their purchases done in that timeframe," he
continued. "We have talked about changing policy to say, 'You have to
purchase your ticket at least 14 days ahead,' but based on our business it's
just not practical. We do have a lot of business that requires next-day travel.
But 40 percent is just not reasonable, and we know there are some people who
Lockheed provides its executive vice presidents with reports
that identify the biggest procrastinators. "They can see repeat offenders
and contact them directly or provide information to their manager, so the
manager can address with them why they're waiting so long," said
Lockheed estimates it saved $15 million from this
advance-purchase initiative last year. With variations across business units,
average price decreases ranged from 9 percent to 20 percent, Stansbury said. "We
primarily focused on moving purchases out of the zero-to-six-day range,"
according to Stansbury. "Year over year, corporate-wide, we saw 3 percent
fewer tickets purchased in that timeframe."
Next up for the advance-purchase initiative may be some form
of gamification program, Stansbury said. Travelers could get points for booking
more than seven days out or for carpooling. "We'd like to provide
incentives like gift cards for good behavior, but we have trouble with that as
a government contractor," he noted. "So some of our travelers are
like, 'I couldn't care less about a red rating on this game thing because it
means nothing to me.' But it will provide visibility for the managers; it's a
starting point. There will be some tweaks."
Focusing on awareness rather than policy-driven changes also
features in Lockheed's key air program goal for 2013, which is to reduce
premium-class use for international trips.
Under Lockheed's policy, travelers should purchase
nonrefundable tickets and fly in coach class, even for international travel.
Some business units deviated from that policy, which they are allowed to do,
said Stansbury, but "we showed them the percentage of premium airfare
international tickets people were buying and what they would have saved if they
bought nonrefundable coach class, so they can see what they're missing out on.
"Business units want people to travel comfortably,"
he said. "I get that. I want to get upgraded like the next guy, but we're
having some layoffs and with [potential U.S. federal budget cuts] on the
horizon, the government is looking for us to save as much as we can. If I can
save someone's job by flying coach for a year or two, that's the message we're
trying to get out to everyone."
Small savings from individual behavioral changes add up in a
massive air program like Lockheed's, and while that's the biggest piece of the
travel and entertainment budget, the firm also is looking elsewhere. It
recently employed Lanyon to audit negotiated hotel rates that should be loaded
into global distribution systems and be available to travelers and agents.
The company in January found that rates for more than 10
percent of hotels were not properly loaded. "In the past, we had to do
random sampling to identify where we weren't getting the right rate," said
Stansbury, crediting the work of hotel manager Joe D'Abate. "Now we're
able to do automated audits, and notes go out to hotels for not having our
The company's lodging program otherwise is rather simple,
Stansbury said. "We have to be at or below the federal per diem, and once
the U.S. General Services Administration comes out with that rate, we
have to match it or be lower. If you offer a non-LRA rate that is at or below
per diem, that gets your foot in the door for consideration. There are
negotiable things around that, like ancillaries, if you want to improve your
chances. Some large travel programs' hotel programs are so much more complex
than ours, since we have that GSA baseline."
Stansbury considers his car-rental program "best in
class," with Avis preferred, based on results of a benchmarking effort
conducted every 18 months. "It's not that we want to stand still there,
but there's not much blood in that turnip either. We had Zipcar in the program
a few years ago and had some difficulty getting usage out of it. We were hoping
it would be a green initiative, but even our Environmental Safety and Health
folks weren't using it. We're hoping now with Avis buying Zipcar, maybe
there are some opportunities and some ideas for how to better market it to our
Meanwhile, Stansbury's department has isolated data on trips
of less than two days and begun encouraging business units to use virtual
conferencing in lieu of travel for a simple meeting. The company had invested
in what it calls video teleconference "years ago," but these services
went underutilized, he said. The effort so far has been difficult to assess
because of other variables in any reduction of short trips, Stansbury said.
SIDEBAR: MINDING DINING
Some travel managers seeking to further contain costs are
scrutinizing areas of spending that traditionally attract less attention,
including dining. If employees are not required to eat at certain restaurants,
the sheer number of options available makes managing dining spend a difficult
"Up to this point, it's been essentially unmanaged,"
said Beverly Heinritz, vice president of client development for Dinova, an
Atlanta-based firm that since 2009 has leveraged client dining spending volumes
to secure rebates. Meals account for about 10 percent of typical corporate
travel and entertainment expenditures, she said.
Lockheed Martin in 2009 became one of the first corporations
to sign up with Dinova. "Meals are one of the more difficult aspects of
travel to tap as far as managing that spend," said Lockheed global travel
and event services manager Mark Stansbury. "We don't have the manpower or
the bandwidth to negotiate with every restaurant that we eat at. We thought
this was a unique approach to it. We kind of saw it as a no-lose proposition."
Steven Schoen, Siemens Corp. director of mobility services
and supply chain management for indirect materials, agreed. He said his company
attempted to negotiate directly with restaurants, to little avail. With that
approach, Schoen said it "wouldn't have been pervasive enough to have been
impactful for us."
Implementation of the Dinova model at both companies is
progressing but much work remains, especially in increasing the capture
rate—the percentage of company-paid meals occurring at Dinova restaurants.
Stansbury said Lockheed's capture rate is between 3 percent and 5 percent.
Schoen would not reveal Siemens numbers but said the benefit is "significant
enough that it warrants our attention."
Michael's Stores since August 2012 has participated with
Dinova. Michael's has roughly 1,000 employees, 600 of whom use corporate cards
that provide detailed dining spend data, said corporate travel administrator
Wendy Flood. Her goal is to achieve a capture rate of 35 percent to 50 percent.
"Realistically, I know we're not going to be able to get it all," she
acknowledged, "but I see every month where it's increasing."
In the short time that Michael's has worked with Dinova,
Flood said she has noticed a small but not insignificant increase in the rebate
check sent to her company.
Dinova negotiates rebates with restaurants based on
aggregated client volume and clients' efforts to designate such restaurants as
preferred and direct employees to them. Each participating restaurant sends a
monthly rebate to Dinova, which sends a portion to each client. Rebate
structures are tailored for each client. Stansbury wouldn't divulge Lockheed's
rebate, but offered that the set percentage is "not in double digits."
A client's travelers need only use a corporate credit card
to pay when dining at a participating restaurant; no special identification or
membership card is required.
In 2012, corporations using Dinova spent more than $700
million on dining, and more than 5,600 restaurants in the United States, Guam
and Puerto Rico are in its network, according to the firm. Even so, encouraging
employees to patronize Dinova restaurants is a challenge. "Travelers ask, 'How
does this help me?' " said Stansbury. "We wish there was a way to
incentivize the decision maker, the individual traveler. We don't know what
that solution is. We'd hoped Dinova would have come up with something."
Dinova's Heinritz said a points-based rewards system similar
to airline loyalty programs "definitely" is a development the company
Dinova also offers a mobile website, which helps users
locate participating restaurants. According to Heinritz, "the number one
thing that people on the road are using their smartphones for is to find
something to eat."
This report originally
appeared in the February 2013 issue of Travel