Like most companies, eBay in 2009 was flying blind when it
came to identifying what it spent on ancillary air fees. Before most of her
peers, corporate travel buyer Laura Hodgkinson set out to measure the impact.
Leveraging management buy-in and supplier support,
Hodgkinson led eBay to customize drop-down menus in the company's
expense-reporting system as a means to capture spend data directly from
travelers. Those efforts, which earned her recognition as a 2011 Business Travel News Best Practitioner,
continue to this day as she works to blend internal data with industry figures
to gauge the full impact air fees have on eBay's total travel spend.
"It goes back to 2009," Hodgkinson said. By then,
major U.S. airlines had demonstrated their infatuation with unbundling fares
and adding fees. That year, ancillary revenues for airlines worldwide totaled
$13.5 billion, but have since grown to $32.5 billion in 2011, according to
estimates in an Amadeus-sponsored Ideaworks study, which examined not just
passenger-derived ancillary revenues, but also other sources of revenue like
mileage sales. The impact on corporate travel budgets, however, remained
difficult to discern. Estimates from travel management companies, industry
associations and suppliers ranged from a few percentage points up to 30 percent
of a company's total air spend. "That's kind of shocking," Hodgkinson
said.
Seeking to understand where in that range her company fell,
Hodgkinson found few viable solutions from airlines, travel management
companies or payment companies. Then, the light bulb went off.
"At last was our expense data tool," Hodgkinson
said. "Because we have that rolled out worldwide, which basically covers
about 99 percent of our travelers, it really was the best resource for us to
look at."
By the end of 2009, Hodgkinson had deployed the first
incarnation of eBay's modified Concur expense tool, including an open-ended,
catchall category for travelers to specify air expenses. "When we went to
pull those reports, the 'other' category was all free-form," she said. "I
learned you can spell baggage about 30 different ways: suitcase, baggage,
luggage, luggage with three Gs, fees with three Es. It was a pivot table
challenge."
That showed Hodgkinson a few things: There were lots of fee
categories to measure, and enabling travelers to define their own expense
categories was not ideal.
Though Hodgkinson had "a long wish list" among the
multitude of potential fee categories, the need to match them to general ledger
codes "changed my long list to a very short list," she said. "If
it can't get tracked into the system, it's not going to do us any good to put
it in the Concur expense report field."
Based on Hodgkinson's examination of expense reports, eBay
in 2010 customized drop-down menus to capture fees for itinerary changes,
baggage, seat selection and inflight Wi-Fi, while maintaining the "other"
category to "capture anything else," Hodgkinson said.
Fast-forward a year, and Hodgkinson continues to refine her
approach. Since she first began capturing ancillary spending through Concur,
the provider released its own version of drop-down menus.
"We did move forward to the Concur ancillary fee tool
in 2011," Hodgkinson said, a move that changed some of the fee categories
the company measures. This year eBay has been measuring baggage fees, airline
change fees, seat selection fees, airline club passes, onboard purchases and
upgrades.
Airlines continue to add ancillary fee categories faster
than drop-down menus can account for them, and Hodgkinson noted the expense-reporting
approach is less than perfect. "I didn't really feel like that was
capturing all the spend," she said. "That was a starting point, but
not the strongest point."
In addition to eBay's expense data, Hodgkinson includes
agency transactional data and publicly available information in an Excel-based
financial modeling tool to better estimate average spending per passenger. Her
effort is supported by CWT Air Solutions Group.
"Now, it's an easy plug and play," Hodgkinson. "All
I have to do is take my quarterly net ticket statistics, put it into the
formula and, in a short time, I know what we spent."
With that, Hodgkinson has a better view than most into
ancillary airline spend. Her initial fears that extra fees represent as much as
30 percent of eBay's total air travel costs have been allayed. Instead, she
estimates they accounted for about 6.3 percent of domestic spend during the
first nine months of this year.
The report originally
appeared in the November 2011 issue of Travel
Procurement.