Roundtable: Small & Midmarket Enterprises’ Quest for Control

Since Southwest launched flights from Atlanta three years ago, the low-cost carrier has expanded and solidified its position there, not to mention across the United States. Its rise provides travel buyers a bit more negotiating power in their dealings with major carriers, and that’s a boon especially for small and midmarket buyers, for whom the sharing economy also has the potential to make a big bottom-line impact. Meetings, too, take up a good amount of room in the brains of those charged with keeping travel expenses on a leash. Four midmarket buyers—Carter’s and OshKosh B’gosh's Cathy Newbill (annual air spend: $3 million), Sage Software's Kathryn Kohler ($2 to $4 million), Dart Container's Cheryl Benjamin ($6 million) and UCB Pharma's Anna Kershaw ($9 million)—hashed it all out with BTN editors David Meyer, Jay Boehmer and JoAnn DeLuna. (UCB Pharma head of global travel and fleet management Geert Behets also joined the conversation).

Kathryn, Southwest has made big inroads into Atlanta, where a good chunk of your travelers are based. How has your travel program changed as a result?

Kathryn Kohler: Our greatest traveling group is [in Atlanta], so when it decided to work with us to get a travel program, we were thrilled because our travelers really like Southwest, it’s easy for them and the cost of course is much lower than Delta, which has primary market share here. We love Southwest. We want to keep on going with that relationship.

Cathy Newbill: We’re going global now. We’re opening offices in China and Japan, so air spend is going up. We just started with Southwest, so things are going well, but before I came in, Delta was the only airline. There was no wiggle room. We went with Delta and nobody else, so now we’re moving a little bit toward the low-cost carriers, which is helping out the bottom line.

So, Kathryn, Southwest provides you with negotiating leverage.

Kohler: Absolutely.

Can you negotiate with Southwest?

Kohler: It’s more of a straightforward program, but it is offering us some incentives. For instance, for our top 100 travelers, it offers priority boarding. It gives our more frequent flyers the ability to get on the plane first, get their preferred seating, preferred baggage handling.

Newbill: Same for us. Really not a lot of negotiating with Southwest, but we can use [its low-cost structure] for other negotiations with the larger airlines.

Cheryl Benjamin: Now my wheels are turning; put Southwest in there and negotiate a little bit better. But I also like the incentives, the priority boarding, the things that make it easier for the traveler; and really, it has to decrease the push back [from travelers]. That’s one of the things that we hear the most: “I can’t pick seats,” and, “I hate standing in line.” It’d have to be a tremendous value.

Kohler: We’re looking at revamping our global policy, so we’re having to standardize with our European colleagues. They have quite a few airlines like RyanAir, similar to Southwest, that don’t have assigned seating. Over there, they allowed their people to get reimbursed for paying priority fees on airlines that did not offer assigned seating. That’s something we’re doing for our travelers here in the U.S. We’re now allowing them to pay the $10 or $15 to get priority boarding if they’re not one of those people who are offered that special incentive.

Cheryl, you’re headquartered in Lansing, Mich., where there’s no fortress carrier like Delta in Atlanta, so do you have more options in negotiating with other airlines?

Benjamin: We are using the regionals to get to Detroit. We really don’t have the power that I would like. I’m really a little worried about what’s going to happen down the road to our negotiating power.

Anna Kershaw: That’s what I’ve been thinking about lately: the need to support [not only] the smaller carriers, which are not really that small anymore, but also the entrants, the carriers that are coming in because they are totally deregulated. We’re down to three majors and really three alliances, and we need that [new] competition in the marketplace.

Benjamin: It’s made it really tough.

Kershaw: Were you all concerned about the FAA fining Southwest and how [the carrier] responded to that?

You’re referring to the fact that Southwest missed a deadline for inspections and was permitted to continue to fly those planes in late February as it completed the inspections.

Kershaw: It concerned me that it negotiated its way out of this window and needed to get the planes checked. There were 128 planes that hadn’t been checked. That literally happened right when Southwest came in the door and said, “We’ve got this promotion for you.” I thought twice about that because it’s really important: safety.

Benjamin: I’m not going to force anyone to take Southwest if they’re not comfortable with it, but some of our departments, our call centers may push those people. I’m not going to do it. With other airlines that I won’t mention, I would tell them they didn’t have to take those.

Kershaw: It’s something we struggle with in the U.S. because our policy is to take the lowest fare.

Newbill: Do you have any type of window or threshold? We have a $150 threshold that they can go over the lowest logical fare.

Kershaw: That technically helps, but in some markets, Southwest is so competitive: Atlanta-Los Angeles, Atlanta-Dallas. They are really biting at Delta’s heels. Our strategy is to try to talk to our contracted carrier and say, “Can you look at that market and try to give a richer discount in that market?” We’re not always successful with our size.

Kathryn, How did you handle the discussion? Did you demonstrate to the other airlines that you’re shifting share to Southwest?

Kohler: I just had that conversation, actually, looking over our annual reports, especially with our global program. We’ve always said that when we start throwing in international flights, the airlines start tripping over each other to get your business. They’re starting to see a pickup on our side, and they’re looking at the other airlines wondering what we’re using.

How do you access Southwest content? Do you all use the SWABIZ online booking tool, or is there a plugin to your booking tool?

Kohler: We use Orbitz for Business.

Newbill: We have a direct connect to SWABIZ.

Benjamin: We go through our booking tool, and then I have agents on-site. If it’s an agent-assisted booking, it goes through BookingBuilder and then goes back into the GDS.

Sharing Economy

Do you allow use of Airbnb, Uber, services like that? What’s your policy?

Kershaw: It’s not really written into the policy.

Geert Behets: We’re playing ostrich.

Kershaw: That’s a good one.

Because of liability.

Behets: The fact is, if somebody asked, “Can I use Uber?” I would say, “Which country are you in and is it legal?” In Belgium, it’s not legal for the moment … so people will not be covered by insurance. For that reason, I would say, “No, don’t do it.” On the other hand, in countries where it is legal and people want to use Uber, I am not going to tell them to spend more money. That would be silly. In general, what I see is that my travelers have been very supportive. We don’t have that many people asking for Uber, certainly not Airbnb. If I hear the requirements they have on hotels, I would be surprised they would go for Airbnb, even though they’re doing private apartments. Right now, we’re waiting to see whether we need to put rules around it or see with our expense manager if [usage] is something we can easily track. If we see its use really going up, we will probably put something in the policy around it about insurance and stuff like that.

Benjamin: We are not saying that they can or they can’t. Airbnb has really been more of a nonissue for us. Uber is out there and it’s being used. I have the app on my iPhone. I’ve used it. We’ve reimbursed for it, but we’ve just not really said one way or the other. Depending on who you talk to inside the organization [about] if it’s risky, they have maybe one idea, I maybe have another, procurement feels a different way. Our sales people are where I’d likely see some more use of it.

Newbill: We do have offices in Oshkosh, [Wis.] and then in New York. We do use Uber. We don’t promote it. We definitely don’t promote Airbnb. It makes me nervous. I would use it for myself for personal [travel], but there’s such a liability for companies these days with our travelers, and even with Uber there’s a liability.

Kohler: We don’t have any policy specific to Uber or Airbnb, but I know quite a few of our travelers use Uber. My boss’ boss loves it, but as far as Airbnb, I haven’t had any questions on it. I haven’t seen any charges for it, but just as a traveler, it would make me extremely nervous from a safety standpoint.

So it’s not in the official policy, but you haven’t had enough requests to worry about that.

Kohler: No, I have to wonder when that’s going to change because of all the press that Uber’s working on corporate agreements and booking tools and Airbnb’s working to have certain content available in Concur. How long is this going to take before you start seeing more coming into your programs? I worry about that.

What’s the impact of having that much more inventory available in this incredible seller’s market? Having all that inventory come online from Airbnb could be a real opportunity for you guys to be able to negotiate a little bit better. Even if you’re not staying there, it’s just a lot more supply in the market. You don’t have to worry about last-minute-availability, perhaps.

Kohler: It might provide an opportunity at places where there are large conferences. San Francisco is a perfect example. The room rates there are incredibly high when there’s a convention in town, and if you could get something a couple hundred dollars cheaper per night with Airbnb, that would certainly save a chunk of change.

Meetings Payment

Kershaw: I was curious if you all were researching a format: We put our meetings spend on meetings account cards, so each meeting gets a dollar amount, say $10,000, and then a declining balance. That’s really going to give us more visibility on our meeting spend versus 14 suppliers involved in a meeting all submitting. We’re also doing that with Bank of America MasterCard.

Benjamin: That’s a great idea.

Kohler: Our meetings people use purchasing cards for their meetings. I’d like to switch that over to meetings cards because I’m constantly raising and lowering limits on the purchasing cards depending on who’s got a meeting.

Kershaw: And you have other things to be doing. It’s really worked out well. We’re just starting that process, but I already see a lot more visibility, and you can drill down and see how much went with Marriott versus others.

Who gets that card? Do they have to meet a certain meetings budget every year?

Kershaw: It’s based on the budgets that are already set, and we’re trying to work it into our [supplier relationship management] process so that whoever’s responsible for that meeting has to sign the requisition. It’s still a requisition process, so the controller signs it, the person over at that cost center signs it and then the meeting account. The bank will issue the card after you have those approvals.

How do you handle meetings expenses?

Newbill: The assistants use their own corporate Amex cards right now. [Reining that in] is next year’s goal.

Benjamin: We’re just really starting to get our arms around the meetings side of it. I have a meetings card that anything that was sourced through our department is put through, but I’ve been very interested in this declining-balance meetings card. I think it allows us still to control the sourcing, but then it really puts some budgets in place. That’s really an important piece. If they go over that budget and they need more funds for a meeting, then we can put some kind of an approval process in place before that happens. [Meetings have] become a big part of what we do, and we have to start controlling them.

Kershaw: Meetings in general are growing?

Benjamin: Yes. Tremendously.

Kershaw: For us, it’s really picked up now.

Newbill: We just moved one of our big offices from Connecticut. We’re now all in Atlanta, and they’re pushing more on-site meetings, but they’re not really doing that. The assistants really love to have that control over that meeting.

For so long, so many people have talked about how every admin wants to be a meeting planner and control those expenses, but we’ve seen a lot of companies centralizing at least the contracting part of the process.

Benjamin: We are trying very hard to do that, and quite honestly, I don’t want to manage their meeting. I don’t want to order their food and beverage, but I do want to make sure that we’re contracting the right property with the right concessions with the proper number of sleeping rooms and the attrition. That’s all that I’m really interested in managing, and that is a huge opportunity.

Kershaw: We did an RFP a few years ago to obtain meetings software. We’re in the process of implementing, and that will give us visibility using one central meetings software. Then, if we outsource a lot of the management of the meeting, we’re trying to get those third parties to use this software. That’s challenging because some of them are used to using their own, but if they use ours, then we can see what sourcing they’re doing. Are they just sourcing their preferred agencies or hotels, or are they sourcing ours? We’re working on that project.

Benjamin: One of the biggest things that I deal with is I’ve been able to maybe look at properties that an admin wouldn’t have typically looked at because they thought they couldn’t afford it, where we can negotiate it down so they’re staying in nicer properties for about the same amount of money. It’s increasing the experience, the attendee experience.

Next Steps

What is your biggest goal for the coming year?

Kohler: Reduce travel spend. Our CFO would like to see it reduced by 20 percent, which I think is a little drastic. We’ll be lucky if we get 10 percent off.

What’s the major way you’re going to do that?

Kohler: We are focusing more on tele-presence meetings, asking people if they are sure they really actually need to travel because a great majority of our travel is internal and making sure that if they do go, [there’s] advanced planning, 14 days in advance. We’re going to be specifically producing reports to our manager so they’ll know these people are only booking their travel two or three days in advance and it’s costing your group money.

Newbill: We’re looking at our policy. We’re bringing in a TMC. We had a very small TMC before. We didn’t really have very much reporting, so now we’re sending out monthly executive reports, showing them where their spend is going, who’s outside policy and mileage. And tackling mileage, trying to bring it down.

Do you offer mileage reimbursement?

Newbill: We spend so much money in mileage, and we’re trying to remind people, “You might be going 350 miles in one day, but look at the cost versus using our preferred rental car.” So much cheaper going the other way.

Do you use the IRS rate for reimbursement?

Newbill: We do right now, but we’re looking at possibly bringing in a third party to help us. They look at where you live and the rates in your area, and they give you a cap for each month.

Kohler: If someone drives a professional vehicle, are they covered by their own insurance or is it company insurance?

Newbill: Their own insurance.

Kohler: Do you remind them of that?

Newbill: We have it in the policy and hope that they read it.

Kohler: Any time somebody asks me about driving their own car, that’s one of the first things out of my mouth.

Newbill: Carter’s and OshKosh have stores everywhere, but we have district managers who drive from store to store to store, and that’s really what their day is. It really is costing a lot of money.

Cheryl, what’s your focus?

Benjamin: Global, bringing in the other countries. Our goal is to implement Mexico by the end of the year, not only the travel piece of it but expense as well. That’s the big initiative, really, for the next 12 months. Then just trying to use all these different data sources a little smarter so we can be a little more strategic.

Does it necessarily mean bringing on some agency partner outside?

Benjamin: Possibly, but again, flowing everything back into us so we can manage our liability and our data.

Anna, how about you—what’s your focus?

Kershaw: I’m really looking at how to mitigate the increases in hotel costs and possibly air. We’re not sure what fuel is going to do with the capacity; maybe air won’t go up as much as we thought. I’m implementing a program called Dinova. Bank of America has been very responsive about helping us streamline that so we don’t have to have anyone touching it in the market. As long as they use the corporate card, whatever they spend, the bank will catch that and provide the quarterly rebate that they earn. That’ll be something. We don’t know [how much] yet because it’s only participating restaurants. The other thing is just more visibility, finishing the rollout of the Cvent product and then being able to leverage that when we negotiate hotels. Right now, our third parties don’t know how much volume we have.

This report originally appeared in the June 1, 2015, issue of Business Travel News.