No one could have looked at the financial meltdown of 2008
and expected 2009 to be anything but a tough year for travel management
companies. Yet, while there were certainly moments when it appeared that any
sign of recovery could be years away, it seems remarkable now how well travel
management companies adapted to their customers' needs and how quickly the
business now appears to be recovering.
(Click here to see a pdf of this section, with all charts
and auxiliary features.)
While it was horrendously tough going, and many people lost
their jobs, the intense cost scrutiny of the past year-and-a-half by senior
management was an opportunity for travel managers and travel management
companies to show the value of managing business travel. Reductions in force by
most businesses created an environment in which more companies outsourced
travel management operations and took advantage of negotiating expertise.
All indicators show that U.S. spending on business travel
fell an average of at least 20 percent last year. The combined sales volumes of
the U.S. travel management companies that released data to Business Travel News
this year about the airline tickets for which they paid airlines last year—as
certified by the Airlines Reporting Corp., the U.S. bank settlement plan—also
showed a nearly 20 percent loss from 2008.
To cope with the drop in revenue and an 8.6 percent drop in
transactions, many travel management companies reduced headcount. Those
reductions in force largely were focused on the point-of-sale agent, however,
because account management and customer service became even more important to
travel management companies last year.
The altering of the financial foundation of the industry
that had almost every travel buyer reconsidering their contracts and bid
activity was greater and more competitive than the industry has seen in a long
while. Even though nearly every contract was in play, it seems that the
incumbents generally kept the business. Rather than a whole lot of shifting,
there was a general reexamination of whether business could be done more
efficiently.
By and large, travel management companies adjusted terms and
counseled their clients to change their policies, in many cases restricting
premium class travel and in some cases implementing or increasing the use of
technology. Companies desperate to make substantial cuts to travel expenses
without hurting their businesses gained a new appreciation for in-house and
travel management company expertise.
Ovation Travel Group executive vice president Michael
Steiner summed up the response to the situation by his travel management
company and others as "a lot of belt tightening, travel policy consulting,
vendor negotiations and best practices discussions."
"Gross volumes obviously were down for everybody,
especially at the beginning of the year, and they kind of picked up at the end,"
said Omega World Travel executive vice president of sales and services Goran
Gligorovic, "but transactional volume was not down that much compared to
dollar amounts. We knew the fare didn't go down that much, so we realized that
a lot of corporations downgraded travel policy regarding class of service, made
more advanced bookings and more strongly enforced travel policy."
While everyone was challenged last year, and many took a
beating, for Travel & Transport the challenge proved to be an opportunity. "We
were very fortunate and had our best sales year ever," said president and
CEO Bill Tech, claiming $115 million in new business, almost half coming from
winning the Allstate Insurance and Booz Consulting accounts.
"The first quarter was horrific. It was T&T's
first-ever first-quarter loss in my 24-year history at the company," Tech
said. "But then with some account wins, things really started turning
around. We were pretty fortunate to get through such a tough time so well."
Citing the unusual amount of bid activity last year, Tech
said business travel buyers "had to reduce costs in their companies just
like we did. Luckily, we retained almost all of our business. Not everyone, but
certainly over 50 percent of our clients came back and asked us to re-look at
it. We adjusted terms in some cases and in some we couldn't.
"We even got a couple of five-year contracts, which are
practically unheard of these days," Tech added. "Those customers have
been with us for a long time and wanted to lock into a lower price."
At Valerie Wilson Travel, "In many cases, after October
of 2008, we were guiding our clients on corporate policy and changing
procedures," said co-president Jennifer Wilson-Buttigieg. "As TMCs,
we've learned to become so flexible and nimble because you don't know what the
crisis of the day will be. We've been teaching and showing our clients that."
The one-to-one conversations that took place with each
corporation to reexamine every contract, leases and rent, medical expenditures
and compensation structures are "what relationships are based on,"
Wilson-Buttigieg said.
While a lot of Ovation's clients issued requests for travel
management company proposals, Steiner said, "most used that opportunity to
validate the program, and 100 percent stayed with us. Some went off-site to
reduce costs, and some moved online, but most kept their configurations the
same."
Some TMCs dealt with the situation proactively. At Omega
World Travel, said Gligorovic, "We decided the environment created an
opportunity for us to reach out to them as a value-add and act as a consultant
to get through the tough times."
Directravel president Pat Fragale said that very few of his
company's clients went out to bid because "we were proactive in late 2008
in scaling to the business level. If that meant some displacement of employees,
unfortunately that's what had to happen. I retained 95 percent of my business
and meanwhile won a lot of new business."
With so many accounts in play, it is interesting how few
changed hands. "For the most part, their travel management companies gave
them what they were looking for in the way of concessions," explained
T&T's Tech, adding, "There is a cost to change in terms of the time,
energy and the money it takes to make a successful transition."
Many travel management companies responded to the reduction
in customer demand by eliminating the jobs of 10 percent to 30 percent of
point-of-sale travel consultants. Others made severe salary cuts to retain
employees.
Tech said that as things improved, instead of giving back
the pay cuts immediately, "we gradually gave them back. We gave some back
in October of last year, some on Jan. 1, and we didn't restore everyone back to
their salary until April 1 of this year. On July 1, we're going to give raises.
That was a lesson that we learned that we will use in future downturns: Cut
quickly but then give back gradually. That allowed us to retain people that we
otherwise would have had to cut."
"We acted the same way we did after 9/11 and in 2003,"
said Valerie Wilson's Wilson-Buttigieg, "and put tiered pay cuts in place.
We were able at the end of 2009 to give 50 percent of everyone's pay back in
one lump sum check. And then 50 percent of their pay was reinstated in May of
this year."
No matter how well companies may have recovered, 2009 was a
rough year for everyone. Still, the trial by fire helped to validate travel
programs and travel management company services and drive greater compliance
with preferred vendors and policies.
"I think the strong survived last year," according
to Directravel's Fragale, "and what I see is that this business is about
relationships and communication."
He said this past year was the time to say, "If it's
not broke, break it and figure out more efficient ways to improve the bottom
line."
"In the past," Fragale continued, "when times
were good, our recommendations weren't a top priority. After the past 18
months, we're seeing that our services are more important than ever, and are
being accepted more than ever before."
Travel Agency Survey Methodology
Business Travel News again this year asked travel management
company chief executives to sign release forms and send them to Arlington,
Va.-based Airlines Reporting Corp., authorizing the U.S. bank settlement plan
organization to release for publication each agency's 2009 ARC air ticket
transaction and sales data.
BTN invited agencies that book more than half of their sales
for business travel through ARC to release ARC data for wholly owned home
offices and legal entities, including all branch and satellite ticket printer
sales data and the percentage of tickets purchased for domestic travel.
ARC provided only ARC air transaction and sales data and the
percentage of sales booked for domestic versus international travel. ARC
defined net air sales as the sum of the fare listed on each ticket exclusive of
agency commissions. Air transaction counts exclude refunds, exchanges and
voids.
All other data, including non-ARC sales and transactions,
are self-reported. This volume may include purchases made through vendor
websites, sales to ARC-accredited Corporate Travel Department accounts and such
bulk-buy programs as American Airlines' AAirpass.
Publicly held American Express and HRG, privately held BCD
and Carlson Wagonlit and all online-originating players did not participate.