The apparent final International Convention & Exposition
of the National Business Travel Association was rife with cautious optimism
that the corporate travel industry's darkest recessionary days have faded into
history.
At the show in Houston—the last under the association's
current name before it switches to the Global Business Travel Association
moniker in time for 2011's annual convention in Denver—buyers and suppliers
from every segment noted further reasons to believe that corporate travel's
outlook points up, but noted that a full rebound was hardly a done deal.
CEOs representing various segments of the industry shared
some flavor of Southwest CEO Gary Kelly's proclamation that, "It's heck of
a lot better than it was a year ago," during a CEO-loaded general session.
When prompted by a question from Trip Davis, the session's moderator and
chairman of TRX, about the biggest potential risks to the industry's
bounce-back, however, they also agreed that economic uncertainty and the
possibilities of double-dip recession or surging energy costs could threaten to
upend the rebound.
"I think the biggest risk is that we slip back into
something like what we've come out of, or something maybe not quite as severe,"
Carlson Wagonlit Travel president and CEO Douglas Anderson said. "U.S.
economic growth rates have slowed in each of the last two quarters—not a
slowing economy, but slowing growth rates. We're in a highly cyclical industry.
Cycles are normally reasonably long in terms of number of years, but shorter
cycles are possible."
Travelport deputy CEO Gordon Wilson sees one risk to the
economy already taking shape. "In Europe, in particular," he said, "we
are about to go through feeling the governmental austerity measures that have
been put in place. While there's been lots of talk about them, they don't
actually start biting until toward the end of this year and into 2011, so that's
a word of caution, because some sectors are so reliant on government business."
That, Wilson noted, could foster the dreaded double-dip, though potentially on
a more region-specific basis, as opposed to the more global recession from
which economies continue to recover.
Starwood Hotels & Resorts Worldwide president and CEO
Frits van Paasschen said he sees the very discipline in corporate spending that
helped companies navigate the recession as an inhibitor to fully coming out of
it. "The issue of uncertainty is really the key here," he said. "We
don't know what's going to happen, but as a business that has gone through the
extraordinary measures that we went through to reduce our costs, we want to
maintain that structure, and we don't want to go through that pain again. We,
as I'm sure is true of many companies, are looking carefully at managing that,
which paradoxically is part of the problem, because persistent high
unemployment is one way we could see of sliding back into a recession."
Speaking unmistakably like an airline CEO, Southwest's Kelly
said ongoing risk in the volatile nature of fuel costs: "If I were to say
or answer the question, 'What is the number-one risk for the airline sector,' I
would probably say energy costs."
At the 2009 NBTA conference in San Diego, then-CEO of
Continental Airlines Larry Kellner described for attendees the carrier's
tortured decision to join competitors in charging for checked bags, claiming he'd
"rather figure out a way to have it all in one package" than
unbundle. The carrier weighed its options, saw its competitors get new revenues
and eventually succumbed to what he called "a competitive move we thought
we had to make." Casting Continental as a hesitant legacy carrier entering
the new world of a la carte pricing, Kellner concluded, "I'm not a fan of
the first-bag fee, but it was the right decision for us."
Fast-forward a year, as his predecessor, Jeff Smisek, sat in
the same airline CEO general session, and a different approach to unbundling
quickly became evident. Claiming that without unbundling, passengers are "cross-subsidizing
one another," Smisek said, "As we've unbundled the product, we've
made air travel more fair, and secondly, we're also creating products and
services that are new and customers value. If they don't value it, they don't
have to select it, and they don't have to pay for it, so I'm a big fan of
ancillary revenue. What you'll see are more and more products and more fees."
Travel buyers paid heed to the shift in philosophy. Dominion
director of travel and corporate services Donna Kelliher told Smisek his stance
on ancillary services "scared me a little bit," adding, "You
sound a little bit more like United and a little less like Continental."
Though Continental has grown to embrace a la carte selling,
Smisek said the carrier would work to advance reporting and distribution of
ancillary services to corporate clients. Asking for what Kelliher called "transparency
at the point of sale, not after the fact," Smisek replied, "We would
like that too. I think you need that and we want that." He added, "We
have issues with GDSs, we have issues with getting the reporting with the
credit card companies. We're at the early stages of this, but you and I have an
alliance of interests here."
"We want to be in their distribution channel for the
ancillary revenue," Smisek said. "We're working with the credit card
companies to make sure they can report back to you on a more detailed basis the
fees you're paying and capture that."
Not all airlines represented at the conference, however,
have become converts to unbundling, and Virgin Atlantic president Richard
Branson drew applause when said he was particularly averse to taking away
amenities and charging for them.
"Personally, I think those amenities are absolutely
essential," Branson said. "I think it's when accountants take over in
a company and start cutting back on amenities that a company is ultimately
doomed to failure."
Prism Group founder and president Michael Whitesage counted
this among what he called the myths of airline contracting: "The largest
companies secure the largest discounts." Attempting to shatter that bit of
conventional wisdom, he said the ascendancy of share contracting—as opposed to
volume-based discounts that once prevailed but largely are dead among the
biggest U.S. carriers—has enabled smaller companies to play in the realm of
corporate contracts. "Companies that can deliver marketshare get the most
competitive discounts," Whitesage said, claiming that discounts enjoyed by
disciplined small or midmarket companies can be superior to those offered to
the largest multinational corporations.
Another myth Whitesage cited is the procurement view that
deploying more than one preferred carrier enables buyers to secure more
favorable contracts and keep airline partners in check. "That doesn't work
today. All you're doing is diluting your share. You get two discounts, but two
low discounts."
Whitesage said his favorite myth is that "share
contracting is not allowed in Europe, Australia, Latin America and Asia. The
reality is that share contracting is allowed everywhere in the world. However,
if you have a carrier that is a dominant carrier in a country like Singapore,
the Netherlands, France or Spain, they have routes that they have dominant
positions in, and share contracting is not appropriate on those routes."
Whitesage said such carriers would likely use sales volume
as a basis for discounts. "But, if I'm competing on a market like Madrid
to New York, I'm going to compete like hell, because the competitors that are
coming in are using share contracting," he said. "If I don't use
share contracting, they'll eat my lunch."
The NBTA Foundation and meetings technology supplier
StarCite are building a new model to measure and analyze corporate strategic
meetings management program development and implementation.
When complete, the Strategic Meetings Management Maturity
Model will classify programs' progress in such categories as policy, sourcing
and technology implementation, and recommend subsequent steps. Officials hope
to release the model by the end of the year.
StarCite and the foundation—NBTA's research and education
arm, which separately announced the names of the first 29 recipients of its
Strategic Meetings Management certification, among them Kesler and Wilt—based
the model on a framework for software development created at Carnegie Mellon
University, industry research, focus groups and white papers that were authored
by NBTA's groups and meetings committee.
"This is what's going to make strategic meetings
management available, accessible and possible for every company," said KK
Strategic Solutions president Kari Kesler, a former corporate meeting buyer and
member of the groups and meetings committee, during an educational session at
the show. "This model is going to turbocharge the pace of maturity and help
us all go forward faster."
When released, users would complete an online questionnaire
that would request details of all aspects of a corporate meetings program,
including policy, strategy, meeting registration, sourcing, planning, payment,
technology and reporting. The model, accessing an extensive database of
strategic meetings management concepts and philosophies, then would analyze the
responses and assign numerical levels of maturity, helping to classify program
aspects as "random, discovery, emergent, operative, excelling or mastery,"
in ascending order of maturity.
The model also would offer a "prescriptive report or
action plan to get to the next level," according to Kesler. However, the
model would not strictly define whether a meetings management program could be
defined as "strategic," she said.
"It's less about saying you have an SMM, which,
frankly, we struggled with as we were building the certification," Kesler
said. "I like this a lot better, because whether you do or you don't, it
helps you get there."
While the wide level of variance in corporate meetings
program structures ensures there could never be a
one-size-fits-all-corporations configuration, the model nevertheless assumes
that there are specific, particular strategic meetings management building
blocks that all organizations could embrace to further their meetings
management efforts. However, there's no guarantee that a given corporation
would want to advance to a higher level, said Xerox Corp. manager of global
travel and meetings management Tracey Wilt, "if their internal corporate
objectives are different than the objectives of the next level."
On the other hand, "it's feasible and possible that you
may scale different divisions in your company against the maturity model to see
who's more advanced, and how the other division could catch up," said
StarCite vice president of enterprise strategy Kevin Iwamoto.
The model also will be able to provide information on best
practices and case studies for companies at each of the six levels of maturity,
officials said. As more users input corporate meetings data, the model's
utility will expand. "Later, when there is a critical mass of data, we
will be able to provide some benchmarking," Kesler said.
StarCite senior vice president of worldwide marketing Kevin
Young compared the model to Capability Maturity Model Integration, a
software-industry performance-improvement process "that helps software
development organizations get more mature and gives best practices and guidance
to get to very advanced practices," he said. "We said, wouldn't it be
great if we had the same thing in the meetings world, where we could help
people step their way through and gradually get to a very robust, complete,
enterprise-wide program? We've worked with the NBTA Foundation to do that, fund
the research and put it in place."
Getting a handle on small meetings remains a challenge even
for mature travel programs, though companies that tackle them stand to find
significant savings, according to a panel at the convention.
Small meetings represent the lion's share of events for many
companies, with about 86 percent of meetings having fewer than 100 attendees,
said NBTA groups and meetings committee vice chair and StarCite vice president
of business development Linda McNairy. Many companies, however, still can't
quantify small meetings within their company, she said.
"A lot of companies still push it off and aren't sure
what to do with it," McNairy said.
Some companies also have been reluctant to devote energy and
resources to controlling those meetings because they don't see it as a worthy
pursuit. "Some have said the return on investment isn't enough for that
particular organization," said Charlene Rabideau, senior vice president of
account management and operations for BCD Meetings and Incentives.
A large portion of these meetings, however, often are
planned by administrators who might be unaware of procedures to best handle the
meetings, said Renee Epple, vice president of global innovations for American
Express Business Travel.
Marriott International vice president of global sales
intermediaries Julius Robinson said inexperienced planners often do not realize
obligations when they are signing contracts and are surprised when having to
deal with cancellation and attrition issues that arise later.
Those buyers who have targeted small meetings reported
significant savings from their efforts. Tim Bone, director of union
conventions, events, meetings and travel for Service Employees International
Union, said his organization recently turned its focus to small meetings. Prior
to that, the meetings often were booked ad hoc by administrators, through
vendors with which SEIU did not have negotiated agreements or through improper
channels.
Using data from purchasing cards, invoices and the expense
reporting tool, Bone aggregated information to show senior management the cost
and importance of small meetings.
"We had the policy rewritten that everything has to
flow through the meetings department," Bone said. "Catching data is
easy because of the expense tool, and the cost associated with those meetings
are up to the departments' budgets."
Bone chose an outsourced model to handle small meetings,
working through planners employed by StarCite. Individual administrators who
want to keep control of small meetings can still do so as long as they go
through the proper channels.
"We have an engine that can help you source and book,
and you can control that yourself or use external meeting planners," Bone
said. "We now can capture what we were not tracking."
SEIU's average savings on meetings ranges between 20 and 30
percent, Bone said.
Siemens director of event management services Bobby
Badalamenti said her company has designed an RFP specifically for small
meetings, with specific choices pre-negotiated for planners. "When you
have a preferred supplier relationship, and they work with you, it's easy to
do," she said.
NBTA during the show announced it has "acquired and
taken full control" of The Masters Program, an annual corporate travel
event in Washington. D.C., that through a partnership with travel technology
firm Amadeus it intends to transform "into a global thought-leadership
forum for C-level and senior executives and a think tank for the travel
industry."
The association also named Jack O'Neill, president of Carlson
Wagonlit Travel North America, as its NBTA Allied Member of the Year, and gave
its President's Award to HSBC vice president of corporate events and travel
services Michael Lyons.
Meanwhile, Dominion's Kelliher, a former Business Travel News Travel Manager of
the Year, was one of three people elected to NBTA's board of directors.
Kelliher, director of travel and corporate services for Dominion, and Christle
Johnson, director of business services for Johnson Partners, each were elected
to three-year terms as direct member directors at large. Maylena Burchfield,
executive director of Adtrav Travel Management, was elected to a two-year term
as allied member director at large.
Michael B. Baker and
David Meyer also contributed to this report.
This report originally
appeared in the Sept. 6, 2010, issue of Business Travel News.