Control, cost savings, transparency and Sarbanes-Oxley compliance are among the benefits of the Airlines Reporting Corp.'s Corporate Travel Department designation, according to CTD managers speaking during a National Business Travel Association presentation in July. But these advantages come with what the presentation called the "need to justify the CTD model frequently."
That justification could soon include rising program costs, although the near-term impact may be small. ARC earlier this month proposed a 2008 fee structure that would boost the annual fee for each independent or home office location 172 percent to $395. The cost for each branch or satellite ticket printer would increase to $150, while quarterly fees would rise to 2 cents per transaction from 1.7 cents. [ARC proposed to retain the transaction floor at 1,000 per quarter, but would boost the ceiling to 1.875 million, up from 1.5 million today. The floor means that agencies or CTDs which process fewer than 1,000 transactions per quarter would incur no transaction fees, while those that process more than 1.875 million transactions would incur no charges for the excess.]
ARC also proposed to eliminate the cost of required training and fees associated with accreditation status changes. The new structure is slated for review by three ARC committees, including the CTD Advisory Group, in the coming weeks.
American Society of Travel Agents senior vice president of legal and industry affairs Paul Ruden suggested the fee restructuring could force organizations to once again weigh the pros and cons of CTDs, just as it's forcing travel agents to re-run their financials. Beyond the 2008 fees, Ruden said he is concerned about ARC's longer-term plan to shift more of its operating costs to agencies by 2011. "They have told us that the total budget for ARC is $50 million," he explained. "They're now saying that we should bear 30 percent of the $50 million, not 10 percent. This next year's increases are only the first steps of a series of steps that will take you to 2011, at which point the fees will be vastly larger than they are now, and vastly larger than those proposed for 2008."
Speaking at a Society of Government Travel Professionals meeting last week, ARC vice president of marketing, sales and customer care Mike Premo said, "The concepts we put forth to the agency community are still open to change and input and so on. That said ... airlines look at agency distribution and say, 'Why am I paying 90 percent of the cost to enable this organization to do business? They should pay 50/50 or maybe even 100 percent of the cost of running a system that they do business with.' So we are moving to a model where the agency share is a little higher. It is a positive message to take forth to the carriers. ASTA has put out a set of statements around their view of the increase. We have a different view of it. When you look at the average cost per transaction, what we are proposing is [a] 1 or 2 cents increase per ticket in the average agency fee from last year. Given the economic environment and the investments we are trying to make moving forward in modernizing our systems, that is an entirely reasonable action to take."
In announcing the fee proposal, ARC stated that fees have remained "relatively flat with very modest increases year over year" since 2001. "While the proposed increase is substantial from a percentage viewpoint, the actual dollar increase, in our view, remains modest and reasonable," ARC continued. Officials also noted such enhancements as Interactive Agent Reporting, Payment Card Industry certification and the ability for agents to process service fees. "Currently, ARC is laying the groundwork to move its business platforms off of aging legacy systems to what will be referred to as the new Universal Settlement System," and facilitate new capabilities such as the processing of ticketless transactions, multiple currencies and alternative forms of payment--as well as real-time receipts and access to data.
Among other enhancements is the ARC Memo Manager, a new program that allows participating carriers to issue, manage, track and pay debit or credit memos with ARC's online reporting. As of today, more than 1,500 travel agents and CTDs, along with 66 carriers, including Delta, signed up for the program.
An ARC spokesperson this week confirmed that one initiative that won't be pursued is the concept of promoting cash settlement through ARC's systems over credit cards as a means to lower costs for airlines and rebate some of the cost savings to participating agencies or CTDs. ARC had said in July that it would continue to develop this program, but too few airlines agreed to participate.
Four CTD representatives speaking at the NBTA event testified to the program's value. For example, Wal-Mart director of global travel services Duane Futch cited control over program aspects including data, data ownership, vendor negotiations, auditing and "people assets."
"The No. 1 reason given for becoming an ARC-approved CTD" is control, stated Premo. Speaking to The Beatin June, Premo said, "In this era, there are more challenges in travel programs and infrastructure in programs than there has probably ever been. With GDS content fees, the economics changed by a couple dollars last summer. The shortage of travel professionals--because of the cloud around agency business and 9/11 and other factors--can create staffing challenges. Some companies are more security-conscious. They don't want outsiders to look at their travel activity. When you look at those kinds of dynamics, probably over time there will be more companies to say, 'A CTD makes sense for me.' Do we think there's going to be a land rush and there will be 50,000 CTDs anytime soon? No, I don't think so. But we like the relationship. It's a very strong and vibrant community. They're all very passionate about CTD status and we will go out of our way to support them and the community."
According to Futch, challenges of the program include "breaking the supplier paradigm and overcoming misconceptions about what a CTD is and isn't." One common misconception is that CTDs do not use travel management companies. They don't have to, but up to 9 percent of CTDs outsource certain services to TMCs, according to Premo. "They represent 38 percent of the ARC CTD's sales," he said. "The majority of CTDs insource and/or partially outsource" such functions as 24-hour service.
Among the NBTA presenters, the American Quarter Horse Association's one travel manager handles all travel for about 75 staff members and $2 million in annual volume; Schwan Food Company has a travel manager, four agents and one back-office employee to support about $9 million worth of air bookings and small meetings; Weyerhaeuser outsources most functions for its $25 million travel program to an onsite travel management company; and Wal-Mart insources all travel management work, finding it to be the lowest-cost option.
ARC has approved more than 150 CTDs since it began the program in 1998, and 144 organizations use the designation today. As of July, eight applications were pending and four others were in the process, said Premo. He cited other well-known firms that are also CTDs, including Federated, Limited Brands, The Gap, Chevron and Schwab.