Travel managers with mature travel programs are peering in every nook and cranny to reduce costs amid this weak economy, struggling to find fresh approaches to saving significantly. When the well of highly visible and reducible costs seemed dry, Bayer Corp. dug deep and implemented a seemingly simple, local strategy to rein in hotel spend by improving compliance to its preferred suppliers. With senior management support and data in hand, the nonmandated plan succeeded and has since been adapted to tackle Bayer's air spend.
"We are like most companies that don't mandate very much of the travel policy," said manager of travel services for Bayer North America Paul Lang. "There are a few mandates--you have to use the corporate card for business expenses--but the company doesn't mandate preferred supplier use."
Although Bayer's travel services department tracks and reports traveler data, Lang said senior management is focused on "the bigger fish to try to catch" and doesn't necessarily respond to savings that "don't jump out and grab them."
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So Lang devised a plan to start small--targeting the hotel program in its U.S. headquarters city of Pittsburgh--in order to clearly show executives the benefits of promoting compliance.
Bayer's local program had included a wide variety of properties, but providing travelers with so many options proved detrimental to the corporation as many opted for hotels with high price tags rather than great value.
"Obviously in a bad economy, one of the first things that is looked at is how can we cut travel costs. It may not be necessarily having to cut the number of trips, it's just that our budgets are less and we still need to take the same number of trips, but we need to do it less expensively," Lang said.
Lang saw the opportunity to improve compliance within Pittsburgh and created a strategy without mandates. He suggested a redesign of the company's online booking tool using Pittsburgh--the largest volume area--as a test market. The redesign ranked hotel properties in order of most preferred and altered the text within the tool to encourage employees to book the number-one preferred property.
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Bayer advised employees to book with a property that had a negotiated rate that was at least $30 cheaper than the property that was a favorite among travelers. After the change was implemented in one of Bayer's businesses in March and another in September, Lang watched compliance at the preferred hotel jump from 22 percent to 78 percent by year-end 2008.
"This is something we should have done awhile ago. We have a very mature program: Our contracts are in place; yes, we renegotiate and we try to get better deals, but we can't really bank on that for showing cost reductions, so we started to focus on compliance," Lang said. That was "the next area where we could make some improvements to help reduce our travel costs or to help us spend our travel dollars a little bit more wisely and basically according to policy."
In the online booking tool, the language now suggests that an employee should only book another property if the preferred is not available at the time of the booking. If employees go against policy, Bayer's travel department reports them to the proper contacts within the business.
Still, ensuring that employees did what they were asked without mandating this activity was an arduous task, Lang said. After Lang presented his plan, Bayer's senior management grabbed the bull by the horns, issuing companywide announcements detailing exactly which properties were within company policy when traveling to Pittsburgh.
"The silver lining in a bad economy for the travel manager is that company management is more focused on the cost of travel and what can be done to reduce that cost, so it gives us more of an open door or more attention of senior management on what is going on and what can be done to improve cost containment," Lang said.
The announcements were just the beginning of senior management's involvement in pushing hotel compliance. Bayer decided to be "a little bit more aggressive" by forwarding the names of "repeat offenders" to the human resources department.
"It was just another point of pressure from another group saying you should be doing the right thing," Lang said. "Once it got to human resources, the intent was that the discussion would include the possibility of termination if you don't start adhering to policy, but I'm not aware of any case where that has happened."
Lang also tracked compliance through back-end reporting compiled from credit card data. Bayer monitored the hotel bookings of employees who stayed in Pittsburgh, and those who were found to be noncompliant were given verbal notices.
By using Pittsburgh as a test market, Lang was able to demonstrate the success of the program and improve the value of the negotiations.
Driving compliance to preferred suppliers not only benefited the bottomline of reducing hotel costs, but it also helped to build relationships between Bayer and its suppliers. Bayer proved it can deliver a high number of room nights to a preferred property, enabling it to negotiate better deals this year. The company was able to consolidate its hotel program from 14 properties to seven in the Pittsburgh area. In addition, Bayer's lack of occupancy in the higher-price property forced the hotelier to offer an aggressive rate for 2009, resulting in a 25 percent decrease in rate, he said.
Policy Takes Flight
After proving successful on the hotel side, Lang and the Bayer travel department were able to begin phase two, "turning the switch on" for the airline side in the second half of 2008. The company focused on 12 markets where Bayer's preferred carriers were not the major airlines operating out of those particular cities. (Bayer has at least one preferred carrier in its main travel locales and more than one in such high-volume markets as Chicago, Newark and Philadelphia.) Since those cities were hubs of nonpreferreds, many travelers were booking outside of policy.
"It's not breaking news, but oftentimes travelers are trying to select the carrier that benefits them because of their particular location," said Lang. "The frequent flyer issue is one of the driving forces as to why they have all of these very creative excuses for taking a nonpreferred over a preferred.
"Our policy allows travelers to keep the miles," he continued. "It does clearly say that the traveler is not to make any business decisions based on mileage they should make the best decision possible--but the reality is, while we have a lot of good corporate citizens, any company the size of Bayer is going to have travelers who don't necessarily abide by the policy."
To thwart the problem, Bayer steered traffic to the preferred carriers by arranging for frequent flyer status match, which was based on what travelers had achieved with the nonpreferred carriers. For example, if a traveler was a gold member of one airline, he would be a gold member of the preferred carrier. Also, the preferred carriers were willing to match their competitors' fares to shift market share in the designated areas.
Senior management supported the travel department by denying trips that were out of policy. While Bayer does not go so far as to refuse reimbursement to a traveler for a trip, the company sought other measures to entice compliance, similar to that on the hotel side.
Lang found that mandating employees to complete a form when booking with a nonpreferred carrier, if the price and time were similar to that of the preferred, discouraged many employees from booking outside of policy.
"The number of approval [requests] that we have been receiving recently has dropped significantly, because the travelers are getting the message," Lang said. "The travel agency says, 'Hey, you have to go back and get this approved,' and the [traveler] says, 'Well, you know what, we will just go with the preferred.' "
The company increased preferred airline market share by 18 percent in the second half of 2008, compared with the same timeframe the year before, Lang said. As such, Bayer expanded the airline policy to 10 more markets.
"It may not sound like a lot, but it should certainly be enough to improve our performance with the preferred carrier," Lang said. "I'm anticipating it won't hurt in the negotiations."