Policy Measures Curb Costs: Buyers Face Budget Issues By Adjusting class of Service, Purchase Guidelines

Business travel buyers are trying to keep costs at bay by implementing a bevy of policy changes, including limiting business class travel, mandating advance-purchase guidelines, opting for lower-tiered hotels and leveraging online booking adoption and preferred supplier relationships.

Some are limiting business class air travel by extending the time threshold for permissible upgrades. "There is a creeping up of that window," said Advito vice president for the Americas Bob Brindley.

Some companies have relinquished reimbursable business class travel from policies. "For the most part, the travel policy has been economy travel regardless of the flight time," said Ricoh Americas manager of corporate travel & special events Maria McSorley (see story, page 14). "In the past, we look at airfares that may fall in a full Y category that allowed to upgrade either through airline promotions, part of our agreement or even the individual's miles. In the past, we would pay a coach fare and then pay the difference."

Many Corporate Travel 100 companies are tightening the belt as well. One CT100 buyer's company, because of projected airfare increases, is holding strong with its policy for business class travel, which has an eight-hour threshold for some business units, while others have a 14-hour threshold and other operating units have an economy-class mandate "even if they are flying to the moon."

Another corporation has gone as far as requiring CEO approval for business class. "Business class is permitted on international travel if the CEO approves it or if the international flight is in excess of 10 continuous hours," said Sue Westover, travel administrator for Lake Forest, Ill.-based automotive parts manufacturer Tenneco, which has a $20 million to $25 million companywide air volume. "Our contention is that if you really must go business class, then it is worth your time to request it from the CEO. Usually that curtails them."

Buyers also are considering mandating advance purchase policies, but should proceed with caution, warned Ricoh's McSorley. "It makes sense to require a 14-day advance where normally we require seven, but we are keeping a close eye on putting that type of stipulation in the policy, because that may generate more exchanges and last-minute changes," she said.

Consultant Dale Eastlund, director of air solutions for Carlson Wagonlit Travel's CWT Solutions Group, said such policies should not be set too far in advance. "Seven to 14 days tends to be kind of a magical window in terms of advance purchase where companies realize savings, but the changes in refunds for those tickets don't offset the savings they've gained," he said. "When you start pushing 21 days out and beyond, we find travelers end up making more changes to the transaction and it becomes a non-savings opportunity."

Meanwhile, with hotel prices again on the rise in 2008 (see story, page 4), buyers are promoting in policies the use of moderately priced or limited-service hotels and implementing caps on daily hotel allowances. "It's tightening the belt around utilizing and putting together good programs within the mid-tier pricing of the hotels," said Scholastic corporate travel manager Susan Jane Story, who anticipates a combined air and hotel increase of between 7 percent and 8 percent for her program.

American Express Business Travel Global Advisory Services policy practice leader Rex Heineman anticipated some hotel downgrading in 2008. "We are not seeing policy derived to go outside of the preferred supplier—whether it's air, car or hotel—because there are such benefits in being able to leverage that spend," he said. "We have seen some situations where companies with hotels have altered the level of hotel they have historically used, such as a four-star to a three-star, to a midprice hotel."

Although buyers are exploring scaling down preferred hotel service levels, that doesn't mean upper-tier chains should be thrown by the wayside, said CWT Solutions Group director for hotel solutions Neysa Silver.

"It doesn't always come at the expense of throwing a more luxury brand out, because well-negotiated luxury properties can offer pretty competitive negotiated rates at times, but in general we are seeing the inclusion of more moderately priced branded hotels throughout the program," she said.

Office equipment supplier Ricoh, which has $13 million in U.S. booked air volume, encourages three-star and midprice hotels, but hasn't defined a policy for their use. "We monitor what's being booked on a daily basis through reporting that we receive from our agency and try to stay within that three- or four-star guideline," McSorley said. "It's always a tough area to keep a tight hold on only because a lot of the rates are very seasonal and you have a lot of sold-out situations, so at the end of the day you are banging your head against the wall."

Meanwhile, Westover has found savings in reviewing modes of automobile transportation for short-haul trips.

"We did a matrix on whether it would cheaper to drive for those day trips and pay mileage, or to rent a vehicle with either Hertz or Enterprise," she said. "Pretty much in every scenario it is cheaper for them to rent a vehicle."

Advito's Brindley said reviewing ground transportation policies can lead to savings.

"You have to take the total cost of airfare, rental car or taxi and compare it to what the mileage charges would be," he said. "More and more clients are running those numbers to see what is optimal. With increasing air delays, if you are going from Chicago to Indianapolis, it may be two hours to drive but two hours to fly there, maybe more with all the time getting to the airport beforehand."

Buyer Ellen White, travel manager for McClatchy Shared Services also recommended a hard look at ground transportation policies as prices increase. "If you rent a vehicle and then you have to pay for parking for the vehicle, there are ways to calculate whether or not that is the best option or to take available transportation," said White.

Meanwhile, buyers are also looking outside of the air, car and hotel buckets to find savings, according to American Express' Heineman, including in travel-related telecommunications. "That's important, because we estimate it's 8 to percent 10 percent of a company's overall T&E spend," he said. "Besides, it's not just companies saying that you can have a cell phone and we'll reimburse $50, it's putting guidelines around understanding what the spend is within the company and really taking in to consideration all the new technologies."

Heineman also noted driving online booking tool adoption has become "symbolic" of a savings area.

"From a domestic standpoint, we are seeing more and more of them focusing on now is the time it's been long enough, we are now going to mandate," Heineman said.

Ricoh actively encouraged the use of its Cliqbook preferred online booking tool and has a 68 percent adoption rate in a nonmandated environment. "If the traveler books seven days in advance online and it's under $500, they can use tool without having to seek further approval for domestic travel," McSorley said. "We've added specific instructions in the training portal encouraging the use of the online booking tool."