Control, cost-savings and transparency have enticed such companies as Moog, WellPoint and Wal-Mart to become ARC-designated corporate travel departments, and those reasons continue to resonate today, as an increasing number of companies consider the option to manage travel.
"We're seeing a definite increase in interest in CTDs from both large and mid-cap accounts," said Partnership Travel Consulting owner Andy Menkes, who attained the first CTD 13 years ago while a travel manager for Republic National Bank. "The reason is that the financial models for [these] companies is a pass-through of all supplier income, and the most efficient and transparent way to accomplish that is through a CTD."
An airline-owned entity, ARC provides transaction settlement and data management services for airlines, railroads and other travel suppliers, and travel agencies, corporate travel departments and other buyers. On behalf of the airlines, ARC accredits buyers, including travel agencies and CTDs, and annually processes about $70 billion worth of transactions. The CTD accreditation allows corporations to issue tickets and track supplier commission payments using their own ARC number, not the travel management company's.
"The biggest revenue stream left in the industry is clearly hotel commissions," Menkes said. "If the hotel bookings are done through the ARC number, it's absolute assurance that all checks, all commissions will go only to that address. It's not easy for an agency to track which client a payment goes to. The agency might receive a check for $5,000, but it doesn't show which bookings are included."
Margaret Kelly, ARC business development manager for CTDs, has noticed increased interest in the CTD from larger accounts, but has averaged only about a dozen new CTDs a year for the last couple years.
[PROFILE_1]More than 250 companies have taken the CTD route since the option first became available on a permanent basis in 1999; just 130 entities actively use the designation, according to ARC. The variance is due to mergers, acquisitions or, in some cases, abandonment of the status, explained Kelly. Travel volume for CTDs ranges from less than $1 million a year to hundreds of millions.
"The dynamic change seems to be more interest coming from larger accounts," agreed Menkes. "If they can get commissions paid directly to the company, then they are assured that the agency only has an income stream from the client, which is how most supplier relationships operate."
Designated companies must appoint an individual responsible for the TMC relationship, but can opt to insource or outsource as much of the travel management function as they wish. Unlike travel agency accreditation, CTD status enables a company to book travel only for its employees, owners and officers.
Some CTDs, such as newcomer WellPoint (Procurement. travel, December 2009) continue to rely upon TMCs and a variety of suppliers to manage their travel. Others, like Moog and Wal-Mart, opt to manage it all on their own.
Balancing Cost And Service
For the 101st CTD--Moog Inc.--going the CTD route was an easy decision to ensure it struck the precise balance of cost and service for its employees. Moog travel services manager Kathy Hall-Zientek said the need to apply for a CTD nearly a decade ago became readily apparent as she traveled with the account manager of her then-outsourced travel management company. "I was paying to teach this individual how to best manage corporate travel. I realized that I was paying for services that I shouldn't be."
At the time, Moog used the "rent a plate" concept, meaning it employed its own reservationists to book tickets and manage travel, but contracted with a travel agency to use its ARC appointment as a branch location of that agency. "My staff was arranging all the travel, yet still paying a TMC every time we hit the button to issue a ticket. We paid literally to be a branch. It just didn't make financial sense to do that. We were either going to become more self-sufficient or outsource. We had to decide."
Hall-Zientek presented the case to senior management and hired consultant Menkes to help "seal the deal." Within 20 minutes, execs understood the benefits, she noted.
Domestic travel was already consolidated at Moog and had been since 1978, Hall-Zientek said. Moog's four full-time travel reservationists continue to book all reservations for the company's 2,000 corporate cardholders who travel an average of three times a year. The company typically has about 750 travelers on the road at any time. The reservationists also book an average of five small meetings of 10 to 30 participants each month and manage leased aircraft charters and temporary housing. The leased aircraft is critical for travel to destinations that don't have commercial flight service.
While many companies curtailed or froze travel during the latest economic downturn, Hall-Zientek said Moog "was in an acquisition stage" that forced the travel team to book more travel pertaining to the growth. The team also found that it needed to train newly acquired employees on the policy and travel services. For that, the travel team relied on WebEx to communicate Moog's travel program and booking procedures.
More than 20 percent of Moog's travel transactions, but 55 percent of its travel spend, involve international routings. The experienced agents are accustomed to international bookings. Employees email or phone the reservationists as the company has yet to implement an online booking system. Volume has risen in the past couple of years, but Hall-Zientek said staffing has remained consistent.
In addition to travel bookings, the team, which includes an accounting resource, does all ARC reporting internally and manages all expense reconciliation, which is automated with the ExpenSite expense reporting tool from Databasics.
"The ability to move market share and negotiate has resulted in over $1 million a year in airline savings," Hall-Zientek said. Management--Moog's travel services reports to treasury--still "questions the lack of resources from rebates," so she "definitely has to emphasize the hard-dollar savings" and highlight the soft-dollar savings that the company is reporting.
In addition to hotel commissions, revenue streams for CTDs include those from car rental, credit card and global distribution system providers, meeting vendors, airlines, other suppliers and value-added tax.
Hall-Zientek has always held her own supplier contracts with airlines, GDSs, hotels and other travel-related providers. "I don't change [suppliers] unless I absolutely have to," she said. "I have to believe I'm getting good deals due to loyalty and long-term commitments."
What's Next
Even so, Hall-Zientek is always seeking ways to improve the current status. "I have been encouraging management to conduct an analysis on the current configuration versus outsourcing," she said. "I'm looking to globalize, and there are always thoughts of what we could do if we outsourced."
Responsible only for U.S.-originating travel, Moog's managers currently do not know "what we spend on a global basis. Each country has relationships with TMCs" that range from local "mom and pop agencies to global." Hall-Zientek said colleagues, especially those in five different United Kingdom and Ireland locations, have asked how to "piggyback" on her program. Moog also has begun to look at credit card programs and contracts to better understand the global scope of travel spending and the opportunities. "Your typical CTD needs the help of a TMC to globalize travel services. You need someone who knows the laws in each country and is represented there to provide assistance to travelers and operatives in each country. I've had several TMCs come in to introduce what they could do to globalize the program," she said, noting she will continue to explore that.
Moog also seeks "ways in which we can operate more efficiently," Hall-Zientek said. "I just formed a committee--including finance, international travelers, risk management and travel department employees--to look at our travel policy. We've always been known as being very pro-traveler, with a soft travel policy that hasn't been updated for a while, so we're going to update the policy in the next couple of months."
The travel team also is looking at new technologies that range from online booking and attendee management to credit card reconciliation software that merges credit card feeds into its back-office system. Moog already pulls in credit card feeds to the expense tool to ease the expense reporting process. "Online booking is definitely something I need to take a second look at," Hall-Zientek said, "as we're at a stage where our volume is definitely going up.
"We're also starting to do a lot of pretrip reports that we've never done before," Hall-Zientek added. The reports are not designed to monitor travelers, but to notify management of upcoming trips to specific destinations and locate travelers.
Moog, like many of its peers, worked for days to route travelers stranded by the Iceland ash clouds. "My staff was probably putting in 12 hours a day. We managed to get them all home. A group of eight travelers in India were especially frustrated, but we got a lot of compliments from travelers who told management how helpful we were. We even got calls from ex-employees who were stuck" and asked for assistance. "It really reconfirmed" the level of service and knowledge of the team.
Benchmarking With Peers
Hall-Zientek validates her program, discusses the latest industry trends and sources reasonably priced software options with her fellow CTDs. "There's better and stronger networking with CTDs. They are managed and run by experts," she said.
Three years ago, Hall-Zientek and eight other CTDs founded the Corporate Travel Department Association, which now numbers about 43 members. As chair of the CTDA, Hall-Zientek frequently talks to companies considering the CTD. "It's not something that a corporation makes a decision on in a short period of time," she said. "It's something they have to map out," sometimes taking longer than a year. "Fear of liability, lack of understanding and not convinced of the concept" are often obstacles that companies must overcome before they recognize the advantages. "Everyone is so busy; they often put it on the back burner."
ARC's Kelly has been talking to some companies about the CTD for more than three years. Recently, some of those companies have finally applied for and earned the status, she said.
While most are in agreement that use of a CTD designation is helpful to track hotel commissions, some question whether such use could negatively impact airline overrides or other benefits that a TMC is able to negotiate and share. "You can outsource, insource--there are so many different models within the CTD," Hall-Zientek said. "Being in the driver's seat is very important," and the CTD provides companies with that control.
"One of the side benefits of the CTD," noted Menkes, "is the flexibility of the model: You don't have to take all the products from one TMC. You can negotiate a direct contract with an online booking tool, services for traditional bookings and your own contracts for middleware or other software. Normally, you get all of that vertically from one TMC."
ARC Streamlines Process
At the urging of CTDs and prospects, ARC last year overhauled the CTD application process to streamline the paperwork. Payment of the $2,100 fee now is due when a company files the completed CTD application, instead of when the application kit was requested. Kelly said the CTD approval process can take about 90 days from the time the company files all the documentation. CTDs also pay a $175 annual fee and a fee of about 2 cents per transaction for more than 1,000 transactions a quarter. In exchange, they receive access to ARC's online reporting functionality to reconcile and manage reports on their activity and the database of 39 months of ticketing activity.
"It works for me. It works for my organization," Hall-Zientek said. "We get a lot of compliments on the service we deliver and put service as a top priority, along with cost savings."