Industry associations are worrying about increased regulatory scrutiny of travel and meetings expenditures at bailed-out firmsas travel managers at other companies are tasked with responding to headlines on executive excess. But a panel discussion Wednesday at The Masters Program here showed that these mainstream developments are an afterthought relative to the travel cost-savings initiatives that businesses already were implementing before the media frenzy about corporate jets and junkets.
Visa Inc. this year expects a 23 percent reduction in travel transactions and a 10 percent cut in travel and entertainment spending, PricewaterhouseCoopers expects a 20 percent cut in expenses, including T&E, and Schering-Plough is shaving internal spend by 25 percent and customer-facing T&E expenses by 10 percent, according to travel managers for the three organizations. The cuts came from senior executive support for both tried and new travel management practices and fresh support for policy among travelers happy to have jobs. The anecdotes support various recent industry polls, but the muddier question posed by conference attendees was how long buyers expected this "new normal" to last.
"Some of the things we may not have fully embraced in the past are now being considered and implemented," said PricewaterhouseCoopers director of travel strategy and continuous improvement Kim McGlinn. "People are really following our preferred policies and going along with preferred suppliers more than ever. We're doing everything we can to save headcount, and people recognize that. I'd like to think it's a culture shift [but] to think it will stay exactly as it is today forever would not be realistic. We'll see some modifying of that one day, but hopefully a lot of it sticks and it will be an absolute shift."
Schering-Plough travel director Christopher Allen expected the more aggressive measures--such as his firm's recent decision to require coach instead of business class across the Atlantic--to wane as firms face retention issues driven by strict employee travel policies. The "immediacy to the need to reduce our costs," he said, has created "some pent-up demand there. Those more draconian travel policy changes are not sustainable over the long term. As we launch new products, there will be a requirement to travel more. As we do that, historically, we have seen the trend go up and we have had to cut the legs out from under it. That's kind of what I expect to see."
The Kenilworth, N.J.-based pharmaceutical firm's use of business class across the Atlantic plummeted from 86 percent to 6 percent within a month of the new policy's establishment in April 2008, but it grew again to about 40 percent in the subsequent months after what Allen called "exception creep."
Visa Inc. has maintained many of its class-of-service policies but, in the wake of its initial public offering, revamped its airline relationships following a global request for proposals and moved half of its transatlantic bookings to an airline that was new to the program because of the negotiated savings. "I never anticipated we could move executives from a legacy carrier in the program to a newer entrant, but we were able to do it in the first month, and that trend has sustained," said senior business leader for travel services Ann Kloepfer.
Allen also cited executive support for cost-saving changes in supplier relationships, while Kloepfer added that the airline RFP stemmed partly from senior management, which was "keen on it being a good time to go out to bid" and had initiated the 10 percent spend reduction goal. All the panelists said their executives were more interested than ever in data on travel buying.
For Visa, a decision to implement one expense management system globally required a significant investment, "but a large part of that decision was the need to have complete visibility into T&E expenses," said Kloepfer. "I can almost guess, based on the headline of the day, what data request I'm going to get. Is it going to be a corporate aircraft day, where they want every analytic I can find on corporate aircraft? There's much more prudent usage of the corporate aircraft than there ever was in the past. Is it meetings and events? We have an attendance report that goes up to senior management every Friday so they are looking at how many Visa employees are attending an event. A year ago, that would have never been the case."
"In some cases, we've already completed some RFPs," PwC's McGlinn said. "In other cases, we're fast-tracking some RFPs. We're looking at everything. No stone is left unturned."
Allen agreed. "We're taking a hard look at where people are eating and what we're spending," he said. "It's a large component. When you put that number in front of the CFO ... it's necessary but it's a big number and also a big opportunity." Overall, he said, "the whole goal is that we want to do the same or more business at a lower cost."