In a quest to increase contract compliance by vendors and service providers, and travel policy compliance by travelers, Siemens Shared Services LLC has found that real-time audits of airline and hotel bookings can deliver substantial cost avoidance. Auditing half of its airline bookings, Siemens in its last fiscal year identified more than $2.4 million in cost-avoidance opportunities, while a hotel audit found another $260,000 worth of overcharges in room bookings.
"Our responsibility is to ensure that our suppliers are providing the correct and lowest rates to travelers, and that travelers are booking the preferred hotels that Siemens has spent the time to negotiate," Siemens North American travel manager Mary Straub said during a January Procurement.travelwebinar on real-time data uses.
"We consider our TMC and online booking provider to be two of our most important partners. In our SLAs (service level agreements) with them, they are required to offer the lowest, in-policy fare at least 98 percent of the time. We use an independent, third-party auditor who ensures that they meet or exceed the SLA. We report this metric throughout our company and use it as supporting documentation to prove our ability to beat the public Internet travel market."
Siemens queues a predetermined percentage of the airline reservations booked in its online booking tool or by its agency to its audit firm. "Not all of those records can be audited," Straub said. The audit is designed to verify that bookings are in compliance with the Siemens travel policy that requires booking at the lowest in-policy fare, and that it is booked correctly against its airline contracts.
[PROFILE_1]In its 2008 fiscal year ended in October, Straub said the third-party provider audited more than 170,00 airline reservations and "identified a little more than $1.7 million in agent, system or rate-loading errors." Fare decreases on tickets booked identified $700,000 more in potential savings, and the agency was able to convert nearly $300,000 once tickets were rebooked at the lower fares. The auditing of both air and hotel records costs about $200,000 a year, Straub said.
When problems are identified, the auditor queues the reservation back to the agency to correct them.
100% Audit Of Hotels
"On the hotel piece, we are auditing every single hotel reservation," Straub said. The audit is designed to verify that each passenger name record for an overnight trip includes a hotel booking, that the preferred hotel is booked and at the negotiated rate.
The purpose of the preferred hotel program is to negotiate lower rates in key destinations to reduce costs. But to be seen on the bottomline, Straub said, bookings have to be made at the preferred properties and rates. "Sometimes that's a challenge," she added.
TMCs and online tools are not always able to book the Siemens preferred rates. For whatever reason, the negotiated rates aren't available at the time of booking. The audit is designed to check that employees, online booking tools and agents have booked hotels for overnight stays and at the best rates.
When the auditor finds overnight stays that don't include hotel bookings or bookings at the preferred properties, an automated message is sent to the traveler to remind him/her to book within the controlled channels, Straub added. If the booked rate is higher than the negotiated rate at a preferred property, an e-mail is sent to the hotel to adjust the rate to the Siemens negotiated rate prior to check in.
"This has been really successful for us so far," Straub said.
[PULL_1]The overcharges were identified on more than 88,000 hotel rates audited from October 2007 to 2008. Siemens was able to have these rates "changed prior to check in at hotels," Straub said. The audit also revealed some instances in which the TMC booked a nonpreferred property. "The SLA dictates how we handle this with our TMC," Straub explained. Often, nonpreferreds are booked due to traveler preference," she added. "This is not really an agency issue as much as it is traveler preference."
Siemens had planned to extend use of the audit data by contacting travelers who didn't book a hotel or a preferred hotel before the trip commences, but has since found an alternate way of managing this opportunity.
Polling of webinar participants indicated that Siemens is not alone in the quest to push compliance. Asked how their organizations use real-time data, 84 percent of 97 webinar participants said they use it "to identify out-of-policy bookings," while 44 percent said they use it "to confirm application of preferred fares." Asked why their organizations collect data at the point of sale, 90 percent of webinar participants cited "why a traveler may have booked a noncompliant/ more expensive fare or rate."
Audits Among Data Tools
Use of pretrip audits is just one of the data-driven initiatives aimed at traveler compliance at Siemens, Straub said.
"Previous data initiatives drove traveler compliance and locked down more than $14 million in savings in fiscal year 2007," she said. "This allowed Siemens to move on to real-time supplier audits and quality control last year." Among those data-driven initiatives were goals of at least 65 percent compliance to online booking policy. As it ended its 2008 fiscal year, online booking compliance stood at 74 percent, "so we're hugely happy with that."
Other goals last year were to increase preferred hotel usage to more than 70 percent compliance in destinations where Siemens has negotiated properties and improve advance booking, Straub said. "Our advance booking has improved. It's not where we want it, but it's a matter of us spending time with what we call a KPI [key performance indicator] scorecard at the end of the month that shows managers which of their travelers are in compliance and which are not.
"With the use of KPI scorecard reporting, we decreased our maverick spend as a company into the single digits," Straub added. "This is all by use of data and using the data to educate our management and travelers." [For more information, see " Changing Behavior: Siemens Measures Cost Of Noncompliance.]