New Year's resolution: Control travel spend
Online booking services could save money.
By Karen Prema -- Purchasing, 1/12/2006 2:00:00 AM
Here's a new year's resolution for 2006: Visualize, manage and leverage as much travel spend as possible. How? Through policy, technology and reports. According to American Express Business Travel, travel and entertainment now comprise 15% of all indirect operating expenses. That percentage could get higher: The organization predicts that in 2006 more global travel will lead to a strong demand and higher air and hotel prices. One solution: outsource management of travel and entertainment. In fact, Matthew Davis, director of American Express Consulting says such outside management can increase net income by 8%.
Case in point: Verizon Communications. Outside travel management saved the company $11 million, or more than 30% of its travel account. The travel team consists of three people in the strategic sourcing organization, and has been working with travel-management companies for the past few years to leverage its travel spend, according to Debra Goldmann, senior specialist for travel services.
Last year, the travel team held an online reverse auction and chose American Express as its travel management provider from four competing suppliers. Through a traditional RFP, the company chose the online tool GetThere to book flights and hotel rooms. Working through the same software, American Express completes the reservations. It determines if the traveler found the best rates through the booking tool. While the company doesn't require employees to use the online system, it certainly encourages it. In fact, Verizon increased its online adoption rate to 83% because online transaction fees are 50% less than offline.
The travel team sets up deals with airlines, rental car agencies, hotels, travel agencies and corporate credit card suppliers. The team imported the preferred suppliers, negotiated terms and the travel policy, and loaded all into the GetThere online booking tool. For a hotel program, strategic sourcing tried to use an auction, but that proved unsuccessful, so staff negotiated with hotels in the top-traveled cities to get the best rates.
Verizon gets a good rate from American Express because of its high (88%) rate of online bookings with no human intervention. This means agents don't have to go into the system to change the itinerary. One reason that continues to drive adoption is that Verizon's American Express agents remind buyers when they call that they should be using the online tool whenever necessary, says Goldmann.
Verizon's travel policy is firm, but flexible. Its elements include:
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Fly lowest logical airfare.
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Book online whenever possible.
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Travelers can choose their own airport regardless of fare cost.
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Business class only on International flights longer than six hours.
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Pre-trip approval not required.
"Issues come up most when people are booking out of policy," says Goldmann. GetThere provides traveler profiles that include required fields such as user's e-mail address and supervisor's e-mail address. The tool generates monthly reports that include the reason travelers traveled out of policy. "You can determine if you are going to tolerate it or not," says Goldmann, "But, since most departments are on their own budget they are more conscious of the spend."
American Express generates random surveys. In addition, the Verizon travel team has an agency report card that contains customer feedback gathered through an e-mail travel mailbox that all its travelers have access to.
There is no pre-trip approval
Once the traveler returns from his or her trip, reports are generated and reviewed by strategic sourcing. It reviews reports from its corporate card provider, which is GE Corporate Payment Services, and from American Express. It also receives prism reports that strategic sourcing provides suppliers to validate data, since strategic sourcing has targets. The reports are beneficial for future reference to track travel patterns.
"We drive behavior by the cost of the transaction," says Goldmann. The offline transaction fee is double the online transaction fee. The company has seen more than 30% savings by booking online. "The bottom line is that we say book online whenever possible," Goldmann says. "Based on visual guilt, the company saved 14%. Visual guilt results from travelers having the ability to shop, and they tend to make good decisions for themselves and tend to be more flexible in their schedules." When travelers see they can get a better rate and compare, they will typically opt for the lower price.
American Express' regional forecasts for global business travel prices in 2006
| Source: American Express | ||||
|
Published air fares |
Published hotel fares |
|||
| Region |
Domestic/Short-haul (Economy class) |
International/Long-haul (Business class) |
Mid-range |
Upper-range |
North America |
5 to 8% |
2 to 6% |
0 to 3% |
2 to 5% |
Japan |
2 to 3% |
3 to 4% |
3 to 4% |
5 to 6% |
Europe |
0 to 4% |
4 to 6% |
1 to 3% |
2 to 4% |
Latin Amer.& Carib. |
2 to 5% |
4 to 7% |
2 to 4% |
3 to7% |
| Global | 3 to 6% |
3 to 5% |
1 to 3% |
3 to 5% |
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