As business travel expenses nose upward, companies are realizing that better cost-management techniques can make a difference
US.
corporate travel expenses rocketed to more than $143 billion in 1994,
according to American Express' most recent survey on business travel
management. Private-sector employers spend an estimated $2,484 per
employee on travel and entertainment, a 17 percent increase over the
past four years.
Corporate T&E costs, now the third-largest
controllable expense behind sales and data-processing costs, are under
new scrutiny. Corporations are realizing that even a savings of 1
percent or 2 percent can translate into millions of dollars added to
their bottom line.
Savings of that order are sure to get
management's attention, which is a requirement for this type of project.
Involvement begins with understanding and evaluating the components of
T&E management in order to control and monitor it more effectively.
Hands-on
management includes assigning responsibility for travel management,
implementing a quality-measurement system for travel services used, and
writing and distributing a formal travel policy. Only 64 percent of U.S.
corporations have travel policies.
Even with senior management's
support, the road to savings is rocky-only one in three companies has
successfully instituted an internal program that will help cut travel
expenses, and the myriad aspects of travel are so overwhelming, most
companies don't know where to start. "The industry of travel is based on
information," says Steven R. Schoen, founder and CEO of The Global
Group Inc. "Until such time as a passenger actually sets foot on the
plane, they've [only] been purchasing information."
If that's the
case, information technology seems a viable place to hammer out those
elusive, but highly sought-after, savings. "Technological innovations in
the business travel industry are allowing firms to realize the
potential of automation to control and reduce indirect [travel] costs,"
says Roger H. Ballou, president of the Travel Services Group USA of
American Express. "In addition, many companies are embarking on quality
programs that include sophisticated process improvement and
reengineering efforts designed to substantially improve T&E
management processes and reduce indirect costs."
As companies look to technology to make potential savings a reality, they can get very creative about the methods they employ.
The Great Leveler
Centralized
reservation systems were long the exclusive domain of travel agents and
other industry professionals. But all that changed in November 1992
when a Department of Transportation ruling allowed the general public
access to systems such as Apollo and SABRE. Travel-management software,
such as TripPower and TravelNet, immediately sprang up, providing
corporations insight into where their T&E dollars are being spent.
The
software tracks spending trends by interfacing with the corporation's
database and providing access to centralized reservation systems that
provide immediate reservation information to airlines, hotels and car
rental agencies. These programs also allow users to generate
computerized travel reports on cost savings with details on where
discounts were obtained, hotel and car usage and patterns of travel
between cities. Actual data gives corporations added leverage when
negotiating discounts with travel suppliers.
"When you own the
information, you don't have to go back to square one every time you
decide to change agencies," says Mary Savovie Stephens, travel manager
for biotech giant Chiron Corp.
Sybase Inc., a client/server
software leader with an annual T&E budget of more than $15 million,
agrees. "Software gives us unprecedented visibility into how employees
are spending their travel dollars and better leverage to negotiate with
travel service suppliers," says Robert Lerner, director of credit and
corporate travel services for Sybase Inc. "We have better access to
data, faster, in a real-time environment, which is expected to bring us
big savings in T&E. Now we have control over our travel information
and no longer have to depend exclusively on the agencies and airlines."
The
cost for this privilege depends on the volume of business. One-time
purchases of travel-management software can run from under $100 to more
than $125,000. Some software providers will accommodate smaller users by
selling software piecemeal for $5 to $12 per booked trip, still a
significant savings from the $50 industry norm per transaction.
No More Tickets
Paperless
travel is catching on faster than the paperless office ever did as both
service providers and consumers work together to reduce ticket prices
for business travelers. Perhaps the most cutting-edge of the advances is
"ticketless" travel, which almost all major airlines are testing.
In
the meantime, travel providers and agencies are experimenting with new
technologies to enable travelers to book travel services via the
Internet, e-mail and unattended ticketing kiosks. Best Western
International, Hyatt Hotels and several other major hotel chains market
on the Internet. These services reduce the need for paper and offer
better service and such peripheral benefits as increased efficiency,
improved tracking of travel expenses and trends, and cost reduction.
Dennis
Egolf, CFO of the Veterans Affairs Medical Center in Louisville, Ky.,
realized that the medical center's decentralized location, a
quarter-mile from the hospital, made efficiency difficult. "We were
losing production time and things got lost," he says. "Every memo had to
be hand-carried for approval, and we required seven different copies of
each travel order." As a result, Egolf tried an off-the-shelf,
paper-reduction software package designed for the federal government.
The
software allows the hospital to manage travel on-line, from tracking
per-diem allowances and calculating expenses to generating cash advance
forms and authorizing reimbursement vouchers. The software also lets the
hospital keep a running account of its travel expenses and its
remaining travel budget.
"Today, for all practical purposes, the
system is paperless," says Egolf. The software has helped the hospital
reduce document processing time by 93 percent. "The original goal
focused on managing employee travel without paper," he says. "We have
achieved that goal, in part due to the efforts of the staff and in part
due to the accuracy of the software."
With only a $6,000
investment, the hospital saved $70 each employee trip and saved almost
half of its $200,000 T&E budget through the paper-reduction program.
Out There
Consolidation
of corporate travel arrangements by fewer agencies has been a growing
trend since 1982. Nearly three out of four companies now make travel
plans for their business locations through a single agency as opposed to
51 percent in 1988. Two major benefits of agency consolidation are the
facilitation of accounting and T&E budgeting, as well as leverage in
negotiating future travel discounts.
A major technological
advance that allows this consolidation trend to flourish is the
introduction of satellite ticket printers (STPs). Using STPs enables a
travel agency to consolidate all operations to one home office, and
still send all necessary tickets to various locations instantly via
various wire services. As the term implies, the machinery prints out
airline tickets on-site immediately, eliminating delivery charges.
For
London Fog, STPs are a blessing. London Fog's annual T&E budget of
more than $15 million is split equally between its two locations in
Eldersburg, Md., and New York City. Each location purchases the same
number of tickets, so equal access to ticketing from their agency is a
must. With an STP in their two locations, the company services both
offices with one agency in Baltimore. Each office has access to
immediate tickets and still manages to save by not having to pay courier
and express mail charges that can range up to $15 for each of the more
than 500 tickets each purchases annually.
Conde Nast Publications'
annual T&E budget of more than $20 million is allocated among its
locations in Los Angeles, San Francisco, Chicago, New York and Detroit.
Since 1994, travel arrangements have been handled by a centralized
agency, Advanced Travel Management in New York City, by installing an
STP in each of these five locations. In addition to increased efficiency
due to consolidation, Conde Nast now has the ability to change travel
plans at a moment's notice and have new tickets in hand instantly.
The
real benefit is that the machines are owned and maintained by the
travel agency., so there is no cost to the company. Due to the major
expense involved, however, STPs remain an option only for major ticket
purchasers. "STPs are a viable option in this process for any location
that purchases more than $500,000 per year in tickets," says Shoen.
As
airfare averages 43 percent of any company's T&E expenses, savings
obtainable through the various uses of technology have become dramatic.
For example, the ability of corporations to collect and analyze their
own travel trends has led to the creation of net-fare
purchasing-negotiating a price between a corporation and an airline to
purchase tickets that does not include the added expenses of
commissions, overrides, transaction fees, agency transaction fees and
other discounts.
Although most major U.S. carriers publicly
proclaim that they don't negotiate corporate discounts below published
market fares, the American Express survey on business travel management
found that 38 percent of U.S. companies had access to, or already had
implemented, negotiated airline discounts. The availability and
mechanics of these arrangements vary widely by carrier.
What's the Price?
Fred
Swaffer, transportation manager for Hewlett-Packard and a strong
advocate of the net-pricing system, has pioneered the concept of
fee-based pricing with travel-management companies under contract with
H-P. He states that H-P, which spends more than $528 million per year on
T&E, plans to have all air travel based on net-fare pricing. "At
the present time, we have several net fares at various stages of
agreement," he says. "These fares are negotiated with the airlines at
the corporate level, then trickle down to each of our seven geographical
regions."
Frank Kent, Western regional manager for United
Airlines, concurs: "United Airlines participates in corporate volume
discounting, such as bulk ticket purchases, but not with net pricing. I
have yet to see one net-fare agreement that makes sense to us. We're not
opposed to it, but we just don't understand it right now."
Kent
stresses, "Airlines should approach corporations with long-term
strategic relationships rather than just discounts. We would like to see
ourselves committed to a corporation rather than just involved."
As business travel expenses nose upward, companies are realizing that better cost-management techniques can make a difference.
US.
corporate travel expenses rocketed to more than $143 billion in 1994,
according to American Express' most recent survey on business travel
management. Private-sector employers spend an estimated $2,484 per
employee on travel and entertainment, a 17 percent increase over the
past four years.
Corporate T&E costs, now the third-largest
controllable expense behind sales and data-processing costs, are under
new scrutiny. Corporations are realizing that even a savings of 1
percent or 2 percent can translate into millions of dollars added to
their bottom line.
Savings of that order are sure to get
management's attention, which is a requirement for this type of project.
Involvement begins with understanding and evaluating the components of
T&E management in order to control and monitor it more effectively.
Hands-on
management includes assigning responsibility for travel management,
implementing a quality-measurement system for travel services used, and
writing and distributing a formal travel policy. Only 64 percent of U.S.
corporations have travel policies.
Even with senior management's
support, the road to savings is rocky-only one in three companies has
successfully instituted an internal program that will help cut travel
expenses, and the myriad aspects of travel are so overwhelming, most
companies don't know where to start. "The industry of travel is based on
information," says Steven R. Schoen, founder and CEO of The Global
Group Inc. "Until such time as a passenger actually sets foot on the
plane, they've [only] been purchasing information."
If that's the
case, information technology seems a viable place to hammer out those
elusive, but highly sought-after, savings. "Technological innovations in
the business travel industry are allowing firms to realize the
potential of automation to control and reduce indirect [travel] costs,"
says Roger H. Ballou, president of the Travel Services Group USA of
American Express. "In addition, many companies are embarking on quality
programs that include sophisticated process improvement and
reengineering efforts designed to substantially improve T&E
management processes and reduce indirect costs."
As companies look to technology to make potential savings a reality, they can get very creative about the methods they employ.
The Great Leveler
Centralized
reservation systems were long the exclusive domain of travel agents and
other industry professionals. But all that changed in November 1992
when a Department of Transportation ruling allowed the general public
access to systems such as Apollo and SABRE. Travel-management software,
such as TripPower and TravelNet, immediately sprang up, providing
corporations insight into where their T&E dollars are being spent.
The
software tracks spending trends by interfacing with the corporation's
database and providing access to centralized reservation systems that
provide immediate reservation information to airlines, hotels and car
rental agencies. These programs also allow users to generate
computerized travel reports on cost savings with details on where
discounts were obtained, hotel and car usage and patterns of travel
between cities. Actual data gives corporations added leverage when
negotiating discounts with travel suppliers.
"When you own the
information, you don't have to go back to square one every time you
decide to change agencies," says Mary Savovie Stephens, travel manager
for biotech giant Chiron Corp.
Sybase Inc., a client/server
software leader with an annual T&E budget of more than $15 million,
agrees. "Software gives us unprecedented visibility into how employees
are spending their travel dollars and better leverage to negotiate with
travel service suppliers," says Robert Lerner, director of credit and
corporate travel services for Sybase Inc. "We have better access to
data, faster, in a real-time environment, which is expected to bring us
big savings in T&E. Now we have control over our travel information
and no longer have to depend exclusively on the agencies and airlines."
The
cost for this privilege depends on the volume of business. One-time
purchases of travel-management software can run from under $100 to more
than $125,000. Some software providers will accommodate smaller users by
selling software piecemeal for $5 to $12 per booked trip, still a
significant savings from the $50 industry norm per transaction.
No More Tickets
Paperless
travel is catching on faster than the paperless office ever did as both
service providers and consumers work together to reduce ticket prices
for business travelers. Perhaps the most cutting-edge of the advances is
"ticketless" travel, which almost all major airlines are testing.
In
the meantime, travel providers and agencies are experimenting with new
technologies to enable travelers to book travel services via the
Internet, e-mail and unattended ticketing kiosks. Best Western
International, Hyatt Hotels and several other major hotel chains market
on the Internet. These services reduce the need for paper and offer
better service and such peripheral benefits as increased efficiency,
improved tracking of travel expenses and trends, and cost reduction.
Dennis
Egolf, CFO of the Veterans Affairs Medical Center in Louisville, Ky.,
realized that the medical center's decentralized location, a
quarter-mile from the hospital, made efficiency difficult. "We were
losing production time and things got lost," he says. "Every memo had to
be hand-carried for approval, and we required seven different copies of
each travel order." As a result, Egolf tried an off-the-shelf,
paper-reduction software package designed for the federal government.
The
software allows the hospital to manage travel on-line, from tracking
per-diem allowances and calculating expenses to generating cash advance
forms and authorizing reimbursement vouchers. The software also lets the
hospital keep a running account of its travel expenses and its
remaining travel budget.
"Today, for all practical purposes, the
system is paperless," says Egolf. The software has helped the hospital
reduce document processing time by 93 percent. "The original goal
focused on managing employee travel without paper," he says. "We have
achieved that goal, in part due to the efforts of the staff and in part
due to the accuracy of the software."
With only a $6,000
investment, the hospital saved $70 each employee trip and saved almost
half of its $200,000 T&E budget through the paper-reduction program.
Out There
Consolidation
of corporate travel arrangements by fewer agencies has been a growing
trend since 1982. Nearly three out of four companies now make travel
plans for their business locations through a single agency as opposed to
51 percent in 1988. Two major benefits of agency consolidation are the
facilitation of accounting and T&E budgeting, as well as leverage in
negotiating future travel discounts.
A major technological
advance that allows this consolidation trend to flourish is the
introduction of satellite ticket printers (STPs). Using STPs enables a
travel agency to consolidate all operations to one home office, and
still send all necessary tickets to various locations instantly via
various wire services. As the term implies, the machinery prints out
airline tickets on-site immediately, eliminating delivery charges.
For
London Fog, STPs are a blessing. London Fog's annual T&E budget of
more than $15 million is split equally between its two locations in
Eldersburg, Md., and New York City. Each location purchases the same
number of tickets, so equal access to ticketing from their agency is a
must. With an STP in their two locations, the company services both
offices with one agency in Baltimore. Each office has access to
immediate tickets and still manages to save by not having to pay courier
and express mail charges that can range up to $15 for each of the more
than 500 tickets each purchases annually.
Conde Nast Publications'
annual T&E budget of more than $20 million is allocated among its
locations in Los Angeles, San Francisco, Chicago, New York and Detroit.
Since 1994, travel arrangements have been handled by a centralized
agency, Advanced Travel Management in New York City, by installing an
STP in each of these five locations. In addition to increased efficiency
due to consolidation, Conde Nast now has the ability to change travel
plans at a moment's notice and have new tickets in hand instantly.
The
real benefit is that the machines are owned and maintained by the
travel agency., so there is no cost to the company. Due to the major
expense involved, however, STPs remain an option only for major ticket
purchasers. "STPs are a viable option in this process for any location
that purchases more than $500,000 per year in tickets," says Shoen.
As
airfare averages 43 percent of any company's T&E expenses, savings
obtainable through the various uses of technology have become dramatic.
For example, the ability of corporations to collect and analyze their
own travel trends has led to the creation of net-fare
purchasing-negotiating a price between a corporation and an airline to
purchase tickets that does not include the added expenses of
commissions, overrides, transaction fees, agency transaction fees and
other discounts.
Although most major U.S. carriers publicly
proclaim that they don't negotiate corporate discounts below published
market fares, the American Express survey on business travel management
found that 38 percent of U.S. companies had access to, or already had
implemented, negotiated airline discounts. The availability and
mechanics of these arrangements vary widely by carrier.
What's the Price?
Fred
Swaffer, transportation manager for Hewlett-Packard and a strong
advocate of the net-pricing system, has pioneered the concept of
fee-based pricing with travel-management companies under contract with
H-P. He states that H-P, which spends more than $528 million per year on
T&E, plans to have all air travel based on net-fare pricing. "At
the present time, we have several net fares at various stages of
agreement," he says. "These fares are negotiated with the airlines at
the corporate level, then trickle down to each of our seven geographical
regions."
Frank Kent, Western regional manager for United
Airlines, concurs: "United Airlines participates in corporate volume
discounting, such as bulk ticket purchases, but not with net pricing. I
have yet to see one net-fare agreement that makes sense to us. We're not
opposed to it, but we just don't understand it right now."
