Spending & Program Complexity Increasing for Biggest Buyers

Like most corporate travel programs, the very largest are in a period of growth, driven by corporate profitability and an ongoing pursuit of incremental revenue. Coinciding with travel price inflation, such growth translates to higher spending, which in turn prompts greater scrutiny of that spending. As a result, big organizations are leaning on their travel management companies to uncover savings opportunities and apply technology to further optimize their travel programs.

Nearly all reported T&E and air volumes showed continued spending growth in 2011, but at a pace slower than last year's. Among 64 companies spending at least $30 million in U.S. booked air volume—most of which are represented here in the 2011 Business Travel News Corporate Travel 100—total U.S. T&E last year jumped on average by 19 percent over 2009 levels. This year, the average annual increase is projected at about 6 percent. On a global level, T&E among surveyed organizations soared 20 percent on average in 2010, and is projected to increase this year by another 5 percent.

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Similar trends are observed specifically for net booked air volumes, both at the U.S. point of sale and globally. The exception is Europe, where surveyed companies last year on average increased air volume by 22 percent but this year expect an average retreat of 3 percent.

Overall so far in 2011, "we have been up about 5 percent to 10 percent [in transaction volume] over 2010," said Mike Janssen, BCD Travel Americas president. "Larger clients expect a slowdown to happen in the fourth quarter. They are taking some actions now, but most are continuing to spend but expect to put the brakes on a little heavier starting in the fourth quarter this year. My expectation that the 5 to 10 percent growth over last year is probably going to go to flat, maybe slightly below last year."

Pedro Paredes, American Express Global Business Travel vice president of client solutions, this year has observed what he called a "re-evaluation" of travel spending, a far cry from the severe across-the-board cuts from 2008 and 2009. "As [travel] prices are going up, the C-level is getting a little concerned," he said. "Customers are asking, 'How can we maximize T&E budgets?' They are looking for strategies to push the buck further and optimize that spend."

According to Janssen, prioritizing optimization also has meant clients are investing in strategic aspects of their programs. "When you looked at things like technologies and consulting, that is not where the money was being spent," said Janssen. "Now it is being spent in those areas again."

Technologies drawing interest among larger clients include pre-trip auditing, policy compliance tools, streamlined exception processes and other automation. The idea is to uncover savings after bookings but before trips commence, by switching to lower fares or rates and/or moving travelers from non-preferred suppliers to preferred ones.

"Clients are looking to get data in a more real-time fashion that allows them to drive greater compliance to their program and determine if the traveler should even go," Janssen said, noting both an emphasis on business travel's return on investment—i.e. focusing on revenue-generating trips and cutting other types—and attention to traveler safety when trips are planned to high-risk destinations.

Consulting Strategies principal Mark Walton said program management technologies meant to enforce policy and improve behavior "have not been as readily available, especially on a multinational basis. But they are getting better and used more. It's a newer area, and clients are starting to look at this more carefully."

In terms of risk management, "the expectations today on a global basis are very hard on a TMC," said BCD's Janssen. "We have continued to evolve our travel risk services. It's a changing expectation on what clients need from us: A to Z on emergency services. Large organizations have changed their focus and want to make sure it's far more robust than it used to be, and they are willing to pay for that if they see the differentiation in service."

A recent GBTA Foundation/Egencia study found that the largest corporate travel buyers are more likely than smaller ones to proactively address emergencies. Conducted between April 20 and May 7 among 651 GBTA direct members and Egencia corporate customers and prospects, the study included 104 responses representing organizations with an annual travel spend of $50 million or above. Among those, 92 percent indicated they have emergency plans in place. That compared to 73 percent of respondents representing organizations annually spending between $10 million and $50 million on travel, and 59 percent spending between $1 million and $10 million.

Global TMC Deals: The Devil Is In The Details

While data backs up the notion that the larger an organization's spending volume, the more likely it will have a single, consolidated TMC—within the United States and/or around the world—trends in how those organizations contract for TMCs and establish service configurations are less clear. Few generalizations can be made, but it is apparent that agency relationships—everything from initial RFPs through program implementation—are becoming more complex.

"We see a lot more front-end homework done in configuration, in assignment of people, in due diligence around who is going to work on the account," said TCG Consulting managing director Albert Taras. He added that service-level agreements, while "core" to an agency deal, are changing to reflect a more sophisticated approach.

Walton agreed, noting how accountability has become a more important consideration, from both a service perspective (often covered by an SLA) and a savings perspective (often covered by a savings agreement). "Companies are going to their TMCs with a charge to help them save," Walton said. "The relationship has to be defined. Almost every company has a different definition of what savings really is and what cost avoidance really is.

"TMCs are really trying to stress reward and penalty versus just penalty," Walton continued. "Some companies are more accepting of that on the savings side than on the service side. On the savings side, these agreements are becoming more difficult to put together. It's harder to achieve hard-dollar savings today."

TMC executives corroborated that SLAs have evolved and become more detailed. "You'll still have the customer satisfaction metrics on operations, but you will also find ways to make sure you are holding each other accountable," said Amex's Paredes. "Especially if they are outsourcing roles to you, the customer wants to make sure they are getting bang for their buck, and they'll add metrics toward savings, online adoption and specifics related to their business objectives over the short to medium term."

Said Janssen, "It's not just telephony statistics, but online services and how that online reservation is going to be serviced when there needs to be human interaction, how there is going to be in-country service and how there is going to be compliance.

"Larger clients were globally consolidating their programs before, but in a lot of respects they were doing that to get their start and bring compliance policy and consistency around the globe," Janssen continued. "It has almost been a discovery period, a first phase. Now you are seeing clients really take that global consolidation to not just drive consistency but also look at regional and country cultural differences. In the RFP process, you are getting a lot more questioning and detailed specifics on regions and countries regarding capabilities and the foundation of operations. More clients want to get out and kick the tires in those areas. Before, they may have just taken for granted that what is there is what they are going to need."

Such scrutiny may be contributing to divergent preferences on global agency configurations, with some organizations favoring regional call centers and others considering other set-ups. Janssen suggested that regional call centers are "maybe less preferred than they were a couple of years ago. Clients absolutely are still looking at that, but they want to make sure that in-country capabilities and in-country knowledge exist, depending on where those call centers are located. A regional call center that is very homogenized, with no ability to get some of the fares and handle nuances and language needs will not fit for a lot of people. Those regional call centers have to be less homogenized than they used to be."

Paredes added that an organization's definitions of efficiency and savings—which vary—may help steer them. "For some customers, it's the lowest-cost solution possible," he said. "But for others, maybe a regional call center solution is not necessarily the right one. You can't have as much interaction with specific travelers before they travel because that might require local language and local understanding to drive the behavior. For customers looking more to drive that behavior rather than the transaction fee cost, they may make different choices."

Policies

There also seems to be no clear trends on travel policy, with anecdotal evidence pointing to a loosening in some areas but a tightening in others. TCG Consulting's Taras, for example, said some of his clients "are more serious about policies" as they move away from guidelines and toward "more strict, defined, exceptions-based" policies.

Janssen, however, said he has seen "a tilt" in the other direction. Companies "are realizing that by ensuring they are putting some of the service aspects back into the policy and managing some of the needs of the travelers, they are getting greater compliance from those travelers, which allows them to drive buying behavior to keep costs down. They are trying to maintain a moderately strict policy but interject some service capabilities."

Among those companies surveyed by BTN, nearly three-quarters said business-class policies this year are unchanged. Nearly all of the remainder said they had become more restrictive while 3 percent of the total reported less restrictive policies.

Meanwhile, the authors of the GBTA Foundation/Egencia study determined that "companies that spend more on travel are more likely to encourage advance purchase [airline tickets] without requiring it. However, companies that spend less on travel tend to set longer minimum advance purchase periods, i.e. 14 and 21 days, compared to the average. This difference can be attributed to more realistic policies by higher-spend companies, and more aggressive targets at lower-spend companies."

Spotlight On Hotels

The GBTA/Egencia survey also found that companies spending more than $50 million annually on T&E are "significantly less likely to restrict hotels by cost per night" than smaller programs, and are "also most likely not to restrict hotels at all."

Hotels had the lowest percentage of policy-compliant bookings (72 percent on average, according to the BTN survey) among the various travel categories. The segment is attracting particular attention as both published and corporate negotiated rates rise.

Fifty percent of those polled by BTN said hotels generally exhibited a less receptive attitude this year than last year regarding negotiating preferred pricing agreements. Airlines were second, with 36 percent perceiving a less receptive attitude. "It's likely a reaction to the fact that last year even large buyers in certain markets saw significant rate increases," said TCG Consulting hotel practice director Kim Maschoff. "Some hotels were saying, 'We actually don't want all your volume, the market is buoyant enough for me to fill it with other higher-rate business.' We also saw less willingness to give last-room availability. Last year they included Internet and breakfast, and this year they have reduced amenities or not offered any."

Maschoff added that the latest economic cycle has brought "indications that there may have been less opportunity to negotiate on the airline side. There definitely has been a transfer: 'Where can we focus to make an impact in the travel budget?' Hotels started to pop up.

"For some CFOs, it's hard to understand total market conditions," Maschoff continued. "You see consumer confidence going down, GDP being downgraded and what is going on in the stock market. All the pointers are that this should be a depressed market, but that's not what is happening in the hotel market at the moment."

Methodology

This 24th annual Business Travel News Corporate Travel 100 ranking is based on 2010 air tickets purchased for business travel at all U.S. points of sale. Most listed organizations provided information for use both in their specific listings and aggregate benchmarking data, some of which is highlighted here.

Respondent organizations completed an online questionnaire; some provided additional information in interviews. For organizations that did not participate, BTN used industry sources, published reports and other intelligence to compile data. Each was given an opportunity to improve the accuracy of BTN estimates.

Fourteen firms not included last year qualified for this list, including first-time members Boston Consulting, Covidien, Danaher, L-3 Communications and Schneider Electric. Those falling off include such familiar CT100 organizations as Alcatel-Lucent, Boston Scientific, Booz Allen Hamilton and Nokia.

Equation Research posted online and tabulated results.