1 November 2022, London Marriott Hotel County Hall
21 November 2022, Hilton London Metropole
November 2022, Virtual
ON JUNE 22, 2007, the word on Wall Street was that global investment bank Bear Stearns was in a spot of bother. New York’s financial community was worried because the inevitable damaged reputation could prove contagious. If customers lost faith in one pillar of the banking community, what was to stop them losing faith in others? Bear Stearns’ bosses agreed, and on June 29, senior executive Richard Marin was replaced by Jeffrey B Lane. Lane was a banking veteran with an impressive track record. He was, after all, a former vice-chairman at one of the world’s leading investment banks, Lehman Brothers.
Bear Stearns’ issues were not alone. In August 2007, as banks worldwide stopped lending money, France’s BNP Paribas suspended two of its investment funds, which had been over-exposed to the US sub-prime mortgage market. In the same month, Bank of England boss Mervyn King was first alerted to the fact that the Northern Rock building society was having some local difficulties. And in September 2008, after more than 150 years in the business, Lehman Brothers went spectacularly bust.
After putting up with the loadsamoney yuppie years of bonus-fuelled braggadocio, the man-in-the-street was less than sympathetic. Misdirected though it may have been, the prevalent perception was that these people had spent all ‘our’ money.
Politicians – revelling in the schadenfreude moment – trumpeted the dawning of the age of austerity. Bankers’ profligacy, they insisted, must end. And to a degree, it did. “Things that had been previously unthinkable suddenly became very real,” says Susan Lancaster, director of UK and international client management at HRG. “Policies were very definitely tightened. One bank we know changed its ‘business class for more than two hours’ rule to ‘business class only for flights of more than eight hours’.
“Another thing that emerged was the realisation service provision doesn’t have to be the same for everyone – non-client-facing staff don’t have to have the same service, or even the same policy, as the client-facing employees. Servicing went very much higher up the agenda. There are still travellers who need a very high-touch service, but others have been told not to phone the travel management company [TMC] unless it’s really necessary.”
Another change, she notes, has been the extension of the banks’ two-tier hotel programmes. Traditionally, while some employees were restricted to lower-grade hotels, vast swathes of the payroll were permitted to luxuriate in top-end establishments.
Once the recession hit, the dividing line was moved – figuratively speaking, Ritz-Carlton’s loss was Rodeway Inns’ gain. The belt-tightening has even extended to the retail banking community who, unlike their investment bank buddies, rarely get to trouble customs and immigration.
In HRG’s experience, once-popular London-Manchester flights have become London-Manchester train trips, although Lancaster suspects the switch is more to do with the prerecession vogue for eco-friendliness than recession-induced restraint.
Crucially, too, Lancaster believes that new rigid rules are already being relaxed. “Old habits are creeping back in, and there doesn’t seem to be as much emphasis on correcting that,” she says. “In the first quarter of this year, there was a lot of nervousness about travel getting out of control again, but once they realised that the increased expenditure was because their own business was growing, they became more relaxed.”
The trains and the two-tier hotel programmes have stayed, but that bank with the eight-hour rule for business class has relented – it’s now anything over four hours.
Lee Whiteing, UK travel and fleet manager for HSBC, could hardly disagree more. “I think at this moment in time there is a much bigger focus on reducing costs than there was three years ago, at the height of the recession,” he says. “Our cost base is increasing, and we’re taking a lot of flak from the financial press, so there is a huge effort to reduce cost in everything we do, and travel is a big part of that.
“There’s a far greater importance attached to management information and reporting and trying to manage spend down, either by avoiding travel altogether or, if you do have to travel, by travelling smarter. One of the things we have tried to introduce – and I do this myself – is to ask: ‘If this was my money, would I be doing this?’.”
That implies there is, or was, fat to trim. Was the pre-recession banking industry as profligate as is sometimes made out?
“I don’t believe so, but the operation is undoubtedly getting leaner. It’s more about going back to basics on things like booking early, but that’s not just to cut costs – on many of our key routes things are getting busier, and the capacity isn’t there, so booking early has become essential if you’re going to get the ticket you want.
“Another thing we do is ask people to look at the fares before they make the decision to travel. Rather than agreeing to a meeting in Geneva, for example, and then checking the fares, look at the fares first, and schedule that meeting accordingly.
“And where we have something like a global conference, rather than choosing to go to Singapore, or Mexico City, or wherever, just because we haven’t been there recently, we’re now choosing destinations on the basis of convenience – we choose places that involve the least amount of people travelling any great distance.”
In his role, Whiteing has to deal with both the retail and the investment sectors, and he readily concedes that there are vast differences. “We have such a huge business, and we have huge extremes,” he says. “On the one hand, we had the suggestion that instead of paying £6 to get across London to Canary Wharf, why don’t we buy Oyster cards and save a couple of quid on every journey? On the other hand, you’ve got the investment bank people who need to get to New York – now – to clinch a multi-million-pound deal, and the cost of travel becomes a secondary consideration.”
Buy-in, at least at boardroom level, is improving dramatically.
“We tend to find that the very senior people are open to change, and they are now more willing to work with us than they ever have been,” Whiteing says. “It’s at the booker level where we find most resistance to change because they’re concerned they will get it in the neck from their bosses – we can suggest cheaper alternatives, but they tend to stick with what they know to be the traveller’s preference.
“The controls in place today are much more rigid than they were three years ago. When it comes to booking trips, there are more questions about the need to travel, and if they really do have to go, then it comes down to finding the smartest way – the most convenient and cost-effective way – to make that trip.”
Priska Schmidli, executive director and head of global sourcing (travel) at Swiss bank UBS, believes that the past three years have seen something of a revolution in travel management and buying practices across the whole banking industry.
“Since 2008, I think the banks’ and financial institutions’ attitudes towards travel have changed drastically,” she says. “That is not to say that travel practices were bad before then, but there is a very different approach now.
“There is much more focus on the best use of management information, a more standardised, global approach to purchasing, and a far greater emphasis on policy compliance.”
From the procurement point of view, globalisation has become a major issue. “Before the recession, banks and financial institutions tended to manage travel at a regional level,” says Schmidli. “Now we are all trying to bring it all together, to create global programmes and really leverage our buying power.”
Travel policies have changed, too. “There has definitely been a radical re-think of the way people travel,” says Schmidli. “In many cases, first class has been all but eliminated, and people who once flew business class for anything over two-and-a-half hours are now expected to fly economy for anything under five and even eight hours. I have heard of instances where economy class is mandated for everyone except client-facing employees.
“As for hotels, we are all still using upscale brands for travellers who are working with clients – they expect a certain standard – but definitely the banking community is making greater use of less expensive accommodation. Also, here in Europe we have seen a big increase in the use of rail. At UBS, for example, we no longer fly from Zurich to Frankfurt. When you take security checks into account, the journey time is actually very similar, and you can work on the train, so it is more productive – and it’s almost half the price.”
Have these changes been well received? “I have to admit that we haven’t made a lot of friends lately,” says Schmidli, “but that is understandable – if the traveller who has been used to a certain standard is suddenly asked to downgrade, that’s hard.
“However, across the banking industry generally, people recognise that cuts have to be made. There’s a big difference between sitting in the front row on an aircraft and sitting in the back row but, with many financial institutions reducing their headcount, it’s better to have a job and travel economy than not have a job at all. “In most cases, senior management is taking a leadership role – they are leading by example, and that is very important when travel managers are having to impose tighter travel restrictions on all employees.”
Schmidli also believes that the banking industry is becoming much more stringent when it comes to compliance: “Financial institutions are asking their travel managers and TMCs for much more detailed management information, and in particular they are taking a closer look at out-of-policy reports.
“That is having a very positive influence – I certainly wouldn’t want my name on an out-of-policy report going to my chief operating officer.”
The very fact Whiteing and Schmidli are prepared openly to share their experiences with Buying Business Travel underscores the fact that their employers have made, and are still making, sweeping changes in the light of the recession.
They are, however, very much the exceptions to the rule. Time and again, banking industry travel managers have expressed a willingness – even an enthusiasm – to talk to the media, only to be slapped down by corporate communications departments who believe that silence is golden.
HSBC and UBS are clearly exemplars of industry best-practice; there may be others, but since they won’t tell, we’ll never know. Until the next crisis.