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Benchmarking is essential to give context to your travel programme’s performance. BBT looks at what’s available to make the process easier.
NO MATTER HOW GOOD A DEAL MAY LOOK, it’s reasonable for a buyer to want to know whether they are paying a fair rate to suppliers, compared to what their peers are shelling out. The obvious first stops for answers are their travel management company (TMC) – which can provide anonymised reports comparing tariffs with those paid by organisations of similar spend, size or sector – or corporate card company.
“This will allow buyers to compare cost per miles in airlines or ADR [average daily rate] in hotels in a specific city,” says Toby Guest, global congress and events manager at pharmaceutical company Bayer. However, there is a downside. “With anonymised data, you are never 100 per cent sure of who the other companies are, so you can never be confident it is a fair comparison,” he says. “Also, account managers are likely to find favourable results, because it is not in their interests to show you are paying over the odds for everything. That said, any decent account manager should be able to highlight discrepancies and help you close those gaps.” This information should appear quarterly with supplier reviews.
In addition, there are reports travel managers can buy from Aberdeen Group, Deloitte or Smith Travel Research (STR), the latter tracking hotel rates. Industry bodies such as the Association of Corporate Travel Executives (ACTE) and the Global Business Travel Association (GBTA) can supply specialist tools.
“GBTA members can sign up to its Managed Travel Index, submit data – which is anonymised – and get really good benchmarking out of that, in areas such as cost-per-mile, ADR and average segment costs,” says Guest. Networking among your peers could also produce a good measure, confidentiality allowing.
GBTA members can input their data for benchmarking comparisons of air fares, hotels and car rental. For air fares, the tool aggregates industry information and shows an average air fare for any city pair. Hotel data comes from STR and lets users look at year-on-year information, to see geographic trends. No proprietary information is divulged.
The Managed Travel Index also looks at the overall programme – finance, administration, sourcing, technology, quality, compliance and so on. Use of technology, sustainability, strategic meetings management and travel risk management are also options for analysis.
The GBTA’s tools are currently focused on the US, but this is changing. “Each time we update a tool, we create a global task force to ensure we are including perspectives other than the North American market to make a tool that is applicable anywhere worldwide,” says GBTA Foundation vice-president of research, Joe Bates. The Managed Travel
Index, travel risk management and the sustainability benchmarking tools are first for enhancement.
MAKING IT EASY
In the UK, some TMCs have software to make benchmarking easy. Hillgate Travel’s Mi Way Analytics allows it to benchmark a customer’s data with other customers that have the same or a similar profile of travel programme, all anonymously.
Carlson Wagonlit Travel (CWT) recently launched Analytiqs, after a trial with 30 clients. The tool’s big sell is the way it deals with real-time data. “As soon as a booking is made, whether online, via mobile or offline, it takes 5-10 minutes to reach the system,” says CWT vice-president of emerging products, Patrice Simon. “Buyers get to see bookings in real-time and match those against policy.”
He says this may change the regularity with which buyers benchmark, because where there used to be a delay of 30-45 days for consolidation, which dictated how often benchmarking was possible, with real-time data available daily, they may benchmark weekly or monthly. Buyers can enter data and define comparison by industry, geography and size to see how they are performing against the CWT client average, and the top 20 per cent of CWT’s clients across 40 key performance indicators.
The next step, in Q1 2016, is to integrate clients’ expense data to allow them to compare hotel rates with amenities. With air, they can compare by cabin class on the top ten routes – but the variables Scott Gillespie refers to overleaf (see A different view, p78) are not available.
A VARIETY OF APPROACHES
Meanwhile, travel buyers take a variety of approaches to the process. “The only benchmarking we have done is through our TMC, making a comparison against their clients anonymously, and I am confident we are getting a realistic answer,” says head of business services for PWC, Mark Avery. “We have had other bits of work done and I’m fairly comfortable with what we are getting.”
The Royal National Institute of Blind People (RNIB) also uses its TMC to do benchmarking: six monthly for big spend sectors, otherwise annually. Strategic procurement manager Chris Day is happy with the results: “They have ways of finding out what other rates are being charged and making sure we are getting the best,” he says.
And international legal firm DAC Beachcroft undertook the exercise in-house. “We did it a couple of years ago and it took three months,” says procurement manager Karen Lewis. “We looked at the industry and at the range we were in for hotels and flights. For hotel bed nights, we measured location and types of hotel, and reckoned we were getting good rates. We took commission into account.”
COVERING ALL BASES
Taking into account all relevant factors for comparison is essential. If a company’s negotiated rate includes breakfast and wifi, and the rates used for benchmarking are with neither, then the negotiated rate will look high when it might actually be relatively low. “Getting that detailed context around the benchmarking data has been an issue for clients,” says Keesup Choe, CEO of data specialist PI. Choe is fairly cynical about benchmarking through TMCs: “The joke is that everybody looks good because it is not in the TMC’s interest to say, ‘oh dear, it looks like we’re not getting you the best rate’,” he says. “But all that goes away if whoever is providing the benchmark numbers discloses the granular information behind it.” Not surprisingly, he advocates independent operators who are dispassionate and adds that good benchmarking can ensure travel buyers remain indispensable to their organisation.
Public sector bodies might need to benchmark only quarterly because contracts tend to be drawn from frameworks, and prices are largely fixed for up to three years, but for the private sector, anything between monthly and quarterly makes sense because of fluctuation in air and hotel tariffs.
Regular inspection of rates can reap rewards. Choe gives a US example: “Recent airline consolidation between Philadelphia and Providence, Rhode Island, meant a reduction from three carriers to two, and prices went up around 15 per cent. If companies had benchmarked air fares on a running basis, that could have been caught earlier.”
He sees benchmarking demands from clients increasing, including for total cost of trip, combining hotel, air and expenses. “If fares are pretty much the same but it is possible to reduce expenses by 20 per cent, clients can change policies to extract that additional value. But the sector does not take a holistic view,” he says.
Ford Motor Company does an annual benchmarking exercise towards the end of the year, and measures the programme against companies of a similar size. “I am always very pleased with the results,” says EMEA travel and relocation manager Stephen Swift. He examines closely the company’s less-used long-haul destinations. “On London-Detroit, no-one could match the discounts we have because of our volume – we know where we are on the volume destinations,” he says. “But for cities such as Shanghai and Johannesburg, we need to get a complete picture.” He adds: “We’d love to do total cost of trip, but it’s hard to get the data.