To achieve ‘best in class’ travel management, there’s no one-size-fits-all solution. Betty Low investigates how to build an ideal travel department
You can be a member of the likes of the Institute of Travel & Meetings (ITM) and the Association of Corporate Travel Executives (ACTE), and have the words ‘travel manager’ stamped on your business card, yet still know your company’s travel management could be improved. It’s time for a review. But what makes a state-of-the-art travel department?
The answer ‘one-size-doesn’t-fit-all’ leaps to mind – but that doesn’t mean there aren’t many of the same questions to address. Tony Pilcher was formerly a senior travel buyer at HSBC and now heads independent business travel management consultancy Pilcher Associates. He counsels us to “look at it as a project for ongoing management. That means scoping it out and determining what the key elements of the project are.”
That would suggest beginning by establishing what your company is about in terms of size, locations, governance, sector and corporate strategy. Corporate travel programmes always underpin corporate strategy. You also need to pay heed to corporate culture – is it a centrally managed organisation or is there an entrepreneurial culture with many individual decision-making units?
The sector of business in which you operate will affect both governance and your travel profile. A digital company may want a lot of hi-tech and mobile solutions, whereas a financial services company may want higher levels of security.
IDENTIFYING OBJECTIVES
An understanding of the aims of the programme is essential. Will the travel programme’s main objective be cost reduction, better controls, better service for travellers or duty-of-care? Identifying this could affect where the department should sit within the company structure.
Andrew Solum is a former buyer and now a consultant specialising in travel management. Both he and Pilcher believe that senior sponsorship is essential, but differ as to where they see a travel department best sitting. “It’s critical to have senior management comprehension and attention,” says Solum. “If they don’t pay it any interest, it probably won’t be a good programme or be supported.
“Personally, as someone with a procurement background, I would prefer it to sit in finance – you deal with so many spreadsheets that you need to work closely with finance to ensure you have a decent programme. They can make sure invoicing is correct and complying with policy, and apportion spend and refunds to the correct budgets.”
Solum believes that purchasing experience is essential. “You’re dealing with a lot of vendors – TMCs [travel management companies] and suppliers for air, hotel, rail, insurance and so on – so you need some sort of understanding of contracts to do your job effectively.”
Pilcher sees this issue slightly differently: “In my view the sponsor – regardless of whether it’s a small, medium or large company – has to be somebody with clout, ideally a board director, and my personal preference is that it should sit under the auspices of the chief operating officer [COO]. The COO’s role is to look at every aspect of a business. If you put it into finance or if you put it into HR [human resources], then they’re only looking at one aspect of how you manage it: finance will want to know what sort of costs; with HR, it’s all about the people. Both of those elements are integral but, to my mind, operations encompasses them all.”
Pilcher adds that once you’ve looked at who is going to sponsor, you then need to look at who is going to manage it. “He or she will manage the strategy and all the operational aspects of the programme – supplier procurement and supplier management, all financial and communication aspects, and the data management programme,” he says. “In my experience, people don’t engage sufficiently at the outset with the IT department. If you are going to use technology to drive your programme, you need that relationship with IT.”
But input is different from control, says Solum. “If you have a travel committee, you get armchair managers who want to run it, and all of whom will have different ideas because travel is such an emotive subject,” he says. “It’s easier if one person holds the entire portfolio and is given a reasonable position in the company rather than relegated to a corner.”
This decision depends very much on the size and structure of the company, and a choice of whether the manager is, in Pilcher’s words, a “general factotum or a specialist in one of the areas of management”.
“What underpins all of this is the policy that is going to drive the programme,” he says. “Therefore you need have taken account of all the views of policy stakeholders, such as HR, and a policy that is both fit for purpose and in line with the company’s objectives.”
IN-HOUSE OR OUTSOURCED?
The travel department’s first outsourcing decision will be the TMC. Appointing a TMC means running a tender process. Having assembled the data previously will make scoping this easier but it is time to consider what you want the TMC to do, for there are a number of functions that can either be outsourced to the TMC or managed in-house by a member of the team.
According to Pilcher, “the TMC plays an integral role in your travel programme, but the total travel management is then broken down into segments, such as online booking tools. Do you use the TMC’s own or do you go out and look for best in the market in terms of functionality and cost?”
As well as technology tools, managers might consider whether it is better to use the TMC’s global distribution systems (GDS) or have their own arrangement, whether to use the TMC’s MI (management information) or consolidate their own data, or whether to have direct relationships with suppliers or make use of the TMC’s.
A number of large, multinational companies have contracted directly with a single GDS. Benefits include a uniform global platform, plus an ability to purchase and book tickets in other countries where the fare for the same air journey could be lower because of local conditions. Despite many of the TMCs having an international presence, they are likely to favour one GDS in some markets because of historical factors. For example, Iberia, Lufthansa, SAS and Air France originally created Amadeus as their booking platform, so it is dominant in these flag carriers’ home countries.
All big agents will have access to any GDS, so the issue is whether a company sees enough benefit to warrant having another supplier relationship. There would also be the financial complication of the GDS incentives then going to the corporate rather than the TMC, so that the transaction fee will be higher than if the corporate still deferred to the TMC’s GDS of choice.
Pilcher points out that the advantage of direct relationships with GDSs will evaporate with open architecture. “If the next generation of open architecture happens, the GDS becomes only one element of the total, so wherever you’re sitting you’ll get Amadeus, Galileo and Sabre, as well as all the direct connects. A relationship with a single GDS becomes unnecessary.”
EVALUATING TECHNOLOGY
The costs and benefits of managing travel technology (such as the online booking tool) in-house is more challenging to quantify and evaluate. Travel tech companies traditionally have relationships with both the corporate and the TMC. The TMC will have specialist knowledge and views about what is appropriate; but technology is central to most companies’ operating systems, so they might understandably want something that complements existing systems.
Most significantly, technology changes – and changes very rapidly. The key question may, therefore, be whether the corporate wants, to borrow a phrase from politicians, a “seat at the table” to understand first-hand what’s on the horizon. TMCs will implement and manage technology effectively but they might not ask the same questions as a corporate.
However, ATPI director Adam Knights points out another consideration: “A worrying trend from a customer perspective is that vertical integration within the industry is starting with such things as expense management, online tools and so on. It all sounds good, until three years down the line they want to renew, review or put one part of the contract up for tender, and then realise that they are vertically integrated.”
THEORY AND PRACTICE
Data management offers intriguing alternatives. Travel managers usually rely on TMCs’ data, complemented by that from payment providers and expense management companies for their management information. TMCs give booked data; card companies and expense management companies both give spend data. All three are limited to providing transactions data only on what goes through their systems. In theory, virtually everything except for the odd small cash purchase could go through the card and expense management system. In practice this doesn’t happen.
But in a world of ‘big data’, the quantity and potential value of data is rising all the time, and some of the larger corporates are looking for independent data collection and consolidation. Pilcher advocates engaging a data specialist. “To my mind you need to have data consolidation that looks at your total programme rather than just the TMC element, because data should not just be about the transactional spend,” he says. “You should be able to use it not just as an analytical tool but as a strategic intelligence tool incorporating your SLAs [service level agreements] with your hotel companies, your ground transport suppliers and your KPIs [key performance indicators].”
Pilcher is talking about direct connects with specialist suppliers such as ground transport companies – “and you wouldn’t get data from the TMC for that”. By the same token, card companies report the spend but not the reason for travel, the times of travel or the class of travel, and TMCs can only report the data that they have. Pilcher argues that rather than looking at the amount that has been spent, a proper data analysis should be able to identify missed opportunities – such as when a higher fare than necessary has been paid because a ticket is booked the day before rather than a month in advance – or to identify the room rate paid, and flag it up if it’s different from a company’s negotiated rate.
SHADES OF GREY
In the end there is no right or wrong, only considerations to take into account – part of which is what ‘travel’ actually encompasses. Knights says: “The grey area is whether ‘procurement’ get involved in all aspects of price. In our experience the remit of a procurement team normally rests with the ‘frame’ agreements – that is, the TMC contract but not the day-to-day prices of flights and hotels.
A number of companies are encouraging their procurement teams to get involved in this area of ‘travel’ and, therefore, the travel teams are either moved into procurement or more closely aligned, as there is a growing recognition that the frame agreement price is only a small element of the overall travel budget.”
There are so many grey areas regarding this question – but probably fewer than 50 shades.