TCGCONSULTING
Changing Dynamics in Corporate Travel
Current Trends & Hot Topics
Albert Taras, Managing Director, TCG Consulting
Detroit, Michigan – October 13, 2006
© Copyright 2006, TCG Consulting, LLP. All rights reserved.
Agenda
• Domestic Market Dynamics
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Airlines
Hotel
Meetings
Security
Evolvement of Procurement in Travel
What are we really Managing?
Program Cycle
When does hype become Reality?
– Going around the world with Managed Travel
• Case Studies
• Questions & Answers
TCGCONSULTING
© Copyright 2006, TCG Consulting, LLP. All rights reserved.
Domestic Marketplace Dynamics
• Company-specific programs built on total T&E platform
• Globalization is unique to each organization; what is the goal?
• Agency role is being redefined
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Program enabler
Manage policy at point-of-sale
Services provider
Introduce, manage and support online booking technology & aggregation of
supplier content
– Manage vendor contracts
• Aggressive online booking adoption
• Sellers market
• Meeting, conferences and trade show management is significant
opportunity for cost reduction
• Procurement/Sourcing taking an active role in travel management
• Introduction of technology to manage security protocols and
traveler tracking
TCGCONSULTING
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Airlines
• Jet fuel at $1.69 / gallon
– Down from $2.30 on Aug 1 (and $3.13 on Oct 5, 2005)
– Every penny = $195 million per year industry-wide
– US carriers have increased fuel efficiency by 23% since 2000
• Load factors are up
– 30% more passengers per flight than 1990
– Approaching 78% domestically
• Industry lost $35 billion from 2001 to 2005
– Only $0.5 billion (loss) expected for 2006
– Taxes and fees ($16 billion in 2005) remain an impediment
• LCC competition
– Southwest at IAD, JetBlue at ORD & CLT
Sources: Air Transport Association, Dept. of Energy, BTN, The Guardian
TCGCONSULTING
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Airlines
• Mergers
– Eyeing the results of USAir & America West
– United, Northwest, Delta and/or Continental?
• Domestic discounts are increasing
– Along with domestic fares (up 11.3% over 2005)
• Alliances are making strides
– With a few speed bumps along the road
• Airbus is stumbling
– CEO out last week on news of A380 delays / A350 issues
• Boeing is flying
– But may struggle to keep up with orders and avoid delays
• Global climate concerns may impact air travel
– UK predicts aircraft to emit 45% of CO2 released by private
vehicles by 2012
Sources: Air Transport Association, Dept. of Energy, BTN, The Guardian
TCGCONSULTING
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Hotel
• May be single largest and (growing) T&E
expense category
– Trending as highest category on expense report
(approaching air on domestic trips).
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Occupancy close to 100%
Fewer negotiated rates available
Lower discounts amplifying higher rates
Emphasis on incremental revenue and room
nights
• Building a program in a sellers market
– Policy complements contracting
– Cap management
TCGCONSULTING
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Hotel
• Dynamic pricing – will it stick?
• Reporting and tracking – integral for decision
support
• Brand loyalty tied to frequent traveler programs
• Access via corporate in-house online tools
• Rates loaded in GDS is key
• Global challenge where GDS is not used or
available
• Chain agreements to compliment negotiated
rates
TCGCONSULTING
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Meetings
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Sacred cow…still? Why?
Where does this sit within company?
Significant cost savings opportunity
Requires definition of what is a meeting
To mandate or not to mandate?
Contract standardization and/or
centralization
• Leveraging opportunities with corporate
travel
• Use of technology to drive processes
TCGCONSULTING
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Content
• Increasingly important area that cannot be
ignored
• Full content is not standardized
• Agency role
– Opt-in
OR
– Opt-Out
• Costs to be “pushed” to enduser/buyer/CORPORATE
– Is the agency the fall guy…again.
– Dusting off the “airline commission reduction model?”
• Are corporate “incentives” a thing of the past?
TCGCONSULTING
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Security
• Integral part of travel manager’s corporate
responsibility
• Is traveler tracking sufficient?
• Crisis planning
– Assignment of responsibilities
• Entrance of 3rd party providers
• Agency opportunity
TCGCONSULTING
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Involvement of Procurement in Travel
1990
• Growth of corp.
direct contracts
• Policy balances
savings
• Where does
travel sit?
1995
• Procurement starts
to push for category
commoditization
• Suppliers resist
• Policy is key savings
driver
• Cost savings not as
important as service
• Discounts grow
but so do fares
TCGCONSULTING
2000
• Soft market/post •
9-11
•
• Buyers market
• Commoditization •
occurs
• Airlines “right sizing”
•
• Other suppliers
byproduct of
soft demand
•
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2005
Sellers market
Policy key savings
driver
Contracts
complement policy
Rigorous
compliance
requirements
Does sourcing
want to stay in
travel category?
What are we really Managing?
Category
Agency
Corp. Card
General
Ledger
Airfare
$2,864, 061
$2,130,613
$3,589,626
Hotel
Car Rental
Other
Total
$1,163,617
$261,054
NA
$1,107,974
272,688
$993,744
$2,091,680
$1,652,398
$1,114,100
TCGCONSULTING
$4,288,732 $4,505,01 $8,560,791
9
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What are we really Managing?
Category
Corporate
Card
$38,577,885 $33,211,739
General
Ledger
$39,988,721
Hotel
$12,999,813
$9,578,892
$13,310,499
Car Rental
$1,288,178
$ 1,266,446
$1,305,754
Other
NA
$28,478,023
$35,488,767
Airfare/Rail
Total
TCGCONSULTING
Agency
$42,865,8 $73,535,10 $85,093,74
76
0
1
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Integrating Components – Managed Travel
Travel Program
Corporate
Payment Systems
Workflow
Policy
Administration
& Compliance
Cash Flow
Management
E-Procurement
Automated
Expense Reporting
& Reimbursement
TCGCONSULTING
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When does hype become reality?
TCGCONSULTING
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Global Dynamics Reshaping Travel
• Access to supplier content in light of GDS deregulation
– Where will supplier information come from?
• Opening of new channels for distribution
– Managed travel
– Supplier direct
– Unmanaged sites
• Changing role of travel agent
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Introduction of new pricing schemes
Program enabler
Manage policy at point-of-sale
Aggregate and display supplier content
Assist in vendor contract compliance
• Local country information
• Regional/global consolidation
– Account management & program development
• E-Tickets becoming preferred documentation for travel
• Failure of multiple airlines; more at risk
• Introduction of Low Cost Carriers
TCGCONSULTING
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Global Dynamics Reshaping Corporate Travel
• Suppliers move to eliminate commissions to agency
– US ( 1998-2001); Europe (2000-2005); Asia (2002-Current); South America
(limited) Africa (NA)
– Suppliers moving directly to corporate
– Cost of agency services now a corporate “cost center”
• Corporate leveraging of global spend
– Introduction of procurement & category sourcing into Travel Management
– Requires meaningful data
– Requires some structure, vision, communication, implementation and
compliance management strategy
• Corporate program vision- achieving balance
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–
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Cost
Service
Security
Uniformity
• Introduction of technology
– Travel reservations-online booking (self-service reservations) compliment
traditional bookings
– Reporting
– CONSULTING
Traveler tracking
© Copyright 2006, TCG Consulting, LLP. All rights reserved.
TCG
Going Global Objectives
What are corporate objectives
- Why are you considering global?
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Leverage global spend
Improved cooperation and communication
Policy
Data consolidation
Reduce cost of administration
Managing or expanding referred supplier programs
Security protocols
Streamline insurance
Introduce technology
Expand corporate uniformity
*Travel is often one of the first global program consolidated
*Are there other corporate programs that can serve as “consolidation models”?
TCGCONSULTING
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Going Global Considerations
1. Stages of travel management across the globe
2. Cultures
3. Language (is there an official company language)?
4. Acceptance of technology (are you networked)?
5. Local laws & restrictions
6. Travel document distribution
7. Use of travel “bookers”
8. Rail
9. Individual employee compensation which often includes a company car
10. How does merchant accept payment and what is company preferred
payment method?
11. Impact of revenue sharing reduction or elimination
12. How will you fund global program
13. Some regions of the world operate in a “revenue sharing” environment
14. Program administration & management
15. What resources are needed to implement?
16. Acceptance and use of technology
17. Will senior management endorse and support
TCGCONSULTING
© Copyright 2006, TCG Consulting, LLP. All rights reserved.
Europe Overview
• 12 Countries operate with Euro as single currency
• Belgium is “EU” headquarters with many US companies
represented by a “head office”
• Traditional and flag carrier airlines are no longer
permitted to received government bail outs
• Cost of gasoline is $6 or more
• Regulations and legal matters are settled via the
European Commission
• Distaste for the US Government-but not the people
• Fear of terrorism is becoming more wide-spread
• Change management is a key concern with introduction
of new programs
– Especially those driven top-down
– Those with a US centric approach
TCGCONSULTING
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Europe Travel
• Travel Management moves from “North to South”
– Move in 4 stages:
• Nordics & UK
• Central- Germany, Holland, Belgium, Switzerland
• France, Austria, Italy, Spain
• Eastern Block & Mediterranean
• Scandinavia often leads the way in advancement and the
introduction of technology
• Use of Rail is a major consideration
• Singular online booking technology solutions is difficult (may
requires multiple solutions)
• Laws often dictate approved reimbursable travel expenses
• More than half of transactions are booked by “Travel Bookers”
• Travel policies are often not written “but are understood” based on
company culture
• Aer Lingus became the first “low cost” Country Flag Carrier
TCGCONSULTING
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Europe Travel
• Employee compensation often includes a company car
• Merchants may not accept corporate card; or
– Pass back merchant fees
– Require individual cards – i.e. Ryanair
• 3 distinct languages exist for business
– English & internet dominant
• Call centers are associated with “infomercials” and perceived as
“low service”
– Perception is slowly changing
– Centers in lower cost countries- Poland and Hungary
• Airline agreements are typically “net routes” and city pair specific
• Low Cost Carriers are dramatically reshaping market
• Amadeus and Galileo have a significant market presence over Sabre
in most of Europe
– Except for the UK
TCGCONSULTING
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Most Common Operational Scenarios
• EMEA
– Country-by-country
• On-site
• Off-site dedicated
• Off-site non-dedicated
– Regional centers
• Off-site dedicated
– By language
– By currency
– By travel management practices
– Hybrid
– On-site in key markets
TCGCONSULTING
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Asia Overview
• Asia represents over 1/3 of the world’s
population
– Over 235 cities in Asia with population exceeding 500k
– 130 of these cities exceed 1 million in population
– 34 of these cities are in China
• Developing (poor) inter-country/land based
transportation infrastructure
– Air transport developing/expanding in some domestic markets
– Inter-country rail network and highway system needs attention
• Collective growth forecast is higher than the US
and Europe
TCGCONSULTING
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Asia Overview
• Increased intra-Asia trade flow
• Growing affluence of Asian middle class
– Many will now travel by air in their lifetime
• Deregulation of air service
• Vision for the creation of a common Asian
economic unit (like EU)
• Governments focusing on the economic
importance of tourism
TCGCONSULTING
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Asia Travel
• Multiple stages of travel management
– Leading – Australia, New Zealand
– Emerging – China, India, Singapore, Hong Kong, Korea, Taiwan,
Japan
– Developing – Thailand, Philippines
• Bilateral agreements required – fragmented market vs.
single US and cooperative European markets
• Limited domestic markets except for: China, Japan, India
and Australia
• Lack of cheaper and alternative secondary airports
• Cargo represents a big revenue generator for airlines in
Asia
• Most Asia traffic originate from the US or Europe –
limited reach for low cost carriers
TCGCONSULTING
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Asia Travel
• Agency is trusted for delivering services & fares
– Centrepiece of program
– But this is changing with direct supplier agreements
and commission elimination
• Charge card usage is limited
– Most counties pay for airlines via agency invoice
– Merchant fees and program capabilities limit
corporate card adoption
• Travel “service” is expected and valued
• Increasing inter-Asia (regional) business network
• Large population – huge business potential
market
TCGCONSULTING
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Most Common Operational Scenarios
• Asia
– Country-by-country
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•
•
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On-site
Off-site dedicated
Off-site non-dedicated
Call centres (limited)
TCGCONSULTING
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South America Overview
• Limited inter-continent cooperation
between countries
• US currency is the floating benchmark and
primary business currency
• Regional terrorism requires unique
corporate security procedures
• Majority of travel is international
• Travelers are typically sales or senior
management
TCGCONSULTING
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South America Travel
• Majority of continent operates in a commission
environment
• Travel agent salary is low which impedes online booking
and other technologies (agent in Colombia earns
$300USD per month)
• Sabre and Amadeus are dominant
• Use of card is limited to foreign based companies
• Car rental is limited; competing against “car / security
service”
• American Express and Carlson dominate region
– Large independent agencies dominate country markets; and are
affiliating with various networks
TCGCONSULTING
© Copyright 2006, TCG Consulting, LLP. All rights reserved.
Most Common Operational Scenarios
• South America
– Country-by-country
• On-site
• Off-site dedicated
• Off-site non-dedicated
TCGCONSULTING
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Rest of World Overview
• Realities of economy and foreign trade
• Penetration of internet and global
commerce is limited
– South Africa and the Middle East are unique
• Health and welfare dominate local
concerns
• Local terrorism and internal wars
• Corruption and government impositions
TCGCONSULTING
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Rest of World Travel
• Limited air service
– Air travel (in-continent) may require connections in
other continents
• International name brand hotels dominate with
penetration of local market hotel chains
• Car rental is limited; most prefer car service
• Performing administrative functions would be
seen as “below a manager” – secretaries
perform all travel processing functions
• Cash advances are still widely used
• Cash may be required to pay for travel
TCGCONSULTING
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Global Case Study #1 – Profile
• US based conglomerate
• Annual global T&E of $180m
• 60+ entities operating in 57 countries
– Independent program administrators
• Responsibility of US – Corporate Services
without a dedicated travel manager
• Some travel support functions in Asia
– Primarily administrative and booking
• Compliance and performance driven via
internal financial pressures to perform
TCGCONSULTING
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Case Study #1 - Objectives
• Leverage global spend
– Reduce travel as a % of corporate revenues
• Provide operating entities with options
• Present peer comparisons via internal
operating entities and external recognized
best-in-class
• Enhance security protocols
• Provide mechanism for contract
compliance
TCGCONSULTING
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Case Study #1 – Accomplishments
• Established global security protocols
• Travel councils formed in
– Americas
– Europe
– Asia-Pacific
• Requires that all operating entities select 1 of 2 approved
agencies
– Allows for access to preferred supplier programs
– Operating entities cannot enter into direct supplier agreements
– All but 1 operating entity is participating
• Reduced cost of travel by
– Realized annual cost savings of $16.8 (incremental)
– Travel as a % of revenues reduced by 28bp
• Corporate sponsored programs
– Airlines, Hotel, Card, GDS, SSR, Car Hire
TCGCONSULTING
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Case Study #2 – Profile
• US based Engineering Firm
– Primary operations in US, Europe & Asia
• Annual global T&E of $52m
• Under Corporate Services & Finance
– US maintains full-time travel manager
– Council Representation via 5 “leading
countries”
• Growing organically and via acquisitions
TCGCONSULTING
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Case Study #2 - Objectives
• Move to a single global agency
– Agency is “program enabler”
• Introduce global policy
• Leverage global spend
– Expand airline & car hire programs to new regions
– Commence hotel & meetings programs
• Reduce cost of administration
• Streamline overlapping insurance
• Introduce technology
– SSR, GDS, Expense management
• Establish global security protocols
TCGCONSULTING
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Case Study #2 – Accomplishments
• Consolidated to a single agency
• Online adoption at 63% (US) of eligible trips within first
3 months – Australia and NZ at 85%
• Reduce increment cost of travel by $3.1m
• Global travel council formed – 1 representative / region
plus an executive sponsor
– Sub-council in Asia-Pacific
• Annual travel plan – 3 day meeting
– Day 1 accomplishment and visioning
– Day 2 supplier review
– Day 3 drafting of strategic plan and responsibility assignment
• Corporate sponsored programs
– Agency, Airlines, Hotel, Card, GDS, SSR, Car Hire, Security
TCGCONSULTING
© Copyright 2006, TCG Consulting, LLP. All rights reserved.
and ROI
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 Travel Management
 Payment Systems
 Expense Management
Assessment
Sourcing
Implementation
Compliance
Management
(704) 552-4421
[email protected]
Offices: Charlotte, Los Angeles, Detroit,
Chicago, Orlando, Europe, Latin America, Asia
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