Connecting with Travel Managers
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The individual corporate travel market in the UK is very large, and largely unexploited by destination managers. This article aims to provide destination managers with an insight into the work of in-house travel managers and how corporate travel budgets operate. It looks at changes to in-house travel buying and the opportunities this presents in terms of destination managers working with corporate travel managers to the benefit of both, by becoming a destination partner to the organisation.
There are two common misconceptions about the corporate travel market:
- this market cannot be influenced because most of the travel is related to meeting business associates in set locations around the country and, indeed, around the world
- business travel is, by and large, not price sensitive, especially when the business concerned is in the banking and finance sector.
The result of these two misconceptions is the belief that there is little opportunity to influence business travel in terms of either location or price. As a result, there is very little interaction between destination managers and corporate travel buyers. Destination managers tend to concentrate on the leisure market and, when they do venture into business travel, they tend to focus on the exhibition and conference market.
This article therefore aims to provide destination managers with an insight into the work of in-house travel managers and to show that there are opportunities for destination managers to work with corporate travel managers to the benefit of both, by becoming a destination partner to the organisation.
From the outside, there is a tendency to think that travel budgets for large companies, especially those in the financial sector, are unlimited. While that may have been the case for some companies over the last few years while the economy (and corporate profits) were growing at an unprecedented rate, things are now changing fast.
For example, Goldman Sachs has recently announced that it will not now provide meals or taxis to staff unless they are working past 10pm. Marsh (the world’s largest insurer), has recently stated that, in addition to not employing temporary staff to cover holidays of two weeks or less, it will not pay for:
- meals or entertainment that does not involve clients
- the cost of car parking for employees
- waiting time for taxis.
When the cost of newspapers becomes an issue for companies with the global presence of Marsh (with over 26,000 staff in over 100 countries worldwide and operating revenue of £7.6 billion in 2007), then it is very clear that the credit crunch and the slowdown of the economy are resulting in deep cuts to the internal budgets of many companies.
While it would be easy to say that this is precisely the wrong time to start developing business with firms such as these, in reality this new found sense of prudence in their travel expenditure should be seen as an opportunity. There is now considerable pressure on the sales staff of all companies to get out and do business. They will not be able to simply stay in the office and wait for the phone to ring.
The Business Tourism Partnership estimates in Business Tourism Briefing that individual corporate travel was worth about £6 billion per annum in 1998. While there has been no survey in the last ten years, it would be reasonable to assume that this amount has at least doubled and could be worth around £15 billion today.
To give an example of the value of this sector of the business travel market, consider a bank with 2,500 employees in the UK, of whom about 80% travel annually:
- about 40% of these employees are what can be termed the sales force and have a travel requirement written in as a core part of their employment contract
- the other 40% have add-on responsibilities for travel such as accompanying the sales staff on their business calls as technical experts or liaising with colleagues in the sister offices in the UK and Europe
- the split between domestic travel and international travel is 75% domestic and 25% international with the international split again between Europe (75%) and other destinations (25%).
This illustrates that even with budget cuts there are still a lot of staff travelling. They may not be staying in five star hotels or travelling first class as they might have done previously, but they are still travelling.
As a further indicator of the size of this market, the annual travel budget for this organisation (not including expenses while travelling) is £3 million, which works out at £1500 per annum for each member of travelling staff. Again this is a fairly typical per person amount for a large company (and a lot less than many people may imagine).
It is important to note that travel budgets are not arbitrary figures that companies pull out of the air. The concept of 'per diem costs' for business trips where staff are simply given a budget and can spend (or pocket) as they please no longer exists. With all large organisations, the travel budget is subject to considerable internal scrutiny at various levels throughout the company. It is based on historical information on actual expenses by department, frequency of travel, duration of travel, and room nights. Based on this, the individual departments allocate what they think will be a fair representation of the future year’s expenses.
Once the travel budget has been agreed and signed off, monthly accrual budget reports are generated on a 'where are we now' basis so that cost centre managers can review and trim their future expenditure plans based on the immediate past actual expenses and the future budget requirements. It is standard for reviews of the travel budget to be completed on a monthly basis with variances 5% above or below that month’s year-to-date budget having to be reported and explained.
With the budget for the year set, there is corporate travel policy to take into account. This will invariably set out the parameters by which the staff can spend their budget. There will be classes of travel and accommodation that are acceptable for staff to use at various levels within the organisation. These will be dependent on the duration of the travel and stay and the seniority of the employee. The policy will also address what is a justifiable expense and what the company will not reimburse the employee for.
As mentioned above, with the economy slowing down, these rules are becoming much tighter, putting increased pressure on both individual employees and travel managers to develop more cost-effective ways to enable the sales force to do their job.
In the past, travel managers operated as in-house travel agents, effectively building relationships with operators and undertaking bookings for staff. This model worked well at delivering discounts that were not available to individual staff members and ensuring that staff did not travel outside the bounds of the company travel policy.
The main problem, however, was that usually the buying power of the firm was not sufficient to negotiate very competitive deals and the time and effort required to undertake the booking meant that a small team of travel buyers was required which was not an efficient use of the company’s resources.
Almost all companies now operate through one or more appointed travel companies or 'partners'. These travel partners have the buying power and resources to be able to extract the best possible price from airlines, hotel operators, and rail companies and feed them through to their clients.
Typically, a travel partner is appointed for a period of three years on the basis of an RFP (Request for Pricing) tender. This tender process is based on:
- the organisation’s travel profile for the preceding two to three years gleaned from the company’s budget and travel management system
- the predicted travel patterns for the next three years, and
- the travel policy.
Travel companies are sent away to calculate a costing for travel over the next three years and details as to value-added services that the company will provide to the organisation’s staff.
The in-house travel department has therefore gone, leaving a single travel manager to run the tender process and manage the relationship with the travel partner. Indeed, even this position is now under threat within many organisations with this function being carried out as part of the finance department operations.
Another key change is that travel partners are now starting to provide their corporate clients with online real-time access to operators’ booking systems through systems similar to Sabre, Galileo, Worldspan or Amadeus. These systems are loaded with the travel partners’ negotiated rates and are bound by the corporate client’s travel policy (ie they can be set to prevent employees choosing travel options outside corporate policy or to require a director to provide online authorisation).
These enable the company’s staff to access all travel and accommodation data so that they can select options – from their desk or while out on the road – that are appropriate to their individual travel plans. Importantly, it provides a much greater level of flexibility by enabling staff on the road to amend their travel bookings as they go, to fit unintended changes to their schedules.
Essentially, this means that corporate staff are now becoming their own travel advisors. Yet this technology still has not replaced the need for a specialist in the travel industry. There is still a very vital set of roles that the travel agents have to play and there are still opportunities for destination managers as well. These opportunities relate to destination managers positioning themselves as ‘Destination Partners’.
The main opportunity that is currently evolving is for destination managers to become a destination partner for corporate businesses. While the travel partners and specialist corporate travel firms will always win out on the ability to provide their clients with heavily discounted travel and accommodation bookings with the major operators, there is a growing niche for destination managers who are able to provide a more bespoke service or value-added add-ons for corporate travellers.
The trick is for destination managers to target companies that have large offices, suppliers or clients in their area. As mentioned previously, most large companies will hold very detailed information on the volume and value of their travel to any particular destination. This should include:
- who goes to that destination
- when they visit it
- how long they stay each time they visit
- how much it costs the company.
This information is there to be mined – there will be patterns of usage that should spark ideas from destination managers on how they can add value for the company.
Then, working with their members who are accommodation, restaurant and attraction providers, destination managers are well placed to develop packages that are specifically tailored to the travel and entertaining needs of the company in that location. This can include:
- different levels of accommodation for different grades of staff, in locations or at times of the week/month/ year that fit with the company’s travel needs
- different check-in/out times
- preferential bookings at particular restaurants
- discounted local taxi services.
These are all solutions that fit the basic requirements of corporate travellers to effectively do business without having to worry about 'logistics' issues.
There is also the opportunity to provide additional services such as links with local golf clubs that allow travelling staff to quickly and easily use local courses where they would otherwise have to be a member. This can be used for recreation after meetings, or for client entertaining, or even for corporate away days. Other services could include cultural activities, conference and banqueting, tours and gaining tickets for local shows.
The Austrian Tourist Office is a destination partner of Virtuoso and American Express. These companies know that if they want to hold a meeting or event in Austria, all they need to do is phone their client manager at the Austrian Tourist Office and everything will be taken care of for them.
Being a destination partner need not be limited to corporate businesses. There is a lot of scope in sports for linkages to be made that benefit both the destination and the business, as illustrated by the following two examples.
- Tourism Malaysia was the official destination partner for Manchester United for the 2006/07 season. They did this not just to get exposure in the UK for Malaysia, which at the time was undertaking their 'Visit Malaysia year', but also to get access to Manchester United’s fan database. This provided them with the opportunity to market Malaysia to the hundreds of thousands of fans around the world.
- The State of North Carolina in the US has signed a two-year sponsorship deal with PGA (Professional Golfers' Association) Germany to be their exclusive destination partner. This allows them to bring golf professionals from Germany to North Carolina and gain coverage in the PGA Germany e-newsletter.
While obviously Tourism Malaysia and North Carolina paid considerable sums to become destination partners, the same thing can be achieved on a much smaller scale.
Through working with large corporations on their corporate travel needs, destinations can get access to in-house communications, such as magazines, newsletters, or email. Offering discounts to staff for their leisure bookings through these mechanisms on the basis of being a destination partner has dual benefits:
- the company gets to pass on a negotiated exclusive benefit to their employees, thereby showing themselves to be a good employer, and
- the destination partner benefits in knowing that it is marketing to an audience who, through their work commitments, will already be spending time in that region.
As a result, the take-up of offers will be considerably higher than with usual marketing campaigns, as large numbers of the staff will know the area and will probably be amenable to tagging on a weekend stay to a business trip, given the proper offer.
The individual corporate travel market in the UK is very large, and largely unexploited by destination managers who tend to think that this market is not able to be influenced. Yet, with estimated expenditure of up to £15 billion per annum, it is a market that warrants the attention of destinations that are looking to expand their market base.
One of the main opportunities for destinations is to review which large companies operate in their area and look to work with them to become their destination partner – which is essentially an extension of customer relationship marketing to the business sector. The wealth of information that these businesses have on their corporate travel expenditure patterns, combined with their travel policies, will provide destination managers with the necessary tools to develop added value services to support the businesses’ corporate travel requirements. It will also provide the opportunity to target staff with leisure break and add-on offers that mesh with their corporate travel plans.
Not only is this a win-win for the destination and the company, but, ultimately, it supports the growth and investment of businesses in the region which creates new jobs and provides a greater market for tourism services and facilities.
An accountant by training, Ian Hill has worked in the banking sector both in the UK and overseas for 30 years. For the last ten years he has been the Travel Manager for a large American bank at its European Headquarters in London. Having left the company, he is a corporate travel consultant advising businesses on how to reduce their expenditure on business travel.