22 March 2007 - Globally consolidated travel management programs on average save companies 20 percent of their total travel spend through standardized travel policies, processes and sourcing, according to Carlson Wagonlit Travel. A CWT Travel Management Institute client survey found that while companies increasingly are appointing global travel managers, certain travel program components are not necessarily equipped for global initiatives.
According to the research--encompassing surveys of 120 clients around the world and in-depth analysis of 30 clients' savings from consolidated programs--the largest savings opportunity is in standardizing travel policies and process, which on average cut total travel spend by 12 percent for CWT clients.
For example, heavier use of advance purchase policies covering air reservations still can yield new savings. "Advanced booking has become common practice in North America," said Cathy Voss, CWT senior vice president of global accounts. "Now we are seeing the trend continue within EMEA and even parts of Latin America. In Asia-Pacific, of course, you have advance booking just because of the tightness of seats. They book in advance out of necessity."
Other policies areas that can cut costs include standardized class-of-service rules and pre-trip approvals. According to Christophe Renard, senior director of the CWT Travel Management Institute, one client "achieved 30 percent savings by only allowing economy class on all trips except for top management."
The second-largest savings opportunity is through consolidated sourcing with travel suppliers--primarily airlines, hotel companies and car rental firms--which on average cut total spend among analyzed CWT clients by 7 percent.
In terms of air travel expenses (which can be shaved by 7.5 percent through consolidated sourcing, according to CWT's analysis), an effective global sourcing strategy is to leverage spend by limiting the total number of suppliers. "For example, a company headquartered in New York, if using a U.S. airline as preferred, will ask European or Asian travelers to use this U.S. airline when flying to New York," Renard explained.
Other methods Renard described include routing additional traffic through a preferred airline's hubs in order to increase total volume and extract higher discounts and "seizing pricing opportunities offered by airlines when these airlines are departing outside their home markets." CWT found that such "challenger" airlines on average offer fares that are 20 percent lower than dominant airlines across a mix of intercontinental city pairs.
CWT president and CEO Hubert Joly said consolidated sourcing of hotels (which CWT found cuts 6.5 percent off a typical lodging bill) "traditionally has been somewhat undermanaged by corporations," the suggested approach also is to effectively allocate volume to key suppliers. "Not the volume allocated at the chain level, but really the volume allocated at the property level," Renard said. For example, one CWT client doubled its volume at a Sao Paulo property and secured a "9 percent additional discount."
According to CWT, other benefits from multinational programs include more effective data consolidation and performance monitoring; more consistent services for travelers achieved through harmonized service-level agreements; and improved security by way of global traveler tracking.
CWT executives said certain aspects of travel programs should not be globalized. For example, they said no single online booking tool can be effectively deployed in all regions. "If you are trying to use one of the U.S. or European [online booking] tools in China, good luck," Joly said. "We have developed our own booking tool in China because there was no tool that was available and that worked in mainland China. That tool that we use there is very different than the wealth of tools we use in the U.S. or Europe."
Instead, CWT suggested a "best-in-region" approach to online booking tools. Similarly, "There is no global offering today," for expense management, Renard said. "Some suppliers are developing regional capabilities."
According to CWT, transnational corporations may favor an even more localized approach for such items as high-touch services and pre-trip approvals, which should factor in cultural differences. "A completely standardized approach around the world is not going to work," Joly asserted. The key, he said, is "finding the right balance for each component of the travel program, in terms of what should be global, what should be regional and what should be local."
CWT suggested certain pre-requisites for those companies pursuing globalized programs: at least $5 million in worldwide travel spend; traffic patterns that allow for consolidated volume with key suppliers and a centralized corporate culture. According to the TMC's research, more companies are looking in this direction as 60 percent of Europe-based companies and 56 percent of North America-based companies today have a global travel manager, compared with 41 percent and 44 percent, respectively, earlier this decade. Those figures in three years are expected to rise to 71 percent of Europe-based companies and 70 percent of North America-based companies.
Despite the increasing interest in and potential benefits of globalizing travel programs, CWT executives cautioned that the process is not easily accomplished. "Consolidation is a journey and it takes time," Renard said. "It typically requires at least three years."
