19 August 2009 - BCD Travel is observing a spike in regional and global travel requests for proposals, "with a matching decline in single-country RFPs," according to a white paper issued recently by the travel management company. BCD concluded that the sharp
increase--up 63 percent in 2008 over 2007 and 40 percent so far this year--relates to cost-reduction initiatives, procurement practices that favor supplier consolidation, tighter resources within travel management departments, efforts to improve expense transparency and heightened corporate social responsibility awareness.
The savings potential from global or regional consolidation can vary based on many factors, but BCD estimated that "a company not already managing a regional or global program with a single or reduced number of TMCs, with no global policy or coordinated supplier program in place, can save as much as 25 percent of its total travel spend."
Other benefits can include traveler tracking and consolidated data, "an often-cited and widely accepted driver behind consolidation," BCD continued. "Whether a corporation can best achieve that leverage working with multiple travel management companies or a single one is the subject of some debate."
Supplier Savings
BCD Travel estimated that incremental savings generated by consolidating a global airline program--providing more volume to fewer preferred carriers--ranges from 1.5 percent to 4 percent. "New global consolidations, where there are fewer negotiated agreements already in place, tend to achieve savings at the high end of this range," according to the TMC. "Entirely new programs, where the corporation does not have significant corporate discounts in place, can come in at even higher levels."
Those organizations building a preferred global hotel program from scratch can realize savings "between 15 percent and 20 percent off average booked rates" if they focus volume on select properties and achieve compliance among travelers, according to the white paper. Car rental cost savings can reach "10 percent" by cutting down to one, primary global provider.
In addition to providing "access to consistent data on expenditures," a consolidated corporate card program can generate attractive rebates. "Whereas a card company might typically grant an annual rebate of 10 to 25 basis points of spend, a globally consolidated card program might yield a rebate up to 80 basis points," according to the paper. If a global card deal is not possible, BCD Travel said single providers in each region "can also bring worthwhile benefits."
Organizations also can see benefits from consolidating meetings programs, both through "gaining visibility of spend with suppliers on a regional or global basis" and then negotiating with combined transient and meetings spending volumes.
"With a global view, the meetings buyer may also find previously hidden savings--for example, that it is cheaper to meet in Budapest than in Amsterdam or London."
Benefits of a TMC consolidation, according to BCD Travel, can include leverage on transaction fees, faster data handling, more effective communication to travelers, consistent service standards and various centralized functions.
Operational Efficiencies At Trane, Kodak
The white paper highlighted BCD Travel client Trane and its European travel program consolidation. The manufacturer of heating, ventilation and air conditioning systems created a program covering Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the United Kingdom--all served by BCD Travel's multinational service center in Mechelen, Belgium. According to BCD, Trane realized a 14 percent reduction in average ticket price, 27 percent cut in agency costs (including savings related to sharing multilingual reservations agents with another BCD Travel client), "greater overall spend visibility and tighter control of travel policy and costs, leading to improved management of the vendor program." Total savings derived from program consolidation totaled "$3.4 million, about two-thirds of which is from cost avoidance."
Meanwhile, BCD noted that online booking providers have been building enhanced tools that are "far less country-specific." Kodak, for example, installed an online tool as part of a European program consolidation covering 11 countries, according to the white paper. The imaging products company "sought local input to ensure that the online booking tool offered capabilities and features that were important to travelers and arrangers in each country, and that the company's executives endorsed online booking. ... Through the use of the [Mechelen] multinational service center and online booking tool, Kodak [in the first year] saw the average ticket price decrease by $33 and agency costs fall by 27 percent. In addition, transaction fees declined sharply in previously expensive markets, with obsolete processes being completely eliminated."
