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Future Watch - Business Travel

Companies are becoming savvier by adding controls over business travel. And they’re adopting video conferencing tools, too, to eliminate some travel.

Tuesday, April 27, 2010
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So what’s the deal with this “new normal” when it comes to rejiggering expectations for future travel sales?

Obviously, the last two years have been the most difficult operating environment in many hoteliers’ careers. But in recent months it appears as if both occupancy and rates have been stabilizing. Of course that’s a great thing. Even so, the world of business travel may have inexorably changed, as companies try to figure out the best ways to spend their budgets in the wisest ways.

Deep cuts made by companies trying to trim travel costs have got executives rethinking the entire concept of business. Larger companies especially are grappling with how to most effectively spend smaller travel budgets, and it’s got many realigning priorities.

“We all know that travel is seen as the largest area of discretionary spending. When you look at different segments, we are investigating how the new normal might impact them,” said Christa Degnan Manning, Director, Research & eXpert insights, with American Express Business Travel (AEBT). “Clearly, for travel buyers and managers, they are being given intense pressure to manage overall travel budgets, demand from employees and how to consume that budget, while also putting controls on behavior to get them to understand alternatives to travel.”

In fact, a recent survey by AEBT found that 43 percent operated in a mandated environment, while 38 percent had soft mandates. That is, they have either very strict or somewhat strict rules when it comes to leaving the office for a sales call, meeting or conference. The poll was conducted in January.

And stricter mandates typically mean fewer travel dollars spent. That’s not good news for hotels with a big focus on the business traveler.

At Deltek Inc., a company that provides enterprise management software and has a considerable travel budget, Karoline Mayr, Senior Manager, Global Travel Procurement, said mandates are here to stay. “During the last year we took the opportunity to go ahead and revamp our travel policy to put in stronger language and mandates and who would be our travel services provider. We knew this was an opportunity to get language in while budgets were tight and allow us to achieve higher savings in this economic environment,” said Mayr. “Mandates are going to stick for us. We don’t see things changing for now and become looser as they did in the past.”

The same thing happened at Wellpoint, a health insurance provider. “Last year at this time we went through the compliance committee and reviewed travel policies and made it much more mandated in terms of clear-cut directives for what was allowable and what was not. We took away the grey areas and made the policy uniform throughout business,” said Cindy Heston, Manager, Strategic Sourcing, Travel, Wellpoint.

Heston said everyone is now required to follow the same process and policies in order to be reimbursed. If someone doesn’t follow a policy or process, they are not reimbursed for that expense. That could lead to a chilling effect in spending.

To better control costs, Siemens Corporation has introduced reason codes for travel expenses. It’s a system that lets them track exactly why every trip taken, was, well, taken. “Our mission is to facilitate the business of Siemens and we manage by opportunities for that business,” said Steven Schoen, Director Mobility Services, Supply Chain Management.

Once the codes were established, they quickly realized that a surprisingly high percentage of travel was for internal meetings, a cost that was not directly associated with servicing existing clients or garnering new business. It also allowed the company to put a focus on decreasing travel internally and put the resources they had left into selling to potential customers or servicing customers, said Schoen.

Unfortunately for hotels, that means increased usage of video conferencing software, a threatening problem for a decade now that seems to finally be coming to fruition.

At Deltek, Mayr said they’re now using the technology for a lot of internal travel. End result: They lowered their travel budget by an incredible 20 percent from Q4 2009 to Q1 2010.

Siemens, too, has embraced the technology for many internal meetings. Instead of certain teams meeting in person every quarter, they do every other meeting via video conference. He said that, during the last two years, every employee workstation has been fitted with webcams and headsets for these meetings, and utilizing the software is highly encouraged. Whereas 50 percent of the company’s travel was related to internal issues, that’s now down to 20 percent.

Rest assured, though, these travel buyers don’t ever see the need for business travel to completely dissipate.

“We don’t consider [video conferencing] a replacement to face-to-face meetings. A year or two ago, when the economy started its downturn, we used it more often, but I still think from a business standpoint face-to-face meetings are still very important,” said Wellpoint’s Heston.

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