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Travel managers, a new generation takes the helm

As major hotel clients and necessary representatives at large corporations, travel managers are even more clever than ever. The crisis developed their management sense and the new computer tools have reinforced their technical nature and their knowledge of rate mechanisms. In this era of Self-booking tools, low-cost carriers and dynamic pricing, business relationships rely as much on partnerships as on strength.

To grasp the psychology and the evolution of the travel manager’s behavior, it is necessary to understand the changing reality with which he must work. One thing is certain, his role has gained strength in recent years. The evolution of reservation methods had transformed the trade, adding new responsibilities and skills: risk and crisis management, reporting and, although it may seem paradoxical, he must also consider all the travel alternatives that exist such as video conferencing and other web solutions.Whether on the ground or in the air, the key argument for seducing travel managers is flexibility, particularly with regard to individual travel. Yield policies encourage them to plan their travel further and further ahead of time to avoid the random aspect of last minute reservations. And Internet largely facilitates this preconception. Service providers must now take into consideration that customers are well aware of the pricing mechanisms and that they too are banking on long-term strategies.More than anything else, the travel manager has become a skilful negotiator backed by a scrupulous manager. This gradual shift occurred with his incorporation into the company’s Finance and buying department, whereas not long before he was part of Human Resources. In North America, he even receives a commission on the economies he makes for the company, and his decision-making influence has grown in just a few years. Nothing will ever be the same again after travel came to a halt following September 11 and the long recovery phase that ensued. Business travel falls into second place after salaries, on the roster of personnel-related spending. And it is up to the travel manager to convince managers to make a few sacrifices... This is done through in-house communications that explain the interest of a travel policy that is somewhat restrictive or has more rigorous procedures. “The most successful corporate travel management programs are those that have the backing of upper management and are linked to meeting specific corporate objectives or initiatives,” observes Jo-Anne Lloyd, EMEA regional manager of ACTE (Association of Corporate Travel Executives). “The more flexible travel management are those that do not cite cost as the bottom-line in determining flights or hotels, but results in proportion to the purpose of the trip.”The mission has become more delicate, but “the mood throughout the international business travel management industry is ‘guardedly upbeat,’ for a number of reasons,” explains Jo-Anne Lloyd. “Security measures have been successful in preventing any major recurrences of terrorist attacks. The incident at Heathrow this summer was controlled and did not trigger an economic setback for the industry, nor loss of life. [Threats of SARS] while still highly pertinent -- have not been realized. New markets are emerging in China, India, and throughout Latin and South America. Companies are investing more heavily than ever in business travel.”More than anything else, online reservations have significantly changed the game. One example summarizes everything: reservations made via internet by companies using e-Amadeus e-Travel Management posted 76% growth in 2004, the year the machine truly took off. In the United States it is no longer rare to see companies book 80% of their travel on Internet. In this regard, the Old Continent is well behind. This is the fault of markets that are significantly less homogenous in terms of practices and a much more intensive use of rail travel which remains outside the standard distribution system. Nonetheless, Charles Régnier, director Online Implementation Europe Carlson Wagonlit Travel, recently affirmed his confidence in the European market’s potential for catching up in the next three years...Business travel has seen its economic model evolve drastically in recent years, particularly with the move to zero commission made by airlines. Half of the companies surveyed recently by ACTE estimate that this measure led to a 3 to 5% increase in their travel budget. This new transparency made cost optimization a major priority. And in this regard, online reservations appear as a source of economies. It is estimated that the savings made in the travel budget could amount to 25% of the amount previously allocated. Of course, the recovery has boosted business travel, but intensive vigilance with regard to spending is firmly established. And yet, a study by Carlson Wagonlit Travel, published last November, estimates that the total travel budget of companies could be decreased by a further 10% by using Internet... In addition to lowering distribution costs by the travel agency itself, psychological mechanisms have entered into play: professional travelers assume more responsibility using Internet rather than the telephone. Seeing a list of fares clearly posted on the screen generates more scruples when it comes to choosing the more expensive listing. This is an interesting factor for corporations where all or some of the managers make their own travel reservations since the advent of “self booking tools”. To this may also be added the phenomenon of reservations being made further ahead of time enabling access to better offers. Thus, even in Europe “web bookings” are taking off, with growth rates of 50 and 100% each year.These famous “self booking tools”, reservation software exported by service providers working within large corporations, were first eyed skeptically but have been gradually gaining ground as they are perfected. Their use in French companies has more than doubled since 2005. And 63% of companies surveyed in another study carried out by ACTE affirmed last year that installing an SBT was one of their priorities in the months to come. This software makes it possible to automate the house travel policy. Concretely speaking, a manager who makes his reservation using this system will only receive offers that fit into the rate range that has been established for his position on the ladder. Many companies saw this as the best way to radically revamp their strategy. Profitable –provided at least one quarter of the company’s reservations are made using it– the self-booking tool took a new leap forward with the integration of all the services that come into play during travel. This means not only the flight + hotel tandem, but also train, taxi and other services at the destination.“Online booking tools introduce higher levels of efficiency and convenience,” admits Jo-Anne Lloyd. “Challenges to online booking are in many ways linked to the corporate culture... A whole generation of travelers equates reservations service to a telephone call. Not everyone is thoroughly computer conversant.”Meanwhile, another innovation is creating a stir in the world of Corporate travel: the arrival of “dynamic pricing”, which threatens to upset the game. The least we can say is that rates that fluctuate depending on business do not appealing to travel managers. Key accounts fear finding themselves faced with the fait accompli, meaning significant rate hikes, with hoteliers in the dominant position thanks to growth. The perspective of contracts renegotiated with higher rates and greater difficulty precisely budgeting spending gives rise to grumbling. It is then up to hoteliers to be transparent and present the concept favorably: potential for economies by organizing travel during “discounted periods”. This strikes the right note. The fear of untimely increases may be tempered by instating a ceiling rate that cannot be surpassed regardless of economic conditions. This final argument cooled the debate. But the vast majority of travel managers remain very skeptical about the interest of generalizing such as model. For the moment, the wrestling match looks like it will end in a tie. In the United States, the results for the last season of negotiations that has just come to a close show that prices did not explode as expected. Only a small minority of travel managers and hoteliers signed this type of contract. Hoteliers did not try to force the issue, but the debate is not over yet either...“No one is really afraid of pricing,” tempers Jo-Anne Lloyd. “Dynamic pricing is the hotel industry’s equivalent of yield management. It is most prevalent in major cities where rooms are at an ultra-premium. But hotel pricing is also cyclic. And when the cycle begins to turn, it will be properties and chains with strong relationships with corporate travel managers that come out ahead.”As far as concerns airlines, we could well have thought that the race to save would have pushed travel managers into the arms of low-cost carriers. But this didn’t take into account certain factors that slow the development of the phenomenon. Constraints are the businessman’s supreme enemy. And wasted time even more so. In this regard the time spent getting to and from secondary airports, and the often early-morning, or late night flight times do not fit very well into their tight schedules. Travel managers, meanwhile, traditionally benefit from preferential contracts with national companies thanks to their high volume of reservations. And most do not want to lose out on such contracts. According to Jo-Anne Lloyd, the current limited interest is not due to any refusal of the concept. “The limited acceptance of low-cost carriers by some segments of the business travel industry had more to do with difficulty in accessing inventory and flights via online booking tools than with a conceptual appreciation”.Whether on the ground or in the air, the key argument for seducing travel managers is flexibility, particularly with regard to individual travel. Yield policies encourage them to plan their travel further and further ahead of time to avoid the random aspect of last minute reservations. And Internet largely facilitates this preconception. Service providers must now take into consideration that customers are well aware of the pricing mechanisms and that they too are banking on long-term strategies.

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