Cutting costs and updating the role of corporate travel managers was the theme this week as more than 3,500 business travel planners and travel industry professionals converged on Los Angeles for the National Business Travel Assn.'s 26th annual conference.
The convention, the group's largest ever, focused on sweeping changes in the travel industry to respond to demands by corporations for lower expenses. The convention floor was filled with software and technology designed to save time and money, and speaker after speaker discussed how suppliers and travel managers must help trim the bottom line.
Even keynote speaker Pat Riley, coach of the New York Knicks, bemoaned the current state of business travel budgets. "We lost our charters" and must now use commercial flights, he told the members.
In-house travel departments have been among the first targets of corporate downsizing, and agencies catering to corporations are therefore getting more business. At one session, called "Avoiding the Ax," Bill Parker, president of WorldTravel Partners, explained how his firm was spun off from the Hoechst Celanese travel department and now serves many companies.
Perhaps the most dramatic illustration of this trend, however, came in a session Tuesday when Kevin Mitchell, president of a King of Prussia, Pa.-based coalition of companies called Business Travel Contractors Corp., gave details of a plan to restructure air fares to save its corporate members as much as 20% in air travel costs.
The plan, which has been kept under tight wraps, has been in development for two years and is awaiting an antitrust review by the Department of Justice. Since it was announced last month, however, it has generated a considerable amount of controversy within the travel industry because it would eliminate frequent-flier miles for business travel and fundamentally alter the role of travel agents and corporate travel managers.
Instead of airlines paying agencies a commission on ticket sales, for example, coalition members would pay agencies fees for their services. Business contract fares would be based on mileage only. Although such ideas have been brushed off by the airlines before, Mitchell's group has the clout of 17 Fortune 500 companies, each of which paid $140,000 to join.
Frequent-flier miles encourage employees to take marginally useful trips or to fly circuitous routes, which can raise corporate costs, Mitchell said. Also, the mileage points, commissions and other hidden costs are built into the price of the full-fare tickets companies often use for business travel.
"Corporations are held hostage to airline pricing," Mitchell said, "and we're paying for waste." Mitchell's group is proposing to post a take-it-or-leave-it price to all airlines that would be the maximum fare its members would agree to pay on a given route. Airlines could accept or reject the posted price and are free to offer another structure, Mitchell said.
NBTA President E.J. Hewitt said senior managers of corporations will be asking their corporate travel managers about the plan. But even though Mitchell was at the convention, Hewitt said, "we want to make it clear we are absolutely not endorsing this."
People are understandably nervous about the proposal, she said. "It's change, and people don't know how it will affect them."
Mitchell tried to assure travel managers that the changes would benefit them by freeing them from the tedious task of sorting through thousands of different fares for the lowest reasonable ticket price to give a client. The changes would allow corporate travel managers to instead focus on long-range strategic travel planning, he said.
Hewitt said travel managers should expect their jobs to change anyway. "While the business travel manager still remains the guardian of a firm's corporate travel interests, the position will call for a greater diversification of skills now and in the immediate future," she said. Travel managers may be involved in related areas such as video teleconferencing, fleet management and training, she said.
One bright spot for corporate cost cutters is the increasing availability of new ultra-low fares in short-haul markets, which could reduce costs by as much as 65%.
The success of super cost cutter Southwest Airlines has spawned a host of imitators, including Continental Airlines' "CALite" service and USAir's "Project High Ground." United will join the fray in October when it launches its low-cost United Shuttle service in 14 markets.
The percentage of the top 1,000 short-haul routes offering these super-low fares nearly doubled from 27% last year to 47% this year, said Robert Harrell, vice president of the Airfare Management Unit of American Express Travel Related Services Co. in New York. He said that by the end of the year, as many as 60% of the top 1,000 short-haul routes will offer the low fares, which are defined as being at least 65% lower than full coach fares in a given market.
Among other convention highlights: