ACTE European Roundtable, Part II
When ACTE Quarterly gathered six European travel managers for a roundtable
during ACTE Global Berlin last November, the candor was in as full supply
as the humor. Last issue, the roundtable participants discussed airline
issues. This time around, we focus on the corporate/agency relationship.
Our six participants included Juergen D. Lepel, Head of Travel Management
Europe for Du Pont; Herman J.G. Mensink, Director of Worldwide Corporate
Travel for Philips Electronics N.V.; Sharon Stoler, Head of Travel and
Transportation for the World Health Organization; Honora Horne, Executive
Director, Travel Services for Goldman Sachs International; Ian Hall, Business
Services Manager for Unilever plc.; Lucas Dendievel, Director, European
Travel Management for Janssen; plus Earl Foster, President of ACTE and
Director of Global Travel Management for Joseph Seagram and Sons.
ACTE QUARTERLY: We've been hearing a lot
about "partnering" among corporates and their agencies. What
have been your experiences?
DENDIEVEL: Not exactly positive. We're
probably working with the best of agencies in a mediocre industry. I've
been involved in purchasing of many different kinds of items in the past-plastic
packaging, cardboard boxes, bottles and caps. Working with those suppliers
seems to follow a totally different standard.
FOSTER: It may be more of a cultural issue.
Agencies never had to deal with management standards the way other supplier
companies defined them. Agencies look at whether they pick up the phone
in three rings. Or whether tickets are delivered on time. Other than that,
it's not a businessthey don't even know their cost structures!
LEPEL: Look around the table, and you have
world-class companies. We expect to partner with someone who's on an equal
level. But agencies are living on the level of agents relying on commissions.
They need to go to management fees. They need to know their costs. They
don't know how to do it. So for now, they are a low-cost provider of very
simple services. As soon as they reach the stage when they are true management
consultants, then I think a partnership has a chance.
DENDIEVEL: If we were to treat our customers
the way we've been treated, we'd be out of business.
ACTE QUARTERLY: Have any of you developed
management standards for your agencies, or instituted incentive-driven
contract elements?
HORNE: We're divided into inplant performance
and contract management. We load the most payment against the contract
management portion, because that's the strategic part. The implant performance
is actually a given. That's their business. Our business is to be an investment
bank. They should be able to run that inplant, pick up the phone, and issue
the documentation accurately. I'm taking that as a given that they'll do
that well without a motivator.
FOSTER: But that's the problem, if you're
considering as a given that that's what they do. But they don't do it.
AQ: What do you do about it?
FOSTER: At Hewlett-Packard and now at Seagram's,
I did develop a quality program for use with my agency. I set out specific
expectations that they had to achieve. If you weren't performing, you were
at risk to lose our business.
HALL: We have an issue in terms of the
perception of the service. I have an issue with the manager of the contract
and the way management information is provided-including serious concerns
about the whole back office support mechanism. Where we don't seem to have
an issue is in terms of the ability for someone to pick up the telephone
and carry out the transaction. So my customers actually believe they [the
agency] are doing a fantastic job because they're getting the tickets done.
We're struggling with this situation, because my customer is saying, well,
everything's fine, don't try to change it.
STOLER: Supplier satisfaction in other
industries is something entirely different from what I see here. We use
over 100 branches of our travel agency network as a long distance client.
In some cases the local agency has a decal on his door that says he is
part of the agency network, but since its a franchise or affiliated operation,
he isn't using the same performance standards as the parent agency. Even
the agency admits he isn't and that they have no control over this--and
yet we are the single largest user of our agency network.
AQ: We've been talking a lot about frustrations
and challenges. Let's take a different tack and talk about what kinds of
improvements you've seen in the past year.
STOLER: I'll tell you one that is in the
works that may hold real promise. We issue our tickets around the world,
and what we need to see are local market fares. Otherwise, we have no way
of judging our actual costs. This is next to impossible until we have linkage
on the Internet or through e-mail. Finally there are small limited amounts
of ticket prices being developed as databases.
HORNE: Agencies have now recognized that
technology is not their area of expertise. So now they're far more willing
to work with me using a software house to sit alongside me and help me
to get to that solution. That's an important step forward for them.
LEPEL: It's not enough for an agency to
say that they have $20 billion buying power but actually have nothing.
Set up a database. Come up with benchmark data. Agencies are realizing
that it is not enough to talk about being a consultant. I don't want an
agency as a consultant. A consultant I hire for a particular job, and then
is gone. I need someone to manage the travel, manage the process. Manage
even our travelers. It is a long-lasting activity and not a one-time job.
That means that you really have to have the right people with international
experience, not just knowledge of the country in which they are based.
HALL: I agree, technology is beginning
to move forward. Not as fast as I would like, but it has had an impact
on the way we do travel-be it with our agencies, or our direct suppliers,
airlines, even hotels.
DENDIEVEL: It's encouraging to see agencies
partner up with third party solution providers. We've just got a new policy
in place, tightened up a little bit, so the ways of evading the policy
have gotten fewer. Quite frankly I'm happy that technology is moving forward.
I think it will take agencies out of the ticketing process.
MENSINK: Agencies are improving. And you
have to bear in mind that they come out of a protected environment. It
was a very interesting issue to deal with when I went out for a bid because
they knew they couldn't cheat. They knew they couldn't say, 'oh, we only
get 2%.' Moving forward on the positive note, I think that especially in
Europe, travel management is being recognized within companies as an essential
activity. Travel is finally being perceived as a controllable cost.
AQ: How did the attitude change come about?
MENSINK: I think the large companies in
Europe have done a good job in positioning travel as a controllable cost--it's
a long-term process, and it's a matter of internal communication. Keep
on showing them figures, because that's the only thing they believe in.
HALL: Traditionally managers have seen
travel as profit through rebate, and it's not. It is a cost. And the true
cost has to be brought out.
LEPEL: One thing is that we're all going
to think more global. By looking on a broader scale, suppliers are paying
attention. We have to watch how we are running our companies, because everything
is on review.
HORNE: For any organization corporate travel
is probably the third largest controllable item on the P&L. And I think
that most organizations now have a very clear understanding of that. I
remember the first time I went to the board and they said, 'How can we
save money on travel?' and I said, 'don't travel.' There was a momentary
silence. I told them, 'That's the easiest way. Scale back, allow fewer
people to travel, downgrade.' The solutions are in fact very straightforward.
FOSTER: But companies didn't look at travel
that way. You first had to get visibility. If you say, 'we spent $700 million
on travel last year,' all of the sudden you've got their interest. If you
looked at each individual little office's spend, that's simply the cost
of doing business.
HALL: I think you're right. There was this
kind of disconnect. Getting global was very key, because suddenly instead
of seeing that I'm spending $10 million senior management suddenly saw
the world spending $210 million-that's a big number, and you take 20% out
of that . . . and that's a lot of people.
AQ: Do European companies manage travel
much differently from what you know about North American firms?
LEPEL: I see differences in corporate culture.
Decision making is different. Apart from wanting total buy-in, we are people
who like to discuss things . . . and keep on discussing things. We don't
say, poof, this is the way we are going to go, the way the Japanese do.
MENSINK: We have different practical issues.
If you were consolidating, you wouldn't have to do it state by state, with
different legal requirements and tax consequences in every state. You are
not allowed in Northern Italy to establish an inplant to issue a printed
ticketit has to be printed somewhere else. If we have a super idea,
we have to set it in place 20 timesbut some changes simply don't justify
20 times the cost. When it comes to airlines, you might negotiate programs
with three airlines in the U.S. If we do it with three airlines, our business
is going to go bankrupt because our travelers can't fly. It's not a question
of whether we want to make airline deals. You can't fly with KLM if you
want to go from Spain to Italy.
FOSTER: You have similar constraints in
Asia Pacific with suppliers. I was able to switch travel agencies in North
America, and was able to do the entire country in one day. Could I do that
in Asia Pacific? Not possible. In Hong Kong, we'd first try a couple of
people, see how it works, because we don't have trust yet.
STOLER: In the States, you sit down with
a rep of whatever vendor. You hear, 'yes yes yes,' notes are taken, you
hear 'I'll get back to you' and you never see him again. Over here you
take time to establish the trust factor, take time to meet with the person.
You may not hear from from that person for two months, but he has not forgotten
you, he is still working on your behalf. He'll come into the office and
say, I've got it. Now let's talk. In Asia you have to establish an entirely
different level of trust, and in Africa too. It keeps everything very,
very interesting.
