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"Old corporate travel policies won't fly"

Sunday, May 13, 2001

Old corporate travel policies won't fly
By Greg Sandoval

A growing number of businesses looking to cut costs are requiring employees
to go online to book business travel.

"Anytime you can take a person out of the equation and automate a process
you're going to be more efficient," said Rusty Carpenter, general manager of
American Expess Consulting, which advises companies on lowering overhead.

In such mean economic times, companies want to be lean. Dragged down by the
ailing technology sector, the sliding economy is forcing traditional
businesses to hunt for ways to cut fat. Travel budgets, which analysts say
ballooned during the past decade's boom times, were a likely place to start.

Last week, Oracle announced that its new mandatory online travel policy will
save the company about $16 million this year and more than $100 million over
the next five years. First Union Bank, Xerox and 3Com have mandated the use
of the Web to purchase travel fare and say that their new policies can help
chop between 10 percent and 20 percent off travel costs.

According to Carpenter, large and medium-sized businesses spent $157 billion
last year on travel.

Online travel is one of the most robust sectors of the Web, with continued
growth and demand even as the stock market has dropped and hundreds of
dot-com businesses have been wiped out.

Now corporate America is figuring out what the tens of thousands of
consumers supporting that sector learned years ago: Online travel sites are
an easy and effective way to locate low prices.

One reason companies are switching to Web-based travel agencies is that
automated systems allow an agency to find fares for customers free of
charge. Offline travel agencies, which must pay travel agents, charge
transaction fees.

Tools of the trade

Costs are further cut by "corporate booking tools," which allow companies to
better monitor their employees' travel plans. Installed in a company's
intranet, the booking tools allow employees to shop online for travel fares
just like they would at Web travel agencies such as Expedia or Travelocity.
The difference is that the booking tools allow a company to insert its
travel policy into the system, and it prevents any free-spending employees
from violating the policy.

When a business traveler presses the "enter" key on a high-price ticket, the
booking tool can alert the traveler that the purchase is in violation.
Several of these systems, which are offered by companies such as GetThere
and eTravel.com, can also snitch to the traveler's boss.

 If a company chooses, it can elect to be notified by e-mail when an
employee makes an unauthorized purchase.

"Corporations and their travel managers realize they've got to use these
booking tools," said Kate Rice, an analyst with travel research group
PhocusWright. "If they haven't used them, they are going to."

Stricter travel policies follow years of frustration by companies over
workers who ignored travel policies. In addition, corporate travel has a
reputation for being far more expensive than just booking travel plans

A common practice by companies that spend a lot on travel is to strike
preferred-pricing deals with airlines, hotels and rental car companies in
exchange for a guarantee that their employees will patronize them. But for
years, employees have booked fares with their preferred airline or rental
car company--and there were few ways for employers to monitor whether
employees were buying the lowest-cost fare or honoring travel policies.

"Travelers will make up any excuse at all to avoid traveling on a carrier so
they can stick to their preferred airlines," said Josh Friedman, a senior
analyst for research group IDC. "Most often, their preferred airline is the
one issuing them frequent-flyer miles."

With booking tools, that kind of conflict won't fly any longer.

The appeal of the agent

But some analysts see serious flaws with the booking tools. They question
whether the company is best served by having workers who travel--often
high-level executives--spend valuable time surfing the Net for the cheapest
deal on a rental Ford compact.

It might be prove less expensive in the long run to pay a travel agent to
search, said Friedman. A former travel agent himself, Friedman said
technology can never replace a human when it comes to understanding another
human's travel needs.

He also questions the strategy of restricting workers to booking only fares
with the carriers and hotels the company mandates. Doing so eliminates the
possibility of the employee finding rock-bottom prices that sometimes
surface on the Web.

"These booking systems don't have the same capacity to analyze variables
that a human does," he said. "The technology isn't there yet. In the long
run, I'm not convinced that they can save companies any money at all."

The long run is precisely where proponents of online booking systems say
they can save companies the most money.

The booking tools will also help companies to guarantee the airline or hotel
chain they've negotiated preferred prices with a certain amount of business,
and that means better terms for the company, said Jeff Palmer, chief
operating officer of GetThere.

Once the companies get a track record using the system, they can drive an
even better bargain when negotiating preferred prices in the future, he
said. And the time issue isn't that critical, he said, pointing to studies
that show that employees quickly find and buy lower-priced tickets online.

"Their behavior shifts and they become much more interested in finding the
best deal," Palmer said. "Instead of just telling an agent what times they
want to arrive or depart, they put together many more variables when doing
it themselves.

"They might be open to leaving from a different airport or open to juggling
their schedules," he added. "These are questions that a travel agent many
times doesn't have the time to ask."

Elaine Triggs, director of travel services at First Union Bank, says she is
excited that employees have taken to ordering airfare online. The company
had hoped to see about 30 percent of its employees booking over the Web;
Triggs said the number has topped 40 percent. Before changing the travel
policy on Jan. 1, less than 1 percent booked tickets online.

Besides trimming direct travel costs, First Union is seeing savings in
indirect areas such as telephone bills and the cost of fax paper.

"We've saved $5,000 a month alone on faxes now that we get far fewer paper
confirmations," Triggs said. "Most come by e-mail now."

In the end, it's the company that pays for the travel, said PhocusWright's
Rice, and it "should a have a say in how (the money is) spent."

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