Title. Principles of Demand Management. Lowest Logical Airfare: Which Policy? Program: Combining Transient Spend with M&E

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1 1 Text Title Insights into Effective Travel Management Issue 6 Global Edition March 21 Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse lectus urna, suscipit non fringilla at, dapibus tincidunt urna. Pellentesque posuere cursus cursus. Donec ac justo in neque pretium condimentum eu a est. Nullam a arcu at sapien adipiscing sollicitudin nec tempus purus. Donec adipiscing molestie scelerisque. Nam ornare adipiscing mauris ut congue. Quisque Savings lacus ipsum, on fringilla Demand: hendrerit consequat eu, auctor sed risus. Fusce semper, est ornare convallis faucibus, mi augue vehicula massa, sodales volutpat mi turpis sit amet massa. Suspendisse potenti. Nam nec augue mi. Principles of Demand Management Nam sollicitudin convallis nunc, eu hendrerit mauris mattis sed. Nullam nec massa eget sapien pharetra tincidunt at vitae odio. Nullam sagittis justo et tellus malesuada vitae blandit diam rutrum. Sed sodales sapien sed risus sollicitudin quis vulputate dui tincidunt. Morbi felis velit, dignissim ut viverra id, adipiscing id arcu. Pellentesque ultrices tellus mollis nibh bibendum id auctor sapien 4cursus. Maecenas quis urna a lorem ultricies semper. Nullam at magna eget nunc adipiscing ullamcorper vitae et ante. Mauris accumsan suscipit ipsum ut egestas. Mauris ut ipsum massa, commodo tincidunt nulla. Nullam convallis nisi sed augue facilisis nec viverra sapien placerat. Proin imperdiet, sapien vitae facilisis hendrerit, elit neque sagittis urna, id tempor tellus ligula Preferred id nisl. Nam vitae felis Supplier sed ipsum convallis or pharetra non at libero. Etiam eu faucibus ligula. Sed diam est, elementum non porttitor quis, pulvinar eget lectus. Nunc sit amet metus leo, in viverra nulla. Aenean id purus lorem. Suspendisse sed elit id purus varius laoreet sed et justo. Sed faucibus tincidunt dictum. Lowest Logical Airfare: Which Policy? Etiam odio mauris, fringilla posuere facilisis non, pulvinar vitae tortor. Sed neque est, adipiscing ac consectetur non, consectetur in sapien. Morbi tempor nibh ut nunc vehicula iaculis. Phasellus vitae ipsum mauris. Etiam molestie nisi sit amet erat porta 8 vulputate. Vestibulum sit amet erat vel eros elementum tincidunt. Nulla imperdiet tellus vitae nisi semper varius. Praesent nisl lacus, accumsan sit amet suscipit condimentum, gravida nec dui. Donec suscipit, ante ac commodo facilisis, tortor nunc fringilla erat, consectetur porttitor nisl nisi a erat. In id eleifend massa. Morbi malesuada sagittis nunc sit amet eleifend. Nulla orci justo, hendrerit Evolving eu dictum ac, porta Your ut tellus. Hotel Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. Cras blandit, nulla sed tristique tincidunt, nisl orci pulvinar ipsum, et vehicula orci purus non augue. Suspendisse potenti. Program: Combining Transient Spend with M&E Nam at mi a dolor faucibus ultricies. Duis quis vehicula velit. Pellentesque nec tortor in ante viverra malesuada. Donec massa dui, commodo dictum fringilla ut, hendrerit vitae massa. Proin a orci nec nunc venenatis dignissim vitae sed tortor. Aliquam gravida, 1quam non fringilla ultricies, ante felis tempor leo, non iaculis quam erat in lacus. Nunc ac cursus nisi. Aliquam nibh purus, blandit vel lacinia a, tristique id nisl. Fusce scelerisque ultrices massa, non eleifend ipsum dapibus vel. Suspendisse augue magna, pulvinar in consectetur vitae, semper at metus. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Fusce massa augue, hendrerit ut pellentesque quis, porta ut sem. In hac habitasse platea dictumst. Lorem ipsum dolor sit amet, consectetur adipiscing Alliance elit. Nunc non Contracting: est tellus, at hendrerit dui. Cras laoreet, libero in commodo ullamcorper, lectus nisi tempor quam, nec venenatis orci libero in purus. Fusce iaculis dapibus eleifend. a Good Fit for Your Air Program? Mauris ligula quam, ullamcorper eget consequat sed, tincidunt at orci. Phasellus nibh turpis, pretium nec volutpat id, tristique sit amet 12turpis. Vestibulum ante ipsum primis in faucibus orci luctus et ultrices posuere cubilia Curae; In eget ultricies ante. In nibh massa, tempor eget convallis vitae, mattis sit amet odio. Vestibulum ornare mi placerat lacus commodo interdum. Etiam sit amet erat ac justo ullamcorper consequat. Praesent ipsum nunc, semper luctus rutrum a, dictum luctus mi. Duis id lorem ipsum. Quisque sit amet mauris at libero auctor mollis. Donec tempor volutpat auctor. Integer vel lacus ipsum, at rutrum metus. Indicators 16

2 Editor-in-Chief Christophe Renard Managing Editors Kim Derderian Alexandra Naintre Editorial Advisors/ Contributors Eric Bausman Guillaume Bizet Nora Boros Benjamin Delaunay Dale Eastlund Delphine Kergoulay Michael Mannix Neysa Silver Nigel Turner Art Director Ashley Ittoo Web Artwork/Photos All photos and artwork by CWT except: Cover and Pages 4, 8 and 1 - Getty Images CWT Vision - Global Edition is published by the CWT Travel Management Institute 31 rue du Colonel Avia 7594 Paris Cedex 15 France The opinions expressed in CWT Vision - Global Edition do not necessarily reflect the position of Carlson Wagonlit Travel.

3 Issue 6 - March 21 3 Welcome Back Travel is back on many corporate agendas this year and that makes good business sense. After all, business travel offers one of the best ways to develop and reinforce professional relationships and build revenues. And from what our clients are telling us, smart travel management is more important than ever. Companies of all sizes are seeking ways to make the most of their business travel investment and optimize their spend whenever possible. This means savings, certainly, but much more. As an industry leader, Carlson Wagonlit Travel remains committed to helping its clients worldwide derive greater value from their travel program and thus contribute to the successful accomplishment of their organization s business objectives. This is why the global edition of CWT Vision is back as well. In addition to our everyday efforts to help our clients optimize their managed travel programs, we are eager to provide a regular flow of relevant information and actionable insights that will enable you to successfully address changes in the marketplace and capitalize on emerging industry trends. CWT Vision - Global Edition will be published quarterly and cover a variety of subjects that our in-house experts across the globe consider of utmost importance to our clients success. In our continued effort to reduce the number of printed documents we produce, the global edition of CWT Vision will be available in an electronic format only, both as a pdf document that you can download from our global Website (www.carlsonwagonlit.com) or as a Webzine. This first issue of 21 covers a variety of subjects from the pros and cons of a hybrid airline sourcing strategy to the many facets of effective demand management. The topics we choose for the global edition of CWT Vision are intended to help facilitate your strategic decision-making and bring added value to your organization s business travel efforts. We are convinced that together we can do a better job on your behalf than all alone. So we encourage you to provide us with feedback and suggestions on how the global edition of CWT Vision can best serve your needs. Are there topics you would like us to delve into? Industry experts you would like to hear from? Please let us know by talking to your program manager or contacting us at We all know that vision can sometimes be shortsighted. CWT Vision, on the other hand, is designed to be far-reaching in scope. To that end, we look forward to hearing from you and knowing how, as your travel management partner, we can accompany you in reaching your goals. Christophe Renard CWT Vice President, Corporate Marketing & Business Intelligence Editor-in-Chief, CWT Vision Global Edition

4 4 Savings on Demand Savings on Demand: Principles of Demand Management An introduction to the principle areas to address when using demand management to optimize your travel program Demand management is the implementation of systemic controls affecting the quantity, frequency and specifications of travel to control costs and eliminate unnecessary consumption without compromising business objectives. Putting these principles into practice will improve a company s ability to identify and enable the meetings, whether by travel or virtually, that are needed to deliver corporate objectives. Travel is an important means of creating or reinforcing professional relationships and developing business activity. Sometimes, however, the communication and interaction that drive results can be achieved as effectively through travel alternatives. Understanding the purpose of business trips is at the root of demand management. Once the objectives are clear, managers can ask the right questions to determine which travel products are best suited, the number of travelers needed to achieve the business objectives, and the appropriate frequency of travel. Controlling costs is different from indiscriminately cutting costs. To reduce costs by reducing travel can lead to lost revenue. In a recent survey of senior management by the Harvard Business School, Half (52%) said that restrictions on the number of flights they take for business would hurt their business. And a majority (78%) said that investing in maintaining current climate relations is most important in driving the future growth of business. 1 Managers should address the six key areas that constitute demand management to optimize their travel program without compromising business objectives. Consolidate and track travel data Common management wisdom says if you can t measure it, you can t manage it. Therefore, data capture is fundamental to demand management and sound decision making. Timely and accurate reporting are a prerequisite to productive supplier negotiations. Quality reports not only identify total spend but the most frequently visited destinations, individual travelers, and patterns of booking and demand, all of which are vital to strategic sourcing. Data can be consolidated from multiple sources, including the travel management company and credit card providers. Although consolidating data obtained in different formats can be challenging, it is an effective way to monitor progress and exploit opportunities that will result in reaching established goals. Good data will track key performance indicators and enable companies to take corrective action that will support their demand management strategy. Key performance indicators, for example, might identify a prospective increase or decrease in volumes to strategic destinations, which could impact negotiations. 1 Managing Across Distance in Today s Economic Climate: The Value of Face-to-Face Communication, Harvard Business Review, 29

5 Issue 6 - March 21 5 Options for controlling travel cost s Reduce travel frequency Promote alternatives to travel Impact on traveler Enforce compliance Optimize travel policy Revisit sourcing Consolidate & track travel data Revisit sourcing A comprehensive sourcing strategy is vital to good demand management and enables companies to get the best price for specified products and services, resulting in bottom-line savings and/or cost avoidance. Companies tend to negotiate with suppliers once a year for air, hotel and car. Identifying what to buy affects sourcing. Here are some examples of the potential to modify what is being purchased and from whom: Category shifts Rail has become a viable alternative to air for an increasing amount of domestic and short-haul business travel. As rail companies progressively equip their fleet with business traveler essentials such as power sources for laptops and WiFi and as they incorporate more high-speed routes, rail travel will continue to grow. Corporate housing such as serviced apartments, rather than hotels, for longer trips and rail transfers between airports and city centers rather than taxis, are other products that may provide an adequate substitute at a lower cost. Re-evaluate partnerships The number of preferred partners and the services provided should be reviewed regularly. There should be an adequate number of suppliers to meet travelers diversified needs while not so many as to impede the ability to achieve the volumes that could drive savings in negotiations. Optimize travel policy A travel policy must be clearly written and widely communicated to travelers and travel arrangers so they know who the company s preferred suppliers are and where to find and book preferred rates. Use of preferred booking channels using corporate online booking tool or TMC travel counselors ensures access to the appropriate content at the right price. As more mainstream business travel content comes from suppliers without a GDS presence, using prefered booking channels becomes increasingly important. Time of booking Surveys repeatedly demonstrate that the further out from date of travel the booking, the greater the savings there are to be made.

6 6 Savings on Demand Kind of ticket Downgrading the class of travel became a common and quick response to the economic downturn, but class of travel is not the only variable to consider. Five or six years ago, it was commonplace to purchase fully flexible tickets for business travelers. The recent trend is for managers to consider restricted tickets that are either non reimbursable or modifiable, where you pay a fee to change a booking. Wendy Wilmouth, who is responsible for procurement of travel and logistics services worldwide at telecommunications giant Alcatel-Lucent, says, Our experience shows that it s rare to change a trip. People used to worry about asking the boss to purchase a second ticket, but we know that those tickets [fully flexible] cost so much more that it s worth losing a couple of [restricted] tickets. She also points out that procurement must monitor volumes to ensure that they do not fall below contractual terms, which would jeopardize negotiated fares and benefits. We have to watch carefully. If we go below a certain volume, we could lose certain negotiation benefits. For some companies for example, this might mean lounge access for those traveling on economy tickets. Enforce compliance Questions travel managers should ask when thinking about demand management: What is the purpose of the trip? Is the trip in line with business objectives? Is the trip necessary? What is the added value of this trip? Who needs to travel to reach our objectives? Can we cut down on the number of travelers and still meet our objectives? Could these objectives be met by a virtual meeting? How will return on investment be measured? How can we integrate demand management into our travel policy, approval processes, performance measurements and at the point of sale? A good travel policy is an invaluable aid to good demand management, but there is no benefit if that policy is not clearly communicated and designed to maximize compliance. For example, particular heed should be paid to policy wording. Must is a stronger directive than should. If advance booking is a route the company wishes to follow, the policy needs to be specific as to how many days out the booking must be made before the traveler is non-compliant. For example, the company could stipulate that all trips must be booked at least 14 days in advance. Wendy Wilmouth says that at Alcatel-Lucent, The objective [of the policy] is to help the traveler to make the trip as cost effectively as possible. Everyone travels economy regardless of the length of the trip or seniority. The only way that someone at Alcatel-Lucent is allowed to book a class of travel other than economy is by derogation, (i.e., the request must go to a member of the 15-person global management team, comprising the firm s C-level, for approval). That stops a lot of requests, says Wendy Wilmouth. Having said that the objective must be compliance to the travel policy, there is definitely an increase in hybrid policies. In such cases, companies are negotiating with suppliers such as airlines but allowing their travelers to book with a non-preferred airline if there s a best buy on a particular day that is cheaper. Often, however, companies establish parameters. For example, accepted practice allows travelers to choose a hotel outside the program only when the price difference is at least 2% lower.

7 Issue 6 - March 21 7 Promote alternatives to travel Identifying the purpose of a trip is vital to answering the question of whether the business objective can be met through a virtual meeting. The choice is no longer between a trip and a conference call. Virtual meetings now encompass web conferencing, webcasts, videoconferencing and telepresence, all of which are now much improved and more accessible options. It might be trite to say there is no substitute for travel, but that doesn t mean it s not a truism. Although tools such as videoconferencing allow us to see expressions on faces rather than just hear voices, it is still not a physical meeting with all the chemistry and connectivity that such a meeting encompasses. In addition, virtual meetings by their very nature are strictly limited in time. The meeting begins and ends at an agreed time and cannot go beyond. Furthermore, videoconferencing does not allow for an extension of the relationship the way a physical meeting can; from a chat over coffee before or a cocktail after, meetings enable incidental conversation from which new ideas and connections might emerge. On the other hand, one of the advantages of virtual meetings is that they are recorded so the content is more completely captured. Documentation of a physical meeting is often more casual. Making use of virtual meetings as an alternative to travel is still in its infancy; only experience will enable companies to find the best mix between the two that suits them. Virtual meetings as a travel alternative Web conferencing: live meetings, trainings or presentations in which all participants are connected via the Internet. Webcast/webinar: a web meeting in which typically it is speaker to audience with limited audience participation or with participation at a set time such as a question and answer session at the end. Videoconferencing: a set of interactive telecommunication technologies which allow two or more locations to interact simultaneously via two-way video and audio transmissions. Participants will typically be located in conference rooms with video cameras, monitors and audio systems. Telepresence: state-of-the-art and fully immersive, using studio-quality audio and lighting, large screen/ life-sized monitors, and boardroom quality furnishings in specially built rooms. Reduce travel frequency Duane Futch, vice president of GetThere and Sabre travel procurement strategy, says, To drive cost-efficient behavior, you must first of all look at why the traveler is traveling. Always remember that the trip is not the objective. It is the enabler. To reduce travel is the most extreme demand management option. If this becomes necessary, the objective should be to cut the travel that is aligned with the lowest priorities of the company. For example, client meetings or any travel whose aim is to generate revenue are likely to have higher priority than travel for routine internal meetings. Demand management should not be limited to tough economic times. Used effectively, it can help companies tailor their travel program to their business needs in any economic climate. Demand management also helps companies achieve non-financial corporate objectives such as reduced carbon emissions or better work-life balance, which can be particularly important for attracting and retaining talented people. n

8 8 Preferred Supplier or Lowest Logical Airfare Preferred Supplier or Lowest Logical Airfare: Which Policy Is Right for You? Reprinted from CWT Vision North America (February 21) Pressure to reduce overall travel costs is at an all-time high. Travel managers are continually tasked to find new ways to save money and, at the same time, maintain or improve the travel experience. Many travel managers have been forced to re-evaluate and adjust travel policies to drive positive incremental results. Surprisingly, deciding between a lowest logical airfare and a preferred supplier policy is a scenario many are considering. A preferred supplier policy biases online displays for agents and online booking tools and directs travelers to purchase tickets on preferred carriers, regardless of airfares on non-preferred carriers. In some cases, a company will establish a fare difference threshold, at which point a non-preferred supplier can be used. When using this type of policy, travel buyers expect the preferred supplier will ensure the lowest fare for a company s travelers in most, if not all, markets and certainly overall savings in return for their loyalty. When employing a preferred supplier strategy, companies enjoy a variety of benefits. Supporting preferred partners can protect existing discounts, offer leverage for improved discounts, and create intrinsic value through soft benefits such as otherwise unavailable frequent flyer status upgrades. Additionally, when preferred carriers are used, companies may limit risk as they use only those suppliers that meet their company s safety and security requirements. Traveler use of a preferred supplier is also easily tracked, ensuring accurate data capture should a company need to locate its employees in a time of crisis. Finally, solid tracking of supplier usage also allows a company to evaluate historical travel patterns and spend to make strategic air program management decisions on an ongoing basis. Using a preferred supplier policy, a travel buyer ultimately has determined that the overall value a preferred carrier brings to an air program outweighs any additional costs incurred when the carrier does not offer the least expensive ticket in every instance. In some cases, purchasing higher-priced tickets on a preferred carrier in a few markets can be offset by savings gained through competitive discounts offered by the carrier in other markets. A careful evaluation of the discounts proposed by a carrier, the corresponding market-share requirements, and prices on competing carriers in key markets is necessary to determine if a preferred carrier policy is the correct strategy. A preferred carrier policy is not without risks and challenges. The ability to enforce this policy and drive compliance is imperative to achieving positive results. Additionally, securing competitive discounts and pricing from preferred carriers is essential. Travelers will question the travel policy if they are required to purchase a pricier ticket on a preferred carrier when a less-expensive ticket is available on a non-preferred carrier or via the Internet. Having solid data and analytics to support a preferred carrier policy is imperative to successfully overcoming such challenges. In the event travelers do consistently find less expensive tickets in a key market, it may lead a travel manager to renegotiate discount levels and/or corresponding market-share goals. If a carrier fails to offer competitive discounts or fares in key markets, a company supporting a preferred carrier strategy may end up paying more than necessary. When correctly executed, a preferred supplier policy should be leveraged to continually maintain and improve discounts.

9 Issue 6 - March 21 9 A lowest logical airfare policy directs travelers to purchase the lowest fare available as defined by pre-determined, companyspecific requirements and thresholds, regardless of the carrier. These requirements may include comparing prices on connecting flights, reviewing options at alternate airports, and/or searching for less expensive flights with adjusted arrival and departure times. Compliance to a lowest logical airfare policy ensures travelers are selecting the least expensive ticket option while meeting acceptable corporate guidelines, even if the airline selected is not preferred. A lowest logical airfare policy may be an effective way to reduce the average segment price (ASP) a company pays in the short term. Although the more immediate and more obvious to the traveler savings generated from this type of policy can be appealing, it s more complex than that. One major issue to consider is a company s ability to support and drive compliance to this type of policy. Travelers need to actually purchase the lowest fares available based on the pre-defined requirements for this policy to drive positive results. When correctly executed, a preferred supplier policy should be leveraged to continually maintain and improve discounts. Despite strong compliance levels, this type of strategy can create problems if travelers circumvent policy, knowingly or not, by adjusting their requests to avoid pre-defined requirements and simply book the most convenient trip. For example, frequent travelers may learn, and potentially exploit, acceptable excuses for failing to book the lowest fare available. Or, they may purposely set their desired departure and arrival times to limit flight options to only those carriers they wish to fly. Allowing the traveler more jurisdiction in purchasing airfare presents challenges for a company whose goal may be to tighten traveler booking behaviors in the future. Failure to manage these risks essentially allows travelers to purchase more expensive tickets at their discretion, negating the value of a lowest logical airfare policy. Travel managers also need to consider how this type of policy will affect access to travel data. Travelers allowed to purchase less expensive tickets outside of controlled booking channels may not be trackable in a time of crisis. This data leakage may also lead to an inability to track total travel spend for future negotiations. Assuming a company currently has preferred carrier relationships, one of the most important risks to evaluate when considering a lowest logical airfare policy is the impact on a company s ability to meet current contractual goals. If travelers purchase the lowest fare, regardless of carrier, it can negatively impact use of preferred carriers and put existing discount levels and contracts at risk. The loss of these discounts may ultimately cause ASP increases in key markets and thus, an increase in overall travel costs. When contemplating a lowest logical vs. preferred supplier policy, consider the advantages and disadvantages of both. No one policy will generate positive results in all situations. Travel buyers need to determine the strategy that best fits their company culture, compliance levels, executive-level support, and overall travel program objectives. Some CWT Solutions Group clients have implemented both types of policies simultaneously and have realized some short-term savings. However, this can be problematic because it can be difficult for travelers to understand and difficult for travel managers to oversee. The inability to maintain compliance with both policies can exacerbate the disadvantages of both, generating higher costs and hurting a company s ability to control its travelers choices. In cases where a hybrid solution works, the policy is enforced per market, enabling a travel manager to direct traffic to preferred carriers in certain markets, while taking advantage of potentially lower fares from non-preferred carriers in other markets. The strategy requires strong compliance and control of approved booking channels, effective traveler communication, and close monitoring. If considering a switch to a lowest logical airfare policy, determine whether this is a long-term strategy or simply about short-term savings. If the motivation is more about immediate savings, understand that when the company returns to a preferred supplier strategy, retraining travelers for more controlled booking behavior may be difficult. n

10 1 Combining Transient Hotel Spend with M&E Evolving Your Hotel Program: Combining Transient Spend with M&E Reprinted from CWT Vision North America (February 21) As companies design and develop their strategic meetings management program (SMMP), an area not to be overlooked is strategic sourcing and, specifically, how to best leverage transient and meetings and events (M&E) hotel spend together. Meeting spend is typically between 25% and 35% of a company s travel and entertainment (T&E) spend, with an estimated 37% of it being hotel spend. If this M&E hotel spend is directed to preferred suppliers already utilized for individual business travel, or transient travel, the combined spend equates to even deeper discounts during hotel negotiations. Discounts will vary depending upon combined spend and a company s ability to direct both transient and meeting spend to specific hotels. As companies consider adding M&E to transient travel for truly holistic hotel program negotiations, success factors remain the same. First, data is essential. For many companies, leveraging combined transient and M&E hotel spend is a part of the development of a strategic meetings management program. If a company has the technology in place and has been tracking costs associated with meetings for at least six months, the combined data will be more meaningful. This combined data will identify high-spend hotels, which will expose overlap with the transient program. If the pieces are not in place to track M&E hotel data, travel buyers can use transient data to identify potential meeting spend by looking for spikes in certain cities or hotel properties. This may indicate a meeting has taken place. Additionally, data can be gathered through surveys and interviews with meeting planners and finance staff, or via accounts payable information like the general ledger or meeting card data. Regardless of how it is compiled, strong data enables the development of a strategy that aligns the combined programs and adds value to both. Second, after the data is gathered and hotel spend is identified, travel buyers must determine within how many cities they want to begin this integration effort. For organizations with weak or incomplete data, consider beginning with a small number of cities. For more complete data, a larger target list with more cities may be appropriate. After determining the number of cities, devise a solicitation list, or a list of hotels or chains that will receive the company s request for proposal (RFP). Take into consideration

11 Issue 6 - March preferred suppliers on the transient side and how they can best accommodate the company s meeting needs. Ultimately, a travel buyer may choose to solicit all hotels for transient and meetings purposes or, based on hotel capabilities, travel buyers may have a list of hotels that will be selected to provide bids for transient-only, meetings-only, or both. There is not a right or wrong way: the approach should be based on combined transient and meeting spend, meeting needs, and overall company processes and culture. The goal is to secure the largest overlap between hoteliers for transient travel and M&E, keeping in mind there may be certain transient hotels that cannot fulfill meetings needs and vice versa. For example, a limited-service hotel may not be able to accommodate meetings because it lacks on-site food and beverage services. In this case, consider choosing the limited-service property for transient travelers and a full-service hotel within the same chain to accommodate the meetings needs, resulting in There is not a right or wrong way: the approach should be based on combined transient and meeting spend, meeting needs, and overall company processes and culture. greater spend across a company s preferred hotel chains. Ideally, when a company begins to merge a transient hotel program with an M&E hotel program, travel buyers will build upon current supplier relationships, proving to the preferred suppliers that the company has the ability to drive not only transient travel spend, but meetings spend to a common set of hotel partners. Finally, when approaching hoteliers to bid on a company s M&E and transient business, the RFP process is much the same as transient hotel alone. When combining programs, ensure the RFP includes questions that satisfy both transient and M&E needs. Specific M&E questions may be about audio-visual capabilities, meeting room size/capacity, food and beverage offerings, and the hotel s willingness to enter into one standard contract for all company events covering cancellations, attrition, and other contractual obligations. Meeting spend, type, and overall need will help determine how to design the combined hotel RFP and program. As with transient travel, for a successful SMMP, there must be strong communications tools in place to drive business to preferred hotels. A policy that clearly outlines the booking process, as well as the organization s plan to manage compliance, is critical. Additional tools such as static and ongoing traveler communications, and online booking tool messaging, will further encourage use of preferred suppliers. These communications should continuously emphasize how meetings are booked, along with specifying the role of any third-party providers or tools to be used. The ability to maintain a strong program will depend upon ongoing optimization. A company should review its hotel program on a quarterly basis to identify new and missed opportunities, thus allowing for necessary adjustments that are important to obtaining maximum cost savings. If the right processes and systems are in place to support a combined transient and M&E hotel strategy, a company s future negotiating leverage will be significantly strengthened, and additional savings to the bottom line will be assured. n

12 12 Alliance Contracting Alliance Contracting: Is It a Good Fit for Your Air Program? Reprinted from CWT Vision North America (February 21) The global economic downturn over the last 12 to 18 months proved to be yet another challenge for the airline industry as carriers looked for ways to increase market share. Not surprisingly, much attention focused on airline alliances as a tool to strengthen demand and revenue. While most companies with large travel programs typically hold one or more airline alliance contracts, many companies with small to medium-sized travel budgets often contemplate the option as well. This article will highlight the current alliance environment, items to bear in mind when considering an alliance partnership, and the benefits of contracting with an airline alliance. Today, there are three alliances that dominate the global airline sector. Star Alliance has 26 member airlines, oneworld has 11 members and approximately 2 associate members, and SkyTeam has nine members and two associate members. Airline alliances are constantly changing as they add new partners around the world. The composition of the existing alliances changed significantly last April when Continental Airlines, a long-time SkyTeam member, announced it would transition to Star Alliance in October. Continental was eager to leverage the route network of Star Alliance, which it felt would better align with its own route structure. There were announcements of new alliance entrants as well: oneworld welcomed Mexicana Airlines to its list of participating carriers, and Star Alliance announced Brussels Airlines as its newest carrier member. For an airline, there are tremendous benefits to being part of an alliance. Without the enormous complexity and cost of an acquisition, airlines extend their network beyond their own fleet and schedule. They establish joint ventures with partner airlines and share revenues. Alliance partners typically align sales and marketing efforts, pricing, scheduling, and frequent flyer programs. There are also benefits for travelers. Alliances tout a quick and hassle-free booking process, frequent flyer program synergy, lounge access, and more efficient transfers: end-to-end service for a world traveler. The route structure of an alliance is the key differentiator and all alliances want the most extensive global coverage possible. This was illustrated recently when both American Airlines and Delta Air Lines proposed making an equity investment in Japan Airlines (JAL), despite JAL s $1 billion loss in 29. American, later joined by oneworld carrier Qantas, wanted to ensure JAL stayed in the oneworld alliance, and Delta hoped to see JAL defect to SkyTeam, thereby significantly improving the combined SkyTeam route structure around the globe. On February 9, JAL announced a decision to strengthen its partnership with American, stating the two would jointly apply for With several airline alliances to choose from, many travel managers question whether it makes sense to enter into a specific alliance contract, or simply continue maintaining separate contracts with individual airlines. antitrust immunity on transpacific routes. If approved, JAL and American will enter a joint business agreement to enhance their cooperation on routes between the United States and Japan, citing better ability to develop and offer competitive products and quality service to their customers. As a result, JAL remains a oneworld alliance member.

13 Issue 6 - March Low-cost carriers, or LCCs, have long looked to partner with other carriers in order to expand their coverage as well. With 48% of global passenger traffic not served by alliances, some LCCs have considered joining an existing alliance or forming their own. United Airlines and Virgin Blue formed the first mainline, LCC partnership in 22. In late 29, Virgin Blue partnered with Delta, replacing its previous relationship with United in order to expand its relationship with a mainline carrier. In 29, Lufthansa began a codeshare agreement with LCC JetBlue Airways, of which Lufthansa currently owns a 19% stake. In early 21, AirAsia and Jetstar Airways formed the world s first true alliance between two LCCs. They expect to increase revenue by sharing passengers while keeping costs down. This low-cost alliance also hopes to realize additional synergies to keep costs low, including joint aircraft procurement with higher volume and lower costs, joint fuel purchasing, cooperative airport passenger and ramp services, engineering, maintenance, and supplies. With several airline alliances to choose from, many travel managers question whether it makes sense to enter into a specific alliance contract, or simply continue maintaining separate contracts with individual airlines. The following questions should be answered to determine if an alliance contract is a good option for a given air program: 1. Alliance alignment: Does the company s travel footprint match a particular alliance route network? Would the program utilize three or more carriers within a given alliance? 2. Air volume international/domestic mix: Does the company s air program have adequate volume to attract several alliance carriers? Some alliances have overall volume requirements, but all are not readily published and can change. Is there enough international spend to take advantage of the foreign flag carriers in an alliance? Is there traffic originating from international point-of-sale locations? An alliance contract can add efficiencies to a global program where various ticketing locations exist. Can incremental spend be moved to an alliance contract, thereby taking advantage of additional or better discounts? 3. Negotiation leverage: Does the travel footprint fit well with only one alliance? If so, negotiating power may be limited with little competition bidding for the business. If a company can answer favorably to a majority of the questions above, airline alliance contracting should be given some additional consideration. For those companies who choose to partner with any of the three mainline airline alliances, the following benefits can be gained: Increased coverage via a broad route network Adds additional savings to air program A single agreement, including some or all airline alliance members Eliminates the inefficiency of dealing with each airline separately

14 14 Airline Alliances Provides a coordinated discount program among partner airlines Establishes joint share-goals, which are more achievable with no overlap between carriers One point of contact for all airlines A designated representative will act on behalf of all carriers Combined performance review measurement Joint performance results in one report Joint review meetings Performance updates for all carriers (Source: Star Alliance, SkyTeam, oneworld websites) To truly determine whether an alliance is a viable option, individualized research and travel program analysis is necessary. When they fit, alliances can be a win-win, delivering efficiencies to a travel program and enhancing traveler experience. n

15 Issue 6 - March Major Airline Alliances Star Alliance Star Star Alliance Alliance SkyTeam SkyTeam SkyTeam oneworld oneworld oneworld Adria Airways Aeroflot American Airlines Air Canada Aeromexico British Airways Air China Air France Cathay Pacific Airways Air New Zealand Alitalia Finnair ANA China Southern Airlines Iberia Asiana Airlines CSA Czech Airlines Japan Airlines Austrian Delta Air Lines LAN Airlines Blue 1 KLM Royal Dutch Airlines Malév Hungarian Airlines bmi Korean Air Mexicana Brussels Airlines Qantas Continental Airlines Plus two associate airlines: Royal Jordanian Croatia Airlines Air Europa EGYPTAIR Kenya Airways Plus affiliate members: LOT Polish Airlines AmericanConnection * Lufthansa American Eagle** Scandinavian Airlines Comair (of South Africa) Shanghai Airlines Sun-Air (of Denmark) Singapore Airlines Dragonair South African Airways Iberia Regional Air Nostrum Spanair JALways SWISS JAL Express Tap Portugal J-AIR THAI Japan Transocean Air Turkish Airlines LAN Argentina United Airlines U.S. Airways LAN Ecuador LAN Express LAN Peru MexicanaClick MexicanaLink QantasLink Announced Future Members Announced Future Members Announced Future Members Aegean Airlines Vietnam Airlines (Signed only S7 Airlines Air India preliminary agreement for discussions TAM on April 15, 29) Daily Flights: 19,7 Daily Flights: 13,133 Daily Flights: 8,387 Destinations: 1,77 Destinations: 856 Destinations: 727 Countries: 175 Countries: 169 Countries: 142 Lounges: 98+ Lounges: 415+ Lounges: nearly 55 * AmericanConnection flights are operated by Chautauqua Airlines Inc. ** American Eagle service includes flights operated by Executive Airlines. Independently operated franchise carriers using the British Airways name, livery and flight code and offering British Airways products and services QantasLink: Airlink, Eastern Australia Airlines, National Jet Systems, Sunstate Airlines. Source: Star Alliance.com/SkyTeam.com/oneworld.com 29

16 16 Indicators AVERAGE TICKET PRICE Europe, Middle East & Africa - Percentages indicate the variation of Q4 9 vs. Q ECONOMY -44% BUSINESS -38% % % 5-33% 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 Domestic Continental Intercontinental Continental Intercontinental North America - Percentages indicate the variation of Q4 9 vs. Q ECONOMY -43% BUSINESS -36% % 1-18% 2-36% 5 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 Domestic Continental Intercontinental Continental Intercontinental Source: CWT client data, worldwide on top 2 round-trip routes Domestic = travel within any given country Continental = travel originating in any given region to international destinations within that same region Intercontinental = travel originating in any given region to destinations outside of that region Top 2 round-trip routes: 2 most frequently purchased round-trip routes per category (domestic, continental, intercontinental) & per region, based on 29 CWT ticket sales

17 Issue 6 - March AVERAGE TICKET PRICE Asia Pacific - Percentages indicate the variation of Q4 9 vs. Q ECONOMY -44% BUSINESS -34% % 1-37% 2-33% 5 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 Domestic Continental Intercontinental Continental Intercontinental Latin America - Percentages indicate the variation of Q4 9 vs. Q ECONOMY -33% BUSINESS -43% % % -32% 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 Domestic Continental Intercontinental Continental Intercontinental Source: CWT client data, worldwide on top 2 round-trip routes Domestic = travel within any given country Continental = travel originating in any given region to international destinations within that same region Intercontinental = travel originating in any given region to destinations outside of that region Top 2 round-trip routes: 2 most frequently purchased round-trip routes per category (domestic, continental, intercontinental) & per region, based on 29 CWT ticket sales

18 18 Indicators BUSINESS CLASS USAGE Europe, Middle East & Africa % North America % Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 Continental Intercontinental Continental Intercontinental Asia Pacific % Latin America % Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 Continental Intercontinental Continental Intercontinental Source: CWT client data, worldwide Continental = travel originating in any given region to international destinations within that same region Intercontinental = travel originating in any given region to destinations outside of that region

19 Issue 6 - March AIR BOOKINGS MADE 14+ DAYS IN ADVANCE Europe, Middle East & Africa % 8 North America % Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 Domestic Continental Intercontinental Domestic Continental Intercontinental Asia Pacific Latin America % 8 % Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 Domestic Continental Intercontinental Domestic Continental Intercontinental Source: CWT client data, worldwide Continental = travel originating in any given region to international destinations within that same region Intercontinental = travel originating in any given region to destinations outside of that region

20 Copyright 21 CWT

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