Travel reach conclusions regarding unbundled ancillary fees.
Monday, 10th May 2010
Source : Association of Corporate Travel Executives
European business travel managers may have to accept the reality of unbundled ancillary fees from the airlines, but they want big changes in the billing and negotiations process.

This info according to dialogue generated by a recent event conducted by the Association of Corporate Travel Executives (ACTE) in partnership with CORTAS – an association for travel buyers of Dutch-based multi-nationals.

According to ACTE President-Elect, Chris Crowley, transparency, uniformity and negotiability were the key issues raised by 100 delegates from the Netherlands and surrounding countries, who convened for an Executive Forum in Amsterdam, 6 April 2010.

"Working together with our local partner, CORTAS, guaranteed that this global issue was addressed and discussed at a local level, while offering a unique caliber of industry insight," said Crowley. "The success of the Amsterdam Executive Forum reflects the power of strong industry relationships."

In the Executive Forum's opening address, ACTE Netherlands Country Champion Arthur Sollet, Travel Manager, Shell, welcomed the delegates and encouraged them to speak freely, and to make the kind of recommendations appropriate to long-term, global solutions to the challenges outlined by the program. Herman Mensink, President of the Prism Group and Head of CORTAS reiterated the welcome on behalf of CORTAS and spoke of the need to find solutions that build upon relationships and bring buyers and suppliers closer together.

"It's one thing to discuss the challenges, but ACTE education events are aimed at going further by bringing the right people together to produce practical, workable solutions" stated Christine Dunton-Tinnus, ACTE's Regional Director, Europe. "With unique insights and recommendations that are to be continued in interactive forums as well as at the ACTE Global Education Conference (3-5 October) which will be held in Germany (Berlin) this year."

Based on a three-part program, the Amsterdam Executive Forum focused on the impact of unbundling and ancillary fee trends in the business travel management industry. The presentation was conducted by Herman Mensink, followed by an interactive discussion moderated by Peter Beulink, OORzaken. Expert opinions included Peter Buis, Managing Director, BCD Travel; Jan Willem Dekker, Executive Vice President Benelux, Carlson Wagonlit Travel; and Bram Graeber, Executive Vice President, KLM-Air France.

The first session recounted the history of the unbundled ancillary fee movement from its inception to current developments and participants voiced recommendations for adjusting travel polices, for government regulators, and for travel management companies. Recommendations for changes to travel polices included adding ancillary fees to company travel budgets, emphasizing the regulations around the new fees in travel policy, and being absolutely specific about what is reimbursable and what not.

Travel management companies would be asked to provide better data reports reflecting these new fees and additional costs. The dialogue also produced two questions that would be put to travel management companies. They were: "Will the corporates have to pay extra for management reporting solutions?" and "Will the quality of these reporting solutions increase if corporates pay for this service?"

One of the biggest concerns leveled at the airlines was the  broad range in costs for similar services, and the lack of uniformity. The consensus among travel managers was that unbundled ancillary fees would now become deal makers or breakers in negotiations with carriers for the next year. Conventional wisdom led many travel managers to believe they could negotiate the softer fees, yet this has been repeatedly hindered by the lack of data regarding unbundled ancillary fees. Another point was that a portion of these fees are waived for frequent flyer program members by some carriers, and that travel policies must make sure travelers take advantage of such opportunities.

The second session asked the questions:

  • Who is benefitting from the impact of dynamic pricing on hotel contract environment?
  • What are the key challenges and 'danger points' around rate integrity/rate loading and the impact on real hotel spend
  • How can corporations and Travel Management Companies gain greater control and optimize hotel spend with technologies and intelligence available today
Presenters included Meritxell Clemente, Senior Channel Manager Hotel Distribution, Amadeus and Inge Stok, Director The Netherlands, Advito, joined by corporate opinions from Albert Blank, BeNe Procurement Lead, Procurement, Ernst & Young Nederland; and Cynthia Laferte, ABN AMRO Procurement Group, Global Procurement - Travel Manager. While a complete answer seemed somewhat elusive, many participants felt the value of dynamic pricing concepts is still not clear, and that the hotel commodity is still one of most difficult to manage and control.

The final session was structured around two case studies on merging transient business travel and meetings management. Eli Lilly and Company support a $50 million (USD) annual travel spend in Europe, and a much larger MICE spend of $80 million (USD), which represents the largest budget line item after salaries. Lilly's objective was to create one global team of travel and meetings departments. This was accomplished through the judicious use of internal consultants (not meeting planners) and independent contractors, in conjunction with a program of outsourced planning, logistics and administration. Lilly uses Six Sigma methodology to maximize managerial benefits of the program. This entails using senior management to think through problems, an established process to make compelling business decisions, the involvement of customers in the solution process, and a team-based approach which helps in change management within MICE.

Nike took a slightly different approach more in line with the corporate culture. Their reasons for merging the two areas included: reducing risk and complexity, consolidated reporting and management of travel and entertainment budgets, and the increased opportunities for savings by combining forces. Consequently, they developed relations and communications across the matrix and to get buy in of senior management, developed processes that drive efficiencies, and aligned preferred suppliers to drive compliance.

"The Amsterdam Executive Forum was very good," stated Jenny van Kleij, European Travel Procurement Coordinator for Cargill BV. "I found the discussions highly effective."

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