study by carlson wagonlit travel on travel policy and compliance

Welcome to the CWT Travel ManagementInstitute research seriesThe CWT Travel Management Institute conducts in-depth research into effectivetravel management practices to help clients of Carlson Wagonlit Travel (CWT)worldwide derive the greatest value from their travel program.

Drawing on the global resources of CWT, the institute aims to provide a regular flowof business intelligence and best practices, offering actionable insights.

This latest research focuses on how companies can optimize their travel policy andimprove traveler compliance. It is one of the eight key levers to effective travelmanagement identified by CWT and explored in a series of research initiatives.

Recent research published by the CWT Travel Management Institute includes:

Global Horizons: Consolidating a Travel Program (2007)

� Toward Excellence in Online Booking (2006)

Effective Travel Management:Key Planning Priorities in Today’s Dynamic Environment (2005)

Eight key levers to effective travel management:

1. Provide the right services and assistance to travelers and optimizetransaction processing

2. Tackle hotel spend in a disciplined and professional manner3. Continue to drive air and ground transportation savings4. INCREASE POLICY COMPLIANCE AND OPTIMIZE DEMAND MANAGEMENT1

5. Further consolidate travel programs6. Address security needs and corporate social responsibility7. Integrate meetings and events in the travel program to control and optimize

the related spend8. Develop executive dashboards and actionable performance measures

1 This research focuses on policy and compliance.Demand management will be addressed in upcoming research.

Contents

Introduction..................................................................................................................................................3

Overview.....................................................................................................................................................3

Research objectives................................................................................................................................4

About this research................................................................................................................................5

Key findings in brief................................................................................................................................7

Key findings explained..............................................................................................................................8

1. Twenty percent savings from improvements to policy design and compliance............8

2. Savings in five main areas...........................................................................................................................19

Advance air booking...............................................................................................................................19

Restricted airfares.................................................................................................................................26

Preferred suppliers................................................................................................................................31

Traveler comfort (authorized air class/hotel category)..............................................................40

Preferred booking channels.............................................................................................................45

3. Eight keys to success..................................................................................................................................62

Engage management throughout the organization..............................................................62

Provide travelers with clear, comprehensive guidelines...................................................65

Standardize the policy regionally or globally..........................................................................67

Promote compliance through communications and training...........................................68

Drive compliance through point-of-sale measures..............................................................70

Track progress and taking corrective action...........................................................................71

Benchmark industry performance............................................................................................75

Leverage travel management expertise...................................................................................75

Case studies..........................................................................................................................................77

Conclusion..................................................................................................................................................80

Appendix.....................................................................................................................................................82

List of companies researched in case studies...............................................................................82

3

Overview

Companies can realize double-digit savings by optimizing their travel policy and increasing travelercompliance according to the latest research by the CWT Travel Management Institute.

Together, policy and compliance are a cornerstone of effective travel management. Yet manycompanies have made a higher priority of sourcing to the extent that further savings from suppliernegotiations may be marginal, while significant opportunities are ignored or inadequately addressedin their travel policy.

In particular, key travel rules are not updated often enough to reap the full benefits of supplierpricing models as they evolve. Moreover, traveler compliance, which is critical to the success of amanaged travel program, is lower than companies would like and presents an increasing challengeas they consolidate their travel program. Understanding the reasons why travelers book out of policyis the first step to managing compliance more effectively.

This CWT research identifies the ways to improve travel policy and compliance for measurableresults. These are presented in Playing by the Rules: Optimizing Travel Policy and Compliance.

Research objectives

The CWT study focuses on three main objectives:

1. Provide a clear overview of industry performance in travel policy design and travelercompliance.

2. Calculate the savings companies can realistically achieve by adopting best practices.

3. Identify the keys to success in managing travel policy and compliance effectively.

5

About this research

For a global, in-depth understanding of policyand compliance issues, CWT applied a range ofresearch techniques. These fall into three broadcategories:

Benchmark studies

A travel policy benchmark involving 87CWT clients

A benchmark of hotel pricing via eightbooking channels, comprising 262 pricequeries on 47 hotels in 25 cities and 19countries worldwide

Surveys

A detailed questionnaire on travel policyand compliance completed by 57 travelmanagers

A questionnaire on policy awareness andcompliance completed by 6,447 travelersand travel arrangers

A point-of-sale telephone survey of 324travelers making a non-compliant booking

Transaction analyses

A global analysis of several milliontransactions made by CWT clientsworldwide

A special focus on 22 companies ofparticular interest due to their travelpolicies and patterns

In-depth case studies of four companies

that have recently improved their travelpolicy and compliance

A review of credit card data for air andhotel transactions provided by sevencompanies, matched with CWTtransaction data

Carried out in 2007, the research involved awide sample of companies in terms of industry,travel spend (starting at $US5 million) and regionof headquarters, as shown in Figure 1. Amongthe survey respondents were travelers and travelarrangers from across Europe, North Americaand Asia Pacific, as shown in Figures 2-3.

Figure 3: Breakdown of surveyed travelers and travel arrangers by region and profile

Figure 2: Breakdown of surveyed travel managers by region and scope of responsibility

North America36%

Travelers who book their own trips38%

Travelers who do not book their own trips43%

Travel arrangers19%

Europe62%

Asia Pacific2%

North America40%

Europe49%

Asia Pacific11%

Purchasing/procurement director13%

Global travel manager35%

Nationaltravel manager27%

Finance director2%

Regional travel manager23%

Figure 1: Breakdown of companies in the CWT travel policy benchmark by sector and travelspend

Advertising/media4%

Transportation/logistics

6%

Telecommunications7%

Pharmaceuticals8%

Heavy industry13%

Technology19%

Chemicals5%

Consulting/outsourcing6%

Consumer goods6%

Energy12%

Financialservices9%

Food/beverages5%

> US$100M33%

US$5-20M32%

US$20-50M20%

US$50-100M15%

Sample size: 6,447 respondentsSource: CWT Travel Management Institute

Sample size: 57 respondents

Sample size: 87 companies

7

Key findings

This CWT research highlights three key findings:

1. Companies can save on average 20percent of total travel spend by optimizingtravel policy and compliance. A significantgap currently exists between average marketperformance and best-in-class performance.While travel managers are increasingly focusedon improving compliance, they should also lookcritically at their policy. Many policies need to bemore clearly defined and certain mandatesdistinctly spelled out to improve compliance.

2. Savings come from improvements in fivemain areas:

Advance air booking represents thegreatest opportunity for savings, withdiscounts sometimes exceeding 50 percentof ticket price.

Restricted airfares can bring savingscompared to fully flexible fares, even whenthe cost of changes or cancellations is takeninto account.

Preferred suppliers, when used consistently,represent lower overall costs than a mix ofsuppliers used on a “best price” basis.

Traveler comfort (air class/hotel category)has a major impact on costs—companiescan benefit from aligning their policy withstandards in their sector.

Preferred booking channels (on- and offlinebooking through the travel managementcompany) bring tangible benefits, includinglower prices, increased use of preferredsuppliers, and enhanced service and security.

3. There are eight keys to success:

CWT has observed a number of best practicesfor designing travel policies and boosting travelercompliance. These include:

Engaging management throughout theorganization

Providing travelers with clear, comprehensiveguidelines

Standardizing the policy regionally orglobally

Promoting compliance through communicationsand training

Driving compliance through point-of-salemeasures

Tracking progress and taking corrective action

Benchmarking industry performance

Leveraging travel management companyexpertise

CWT calculated this 20 percent savings potentialby comparing average market performancewith best-in-class performance in five mainareas: advance air booking, restricted airfares,preferred suppliers, traveler comfort (air class/hotel category) and the use of preferred bookingchannels (see -11 for an overview of themethodology and Pages 12-13 for furtherdetails).

The results show that rules pertaining topreferred suppliers and traveler comfort (airclass/hotel category), which are typically thefocus of cost-saving efforts, are not the onlysource of significant savings. Companies canbenefit by improving performance across theboard, as shown in Figure 4.

Improvements to policy can bring significantsavings—even without any further measures toboost traveler compliance. In fact, the roomfor improvement may seem surprising: CWTcalculates that companies using best practices toredesign their policy can save as much as8 percent of total travel spend.

Best practice in traveler compliance, on the otherhand, can save a further 12 percent of total travelspend. This figure is conservative compared withthe potential savings estimated by 57 surveyedtravel managers (17 percent).

1. Twenty percent savings from improvementsto policy design and compliance

Where are the main savingsopportunities?

A significant gap currently exists between average market performance and best-in-class

performance. While travel managers are increasingly focused on improving compliance,

they should also look critically at their policy. Many policies need to be more clearly defined

and certain mandates distinctly spelled out to improve compliance.

�

Figure 4: Companies can save on average 20% on total travel spend by improving policyand compliance in 5 main areas

Savings from compliance improvements

Savings from policy improvements

*Note: As restricted fares are typically available in advance, CWT calculates a 1.5% overlap in savingsfrom improved performance in these two areas. This figure is deducted from the total savings, whichbecome 20.6% instead of 22.1%.

Source: CWT Travel Management Institute

CWT has created a model to calculate the savings companies can realize when they improve theirtravel policy and traveler compliance. Based on client transaction data and case studies, this modelcompares average market performance with best-in-class performance in five main areas:advance air booking, restricted airfares, preferred suppliers, traveler comfort (air class/hotel category)and the use of preferred booking channels. To determine the separate impact of policy andcompliance measures, a four-step approach is applied. Advance booking is used in the followingexample:

Methodology for calculating the savingspotential of improved travel policy andtraveler compliance

1. What impact can best practice policy measures have on traveler bookingbehavior?

How many days earlier do travelers tend to book if the policy changes from “assoon as possible” (industry average) to mandatory booking at least 14 days inadvance (best practice)?

�� Travelers book 1.6 days earlier

11

Note: to calculate savings as a percentage of total travel spend, the model uses a ratio of 70 percentair and 30 percent hotel spend.

Figure 5 details the calculations made by CWT in each of the five main areas, along with the relevantsources of information (industry benchmark, case studies, etc.).

2. What impact can best practice compliance measures have on travelerbooking behavior?

How many days earlier do travelers tend to book when measures to reinforcecompliance are introduced?

�� Travelers book a further 2.5 days earlier

3. What impact can changes in traveler booking behavior have on costs?

What is the typical cost reduction for each extra day in advance travelers book?

�� 1 day = -2 percent of air spend

4. What is the cumulative impact of best practices in both policy andcompliance?

How do overall changes in traveler booking behavior translate into savings?

�� Total changes to traveler behavior (1.6 days + 2.5 days = 4.1 days) ximpact per day (-2 percent) = total savings potential (-8.2 percent of airspend or -5.7 percent of total travel spend)

Figure 5: Calculating the savings potential of optimized travel policy and improved travelercompliance: required changes and financial impact

Advanceair booking Air

Air

Air

Hotel

Air

Hotel

Air

Hotel

2.2%

-

1.0%

1.0%

-

-

Restrictedfares

Preferredsuppliers

Travelercomfort

(air class/hotel category)

Preferredbookingchannels

Savings impacton total spendChange in travel policy

-

Changing policy from booking as soon as possible to at least 14 days in advance results in travelers booking on average 1.6 days earlier (from 9.8 to 11.4 days before departure)

Changing policy on restricted fares fromrecommended to mandatory increases their useby 14% (from 40% to 54% of tickets)

Asking travelers to systematically select preferred airlines instead of taking the lowest fare regardless of the airline reduces the average ticket priceby 3.1%

No change: 88% of policies already mandate the use of preferred hotels

Increasing the minimum flight duration for business travel from 4 to 6 hours reduces the use of business class by 1 percentage point (to 9.5% of all flights)

Replacing 20% of program hotels with a hotel in the next lower category reduces the average room rateby 3.3%

No change: 91 percent of policies already mandate booking through the travel management company

No change: 80% of policies already mandate booking through the travel management company

2.2%

2.3%

2.0%

8.7%

- 0.7%

8.0%

22.1%

- 1.5%

20.6%

13.4%

- 0.8%

12.6%

2.2%

SourcesImprovementin compliance

Savingsimpact ontotal spend

Totalsavingsimpact

Enforcing compliance with advance booking policy results in travelers booking on average 2.5 days earlier

Moving from average to best-in-class performance on restricted fares increases their use by 15 percentage points

Reinforcing controls on the use of preferred airlines increases their use by 20% (from 50% to 70% of all flights)

Moving from average to best-in-class performance on preferred hotels increases their use by 20% (from 40% to 60%)

Reinforcing controls on theunauthorized use of business/first class increases the use of economy class by 2.5 percentage points

No change

Moving from average to best-in-class performance on preferred booking channels increases TMC bookings by 8% (from 87% to 95%)


1.8%

1.4%

2.3%

-

0.5%

1.4%

Industry benchmark of 23 companies

Analysis of advance booking discounts on 13 representative domestic and international routes for 46 clients

Industry benchmark of 18 companies and detailed case studies

Average gap observed between fully flexible negotiated fares and the cost of restricted fares including penalties is based on ticket price sampling for 3 routes and average change/cancelation rates for 13 companies


Impact of volume discounts based on the CWT study Global Horizons: Consolidating a Travel Program (2007)

Industry benchmark of spend on preferred and non-preferred hotels at 7 companies


Based on the flight patterns of 3 major companies

Price impact of moving from business to economy class is based on fares paid by 3 major companies, route by route across all flights

Price impact of changing hotel categories is based on 178,328 transactions in three major cities

Industry benchmark of compliance at 5 major companies

Difference between booking through the TMC and other channels is based on 262 hotel price samples for 47 hotels in 25 cities

4.3%

1.9%

5.4%

4.8%

5.7%

2.3%

1.9%

3.2%

2.5%

3.5%

Industry benchmark of booking channel compliance at 4 major companies

Price difference between booking through the TMC and through airline and public Websites is based on a benchmark by Topaz International (April 2007)

Total savings:Minus overlap between advance booking and restricted fares:

Net savings:

13

Advanceair booking Air

Air

Air

Hotel

Air

Hotel

Air

Hotel

2.2%

-

1.0%

1.0%

-

-

Restrictedfares

Preferredsuppliers

Travelercomfort

(air class/hotel category)

Preferredbookingchannels

Savings impacton total spendChange in travel policy

-

Changing policy from booking as soon as possible to at least 14 days in advance results in travelers booking on average 1.6 days earlier (from 9.8 to 11.4 days before departure)

Changing policy on restricted fares fromrecommended to mandatory increases their useby 14% (from 40% to 54% of tickets)

Asking travelers to systematically select preferred airlines instead of taking the lowest fare regardless of the airline reduces the average ticket priceby 3.1%

No change: 88% of policies already mandate the use of preferred hotels

Increasing the minimum flight duration for business travel from 4 to 6 hours reduces the use of business class by 1 percentage point (to 9.5% of all flights)

Replacing 20% of program hotels with a hotel in the next lower category reduces the average room rateby 3.3%

No change: 91 percent of policies already mandate booking through the travel management company

No change: 80% of policies already mandate booking through the travel management company

2.2%

2.3%

2.0%

8.7%

- 0.7%

8.0%

22.1%

- 1.5%

20.6%

13.4%

- 0.8%

12.6%

2.2%

SourcesImprovementin compliance

Savingsimpact ontotal spend

Totalsavingsimpact

Enforcing compliance with advance booking policy results in travelers booking on average 2.5 days earlier

Moving from average to best-in-class performance on restricted fares increases their use by 15 percentage points

Reinforcing controls on the use of preferred airlines increases their use by 20% (from 50% to 70% of all flights)

Moving from average to best-in-class performance on preferred hotels increases their use by 20% (from 40% to 60%)

Reinforcing controls on theunauthorized use of business/first class increases the use of economy class by 2.5 percentage points

No change



1.8%

1.4%

2.3%

-

0.5%

1.4%

Industry benchmark of 23 companies

Analysis of advance booking discounts on 13 representative domestic and international routes for 46 clients


Average gap observed between fully flexible negotiated fares and the cost of restricted fares including penalties is based on ticket price sampling for 3 routes and average change/cancelation rates for 13 companies



Industry benchmark of spend on preferred and non-preferred hotels at 7 companies


Based on the flight patterns of 3 major companies

Price impact of moving from business to economy class is based on fares paid by 3 major companies, route by route across all flights

Price impact of changing hotel categories is based on 178,328 transactions in three major cities

Industry benchmark of compliance at 5 major companies

Difference between booking through the TMC and other channels is based on 262 hotel price samples for 47 hotels in 25 cities

4.3%

1.9%

5.4%

4.8%

5.7%

2.3%

1.9%

3.2%

2.5%

3.5%

Industry benchmark of booking channel compliance at 4 major companies

Price difference between booking through the TMC and through airline and public Websites is based on a benchmark by Topaz International (April 2007)

Total savings:Minus overlap between advance booking and restricted fares:

Net savings:

As a general rule, two main aspects of policydesign have an impact on traveler behavior andsavings. These are coverage—how many of thefive key savings areas are addressed—andeffectiveness—which rules or guidelines areprovided and how clearly they are defined (e.g., whether they are mandatory or simplyrecommended).

The CWT benchmark survey of 87 corporatetravel policies from around the world revealedconsiderable room for improvement on thesemeasures. Performance is fairly homogenous insome areas and varies widely in others. Forexample, preferred booking channels arecovered by 96 percent of policies and in aprecise manner by 93 percent. On the otherhand, only 63 percent of policies cover restrictedfares and only 4 percent do so effectively. Thesefindings are summarized in Figure 6 and detailedin Key Finding 2 (Pages 19-61).

Where is the room forimprovement in policy design?

Figure 6: Travel policies vary in terms of coverage and effectiveness Coverage and effectiveness of travel policies per rule

The following policy positions are rated as “effective”:

AirAdvance booking: mandatory 14+ days in advance

Restricted fares: mandatory

Preferred airlines: always favored, instead of lowest fare

Class: business class for flights lasting 6+ hours only

Booking channel: mandatory online or offline booking through the

travel management company

HotelPreferred hotels: always favored (instead of lowest fare) and clear

instructions if unavailable

Booking channel: mandatory booking through the TMC

Source: CWT Travel Management InstituteBased on a CWT travel policy benchmark (87 companies)

15

Traveler compliance—an issue for all companies—also shows considerable room for improvement.

In an analysis of 5,226 transactions, 50 percentof air transactions fail to comply with at least onerule. Similarly, a study of more than 200,000 hoteltransactions shows 60 percent of these are non-compliant (see Figures 7-8).

Where is the room forimprovement in compliance?

Figure 7: In a typical example, 50% of air transactions break at least one key travel rule

50

0

100

50%

% of transactions

50%

10% 28%

6%

23%

11%

8%

7%

50%

1%

Booked<14 days

beforeflight

Non-preferredairline

Restrictedfare notused

Non-compliantclass oftravel

Bookingoutside

preferredchannels*

Total

Blank sections show overlap with previous items (i.e., transactions have already broken at least one rule)

Non-complianttransactions

Complianttransactions

Transactions are considered non-compliant only if a compliant option is possible. The following assumptions are used regarding the availability ofcompliant options: 40% of trips can not be booked 14 days in advance due to late trip decision; non-preferred airlines are unavailable in 10% ofcases; restricted fares unavailable at the time of booking in 20% of cases; all bookings could be made through the TMC.

* Data on booking outside preferred channels was unavailable for this company, so the average of four other companies studied was used.

Source: CWT Travel Management InstituteBased on 5,226 CWT client transactions, January - May 2007

Figure 8: More than 60% of hotel transactions break at least one travel rule

50

0

100

61%

% of transactions

39%

Non-complianttransactions

Complianttransactions

32%

45%

16%

61%

Non-preferred

hotels

Bookingoutside

preferredchannels

Total

Blank section showsoverlap with use ofnon-preferred hotels

Transactions are considered non-compliant only if a compliant option is possible. Assumptions: preferred hotels in the required location areunavailable at the time of booking in 25% of cases and all bookings could be made through the TMC.

Source: CWT Travel Management InstituteBased on transaction data for 5 companies in 2007 (US$76.8M spend)

17

The starting point for improving compliance isunderstanding the reasons why travelers bookout of policy. While travel managers believepersonal preference is the main reason for non-compliance, travelers rate it behind practicalityand pricing, as shown in Figure 9. Althoughtravelers may have a tendency to understate therole of personal preference when booking (e.g.,the ability to collect frequent flyer points), some

non-compliance inevitably occurs when suitablecompliant options are unavailable (e.g., preferredhotels may not be available at all times or coverall necessary locations).

A detailed analysis of non-compliance can indicateareas where the travel policy may need to beadjusted, as well as areas where compliancemeasures can be improved. Non-compliance ispresented in more detail in Key Finding 2 (Pages19-61), while keys to success are discussed in KeyFinding 3 (Pages 62-79).

What are the main reasons fortraveler non-compliance?

Figure �: Travel managers and travelers have different views on the main reasons for non-compliance

High

Medium

Low

Travelers' view Travel managers' viewTravel managers' view Travelers' view

Importance of reasons behind choice of non-preferred airline

Importance of reasons behind choice of non-preferred hotel

1Practicality includes proximity of hotel to business destination, scheduling and availability of flights2Personal preference includes use of frequent flyer program, comfort and overall preference

Source: CWT Travel Management InstituteBased on CWT surveys of travel managers (54 responses) and travelers (4,889 responses)

Surveyed travel managers said they are aiming toboost compliance with key policy items over thenext three years, building on progress alreadymade (see Figure 10). To do so, they intend toreinforce existing initiatives such as regular

reporting and communications while introducingtougher measures such as requiring the travelmanagement company to refuse non-compliantbookings, implementing strict sanctions againstnon-compliant travelers and targeting actionagainst systematic offenders. These measures arediscussed further in Key Finding 3 (Pages 62-79).

What levels of compliance aretravel managers aiming for?

Figure 10: Travel managers aim to improve compliance with all travel rules significantly inthe next 3 yearsEstimated compliance with policy items

46

66

78 75

8893

59

71

83

67

79

86

76

9096

61

76

85

54

69

81

50

63

84 82

92 94

7680

94

51

77

39

0

10

20

30

40

50

60

70

80

90

100

Use

of o

nlin

e bo

okin

g to

ol

3 years ago Today In 3 years

Pref

erre

d ai

rline

s

Air c

lass

Adva

nce

book

ing

Low

est f

are

Pref

erre

d bo

okin

g ch

anne

ls

City

pric

e ca

ps

Pref

erre

d ho

tels

Pref

erre

d bo

okin

g ch

anne

ls

Trav

el c

lass

Pref

erre

d bo

okin

g ch

anne

ls

General Air Hotel Rail

% of bookings

Source: CWT Travel Management Institute, based on a CWT survey of travel managers (38 responses)

1�

What impact does advance air bookinghave on ticket price?

There is plenty of evidence that booking inadvance brings significantly lower fares. Ananalysis of 33,000 transactions made by 46

companies on 13 routes shows that prices are,on average, 2 percent lower per day duringthe two weeks before a flight (see Figure 11).Depending on the class of travel and route, theaverage ticket price can be more than 50 percentlower when booked at least 14 days in advance(see Figure 12).

2. Savings in five main areas

1. Advance air booking

The CWT study highlights considerable scope for companies to optimize their travel policy

and improve traveler compliance in the following areas: advance air booking, restricted

airfares, preferred suppliers, traveler comfort (air class/hotel category) and the use of

preferred booking channels (i.e., travel management company agents and corporate online

booking tools). Each of these areas represents significant savings opportunities that are

currently under-exploited by companies, as explained below.

0

20

40

60

80

100

14+ 13-8 7-3 2-0

Average ticket price as a percentage

of last-minute fare

Number of days booked in advance

Figure 11: The average ticket price rises by approximately 2% for each day closer to thedeparture date

Source: CWT Travel Management InstituteBased on 33,639 transactions by 46 companies on 13 representative domestic and international routes worldwide in 2007

The price advantage of booking early is particularlymarked for economy fares (see Figure 13). Inaddition, advance booking discounts are generallylarger in highly competitive markets. For example,domestic carriers in the United States tend to offerdiscounts that are more than four times the size ofthose offered in France, where the national airlineis the only carrier on many domestic routes (seeFigure 14). In markets that are highly regulated(e.g., China) or where demand exceeds supply(e.g., India), the price advantage of booking inadvance is sometimes smaller.

Figure 12: Advance booking discounts can sometimes exceed 50% of average ticket price

-4%

2%6%

9% 11%16%

19%25%

29% 29%

40%46%

49%

55% 58% 58%

Shan

ghai-

Singa

pore

Delhi-L

ondo

n

Mumba

i-Sing

apore

Beijin

g-Pari

s

Shan

ghai-

Beijin

g

Paris

-Mila

n

Marseil

le-Str

asbo

urg

Frank

furt-N

ew Yo

rk

Delhi-M

umba

i

Paris

-New

York

Atlan

ta-Lo

s Ang

eles

Dusse

ldorf-

Munich

Lond

on-M

anch

ester

Dusse

ldorf-

Milan

New Yo

rk-Ch

icago

Lond

on-M

adrid

Average discounts for booking 14 or more days in advance (compared to 0-2 days in advance) for 16 routes

Source: CWT Travel Management Institute, based on consolidated client transaction data, January – March 2007

21

Figure 13: Advance booking discounts are more significant for economy than business classAverage ticket price for Paris-New York round trips booked in France

1,600

1,400

1,200

1,000

800

600

400

200

014+ 13-8 7-3 2-0

1,800

-39%

5,000

4,000

3,000

2,000

1,000

0

6,000

-6%

Average ticket price (US$)




14+ 13-8 7-3 2-0

Economy class

Business class

Source: CWT Travel Management InstituteBased on consolidated client transaction data, Q1 2007 (1,079 economy and 730 business class transactions)

How much room do companies have toimprove advance booking?

Advance booking clearly offers savings, butcompanies do not take full advantage of them.Despite the fact that some trips are decided atthe last minute, travelers have the opportunityto book earlier in many cases. Currently, manydo not book as soon as the decision to travel ismade: CWT research shows that only 33 percent

of trips are booked at least two weeks inadvance, although the decision to travel is madeearly enough to allow a total of 47 percent oftrips to be booked within this timeframe (seeFigure 15).

Figure 14: Advance booking discounts are higher in countries where competition is moreintense

0

10

20

30

40

50

60

1 1.5 2 2.5 3 3.5 4 4.5 5 5.5

France

Germany

United KingdomUnited States

% fare difference

Average number of competitors on each route

Canada

Italy

Brazil

Spain

Source: CWT Travel Management InstituteBased on CWT client transaction data, January-May 2007 (880,000 transactions from the top 19 routes for each country)

Fare difference between booking 14+ and 2-0 days before departure

The most room for improvement lies with asmall proportion of travelers. Booking patternsvary widely across the traveler population. Onecase study revealed as few as 25 percent oftravelers made as many as 60 percent of latebookings. In contrast, 30 percent of travelersalways booked at least 14 days before departure

(see Figure 16). Interestingly, travelers booknoticeably earlier when they reserve first-classseats: 70 percent are booked at least two weeksin advance, compared to 42 percent for businessclass and 36 percent for economy (see Figure 17).

23

Figure 15: Travelers tend to delay booking once they have made the decision to travelPercentage of trips planned and booked at different dates

0102030405060708090

100

14+ 13-8 7-3 2-0

When trip is planned

When trip is booked

Cumulative % of trips

Number of days prior to departure

Example: 47% of trips are decided at least 14 days prior to departure but only 33% are booked during this timeframe

Figure 16: A minority of travelers are responsible for the majority of late bookings

Travelers who often book late

Travelers who occasionally book late

Travelers who never book late

Source: CWT Travel Management Institute, based on 303 client transactions, April 2007“Often book late” is defined as booking fewer than 14 days in advance at least twice during themonth studied and “occasionally” only once

Source: CWT Travel Management Institute, based on 7,677,001 CWT transactions, January-June 2007and a CWT survey of travelers (5,589 responses)

Companies may therefore wish to identify howmuch late booking could be avoided and takesteps to increase advance booking. One majorway is to word their policy more effectively.Ideally, advance booking should be mandatoryand defined as at least two weeks in advance.

Mandatory. While 77 percent of companiesinclude advance booking in their policy, only15 percent state that it is mandatory (seeFigure 18).

At least two weeks in advance. Amongcompanies that mention advance booking,only 30 percent define a timeframe of two ormore weeks before departure. Twenty-fivepercent simply ask travelers to book as soonas possible, which as shown in Figure 19,appears to have no impact on bookingbehavior. Companies that specify a two-weekdeadline have the highest rate of advancebooking. Clearly defining advance bookingpolicy and explaining the financial benefitsmakes a significant difference.

Figure 17: Advance booking performance is best for first-class seats

14+ days

13-8 days

7-3 days

2-0 days

Days booked in advance

Source: CWT Travel Management InstituteBased on transaction data for all international routes originating from Europe in 2006

Percentage of bookings per class and lead time

25

Figure 18: Advance booking policy is often loosely defined

Figure 1�: Companies that require travelers to book at least two weeks in advance obtainthe highest rates of advance booking

14+ days

13-8 days

7-3 days

2-0 days

Days booked in advance

Source: CWT Travel Management InstituteBased on a CWT travel policy benchmark and transaction data for 23 clients in Q4 2006

Source: CWT Travel Management Institute, based on a CWT travel policy benchmark (79 policies)

Advance booking rules and specified lead times

Advance booking performance by policy requirement

Figure 20: Restricted fares offer significant up-front discounts

What impact do restricted fares have onsavings?

Restricted fares1 (including those offered bypreferred airlines) cost considerably less thanother fares as a general rule. The price difference

applies to short-haul and long-haul flights in bothbusiness and economy class and is particularlymarked for short-haul economy, where restrictedfares can be more than 60 percent lower thannegotiated flexible fares (see Figure 20).

2. Restricted fares

Negotiated flexible fares Restricted fares (including those offered by preferred airlines)

Source: CWT Travel Management InstitutePrices based on actual ticket availability at moment of testing (July 2007) and fares negotiated for a major European clientVarious restricted fares are available on each route; the greater the restriction, the lower the price

1 Restricted fares impose conditions such as advance purchase requirements, a minimum ormaximum length of stay and financial penalties if the booking is changed or canceled.

27

Even when the cost of exchanging or cancelingtickets is taken into account, companies that userestricted tickets when available tend to realizesubstantial savings. These reach on average 24percent of air costs on the relevant routesaccording to an analysis of a selection of domesticand international city pairs.

One main reason is that companies typicallychange or cancel only 20-35 percent oftickets—considerably fewer than is generally

believed. This was revealed by an analysis ofmore than 10,000 transactions by 13 CWT clientsfrom a wide selection of industries, as shown inFigure 21. The only noticeable exception was aninvestment bank, where changes or cancellationswere made to 79 percent of tickets.

In the example shown in Figure 22, the companycan save 25 percent of costs by using restrictedfares even if it changes or cancels 30 percent oftickets.

Figure 21: Companies typically change or cancel 20-35% of tickets

W

O

G

S

U

T

M

R

V

P

C

N

Q

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Typical range:20-35%

Ticket change and cancelation rates

Company

Combined changes and cancelations as % of booked tickets

Source: CWT Travel Management InstituteBased on CWT ticket processing data (10,507 transactions included), May – June 2007

How much can companies improve theuse of restricted fares?

Restricted fares are usually sold on a “first come-first served” basis. Their availability is thereforelimited, which helps to explain why travelers aremore likely to use restricted fares the earlier inadvance they book, as shown in Figure 23.

Asking travelers to use restricted fares does,however, make a difference. When restrictedfares are mandatory and available at the time ofbooking, travelers use them 58 percent of thetime. This figure drops to 43 percent whenrestricted tickets are simply recommended andto 30 percent when they are not mentioned inthe policy at all, as illustrated in Figure 24.

Figure 22: Restricted fares offer savings that outweigh the cost of ticket changes andcancelations

Typical change/ cancelation range

0

100

200

300

400

500

600

700

Example: Paris-Strasbourg (domestic) economy round-trip, July 2007


-25%

Flexible negotiated fare

% of tickets changed or canceled

Restricted fares requiring booking10 days in advance

(includes change/cancelation costs)

Change/cancelation costs outweighupfront savings from restricted fares

Upfront savings from restricted faresoutweigh change/cancelation costs

0 20 40 60 80 100 120 140 160 180

Average total cost of fares, including changes/cancelations

Source: CWT Travel Management Institute, based on ticket availability at moment of testing (July 2007) and fares negociated for a major Frenchclient. Includes impact of both changes to departure dates and cancelations at an assumed ratio of 3:1

2�

Use of restricted fares by policy requirement

Figure 23: Travelers are more likely to use restricted fares the earlier in advance they book

Source: CWT Travel Management Institute, based on 2,523,709 CWT client transactions in 2006

Figure 24: Travelers use more restricted fares when the travel policy mandates their use

Source: CWT Travel Management Institute, based on 562,751 transactions for 18 clients in 2006. 1 Eligible bookings are those where a restricted ticket is available. This is based on the assumption thatrestricted fares are available in 80% of cases.

Yet only 4 percent of policies mandaterestricted fares. Fifty-nine percent simplyrecommend restricted fares, while 37 percent donot mention them at all, as shown in Figure 25.Given the link between the availability ofrestricted fares and advance booking, any policythat promotes the use of restricted fares shouldalso underline the importance of booking inadvance.

Europe and Asia Pacific lag behind NorthAmerica on these aspects of the policy accordingto a study of 87 travel policies (see Figure 26).

Figure 25: Most companies simplyrecommend restricted fares

Figure 26: North American policies on restricted fares and advance booking are the strictest

Not specifiedRecommended or mandatory

No constraint/as soon as possible1 week or more

Recommended59%

Mandatory4%

Not specified37%

Policy on restricted fares

Source: CWT Travel Management InstituteBased on a CWT travel policy benchmark


31

Figure 27: Preferred airlines offer lower average ticket prices

0%

10%

20%

30%

40%

50%

60%

Economy class Business class

Weighted average reduction1: 23%

Duba

i-Par

is

New

York-

Chica

go

New

York-

Paris

Duss

eldor

f-Par

is

Casa

blan

ca-P

aris

Paris

-Vien

na

Duss

eldor

f-Lon

don

Mad

rid-P

aris

Duss

eldor

f-Pho

enix

Paris

-Sin

gapo

re

New

York-

Paris

Paris

-Toky

o

Duss

eldor

f-Sha

ngha

i

Beijin

g-Pa

ris

Barce

lona

-Dus

seld

orf

Source: CWT Travel Management InstituteBased on 11,363 transactions for five companies in 20061 The weighted average reduction takes into account the number of transactions on each route

What impact does using preferredsuppliers have on savings?

Companies pay consistently lower average ticketprices or room rates when they use preferred

suppliers. According to this latest CWT study,companies pay on average 23 percent less forflights with preferred suppliers than alternatives(taking into account any back-end rebates whenapplicable) and 5-14 percent less for roomnights, depending on the hotel category (seeFigures 27-28).

3. Preferred suppliers

Reduction in average ticket price for preferred airlines vs. other airlines

These figures may come as no surprise to mosttravel managers, who know they can enhancesavings by concentrating volume on preferredsuppliers and negotiating attractive volume-based discounts, as described in the CWT studyGlobal Horizons: Consolidating a Travel Program(2007).

What may be more surprising, however, is that apolicy of always favoring preferred airlines ismore cost-effective than asking travelers to takethe lowest fare regardless of the airline, as shownin Figure 29. The main reason is that companieswith a lowest-fare policy are typically less able tomake volume commitments to airlines duringpricing negotiations and can not reach the higher

thresholds required by airlines for additionalvolume-based discounts. This is something thatcan be pointed out to travelers throughcommunications and training.

According to CWT calculations, companies thatswitch from a lowest fare policy to a preferredairline policy can save approximately 3 percentof air spend or 2 percent of total travel spend.

Figure 28: Preferred hotels offer lower average room rates Price comparison of hotels in all destinations and categories for 3 European clients

Source: CWT Travel Management InstituteBased on US$70.2M in transactions over 2,914 destinations for 3 companies in 2006The weighted average reduction takes into account the number of transactions in each hotel

How are companies performing onpreferred supplier policy?

Surprisingly, many policies can be improvedregarding preferred suppliers. Currently, only 29percent mandate the use of preferred airlineswhenever possible (even when a lower fare isavailable with an alternative carrier), as shown inFigure 30.

33

Figure 2�: A policy requiring travelers to always take preferred airlines can be morecost-effective than asking them to take the lowest fare

0

100

200

300

400

500

600

700

0 50 100 150 200 250 300 350 1 300


Number of bookings on the route (in a 5-month period)

Sample company: • Policy: select preferred airline even if lower fare available• 154 transactions• Average ticket price: US$513.50

Companies with a policy asking travelers to take the lowest fare

Companies with a policy asking travelers to take preferred airlines

Example: New York-Los Angeles, economy class round-trip

Source: CWT Travel Management InstituteBased on client transaction data from January – May 2007 matched against policy rules from a CWT travel policy benchmark

For hotels, only 13 percent of policies mandatethe use of preferred hotels where available,although a further 76 percent recommend them,as shown in Figure 31. In addition, 28 percentprovide no guidelines for travelers on what to dowhen preferred properties are unavailable, suchas asking the travel management company foradvice or imposing price caps per city and/orlimits on hotel categories (see Figure 32).

Figure 30: Companies have 6 main policies on airline selection

Lowest fare mandatoryirrespective of airline

Preferred airlines orlower fare alternative

Preferred airlinesor alternative if lowerby a specified amount

Lowest fare offered bypreferred airlines

recommended/mandatory

Preferred airlines mandatoryirrespective of fare

2

MandatoryRecommendedNot specified

4B

4A

5

6Not specified

Recommended/mandatory

1 Preferred airlinesrecommended

310%

15%

11%

10%

25%

No precise guidelinesfor selecting airline

27%

2%

Preferred airline favored: 40%

Lowest fare favored: 15% Discretionary: 35%Policy onlowest fare

Preferred airline policy


35

Figure 31: Most policies recommend the use of preferred hotels

Lowest rate recommendedirrespective of hotel

Preferred hotels orlower alternative rate

recommended

Lowest rate amongpreferred hotels

recommended ormandatory

Preferred hotels mandatory irrespective of rate

2

MandatoryRecommendedNot specified

46

5

Not specified

Recommended/mandatory

No precise guidelinesfor selecting hotel

1

Preferred hotelsrecommended

3

11%56%

20% 8%

5%

0%

Preferred hotel favored: 69%

Discretionary: 20%

Policy onlowest rate

Preferred hotel policy No precise guidelinesfor selecting airline


Figure 32: 28% of companies do not provide guidelines on what to do when preferred hotelsare unavailable


Areas included in guidelines

No guidelines 28%

City price cap and hotel category8%

Follow recommendations of travel management company18%

Hotel category21% City price cap

25%

How compliant are travelers withpreferred supplier policy?

Compliance with preferred hotel policy isgenerally low, ranging from 22-47 percent inseven companies studied by CWT (see Figure33). Many companies can aim for higher

compliance, even though they cannot expect100 percent, as no preferred hotel program cancover all destinations.

Non-preferred hotels

Preferred hotels

Hotel program coverage1

Figure 33: 53-78% of hotel spend is with non-preferred hotels

Source: CWT Travel Management InstituteBased on transaction data and credit card spend data for 6 European companies in 2006.1Hotel program coverage is the percentage of transactions which could be made at preferred hotels (i.e., the program offers at least one preferredproperty in the relevant city).

37

Surveyed travelers cited proximity to their placeof business and availability as the mainreasons why they book at a hotel outside thepolicy, as shown in Figure 34. Another importantreason is travelers’ misperception that they canobtain better prices outside the policy. Inaddition, a minority of travelers admit thatpersonal preference may influence their choice

of an alternative hotel: 13 percent cite comfort,access to business/leisure facilities, loyaltyprogram/personal connection, as well as apreference for specific hotels.

Proximity to place of business

Availability

Following arrangements of travel companions

Better room pricing

Comfort of room/hotel

Access to business/leisure facilities

Preference for specific hotels

Loyalty program/personal connection

Other

26%

21%

17%

5%

2%

3%

4%

4%

17%

% of all responses

Practicality

Price

Personal preference

Combination/other

Figure 34: Travelers cite mainly practical or price reasons for choosing alternatives to preferredhotels

Source: CWT Travel Management Institute, based on a CWT survey of travelers (4,899 responses)

81 89 85

31

71 7061

7991

53

11

69

2112

3816

8

47

19 113 0 7

181 5 1 1

0

20

40

60

80

100

Par

is-Bu

enos

Aire

s

Non-preferredairline

Other preferredairline(not Air France)

Air France(preferred airline)

Paris

-New

Yor

k

Paris

-Mad

rid

Paris

-Bei

jing

Paris

-Tok

yo

Paris

-Cas

abla

nca

Paris

-Dub

aiPa

ris-N

ew Y

ork

Paris

-Sin

gapo

re

Paris

-Vie

nna

% of bookings

Airlines chosenby traveler

Preferred airline is not Air FrancePreferred airline

is Air France

With air, transaction data suggests thatcompliance with preferred airline policy presentsa particular challenge when travelers are loyal toother airlines. Travelers often have a preferencefor the legacy national carrier. For example,travelers from two French companies fly with

Air France on seven out of eight routes on whichAir France is not the company’s preferred carrier,as shown in Figure 35. A similar pattern is foundwith travelers from a German company whomainly use Lufthansa.

Figure 35: Travelers tend to choose their national carrier even when it is not the company’spreferred airline

Source: CWT Travel Management Institute, based on 7,200 transactions for 2 major French companies in 2006

Example of 2 European companies

3�

Although travelers are often loyal to certainairlines because of frequent flyer benefits, theygive mainly practical reasons for choosingalternatives to their company’s preferred airlines:convenience of departure times, a preference fordirect flights and availability of seating, as shownin Figure 36. Travel managers should investigatenon-compliance for these reasons, which can

indicate areas where the program could beadjusted to better match travelers’ needs. Finally,the belief that lower prices can be found outsidethe program is another significant reason fornon-compliance and often a misperception thatcan be corrected by effective communicationsand training, as discussed in Key Finding 3(Pages 62-79).

Convenience of departure time

Preference for direct flights

Availability of seating

Better ticket pricing

Follow arrangements of travel companions

Preference for fully flexible tickets

Loyalty program

Personal comfort

Other

27%

17%

16%

2%

2%

4%

5%

10%

16%

% of all responses

Practicality

Price

Personal preference

Combination/other

Figure 36: Travelers cite mainly practical or price reasons for not choosing preferred airlines


Although air class and hotel category rules aregenerally well covered in corporate travelpolicies, some companies can better align themwith industry standards. As compliance withthis area of policy is high, adjustments to theauthorized levels of comfort—air seating classesor hotel categories—can have a major impact oncosts.

How does adjusting air travel class policyimpact savings?

Ninety-nine percent of the policies reviewed byCWT include rules on air travel class, which isunsurprising, given the significant differences infares between economy, business and first.Nonetheless, companies can fine-tune theirpolicy and realize further savings.

Most companies specify a minimum flightduration for business class travel (rather thanfrequency of travel or length of stay). Thisthreshold is on average 6 hours (see Figure 37),varying only slightly with traveler profiles (e.g.,senior executives vs. other employees), asshown in Figure 38.

4. Traveler comfort(air class/hotel category)

Figure 37: The threshold for authorizing business class is on average 6 hours


41

Economy all tripsBusiness depending on flight durationBusiness all tripsFirst all trips

Authorized travel class

Figure 38: The authorized travel class varies only slightly with traveler profile


Clearly, raising this threshold can bring significantsavings. In the example shown in Figure 39, aEuropean company could save 8 percent of airspend by moving its threshold from four toseven hours because of the large number offlights in the six to seven-hour range (betweenEurope and the United States). Alternatively,

removing thresholds and requiring travelers totake economy class for most flights—the mostextreme policy—can save companies up to 35percent of air spend. Before doing so, travelmanagers find it useful to benchmark standardsin their sector to ensure their approach is notoverly strict.

In general, companies have gradually taken atougher approach to business class travel andtravelers generally comply with air class rules. Asa result, economy class travel has increased,reaching on average 89 percent of short-haul

flights and 62 percent of long-haul flights in2006, up from 61 percent and 42 percentrespectively in 1997 (see Figure 40). Widevariations exist among sectors, however, asshown in Figure 41.

0

20

40

60

80

100

120

140

0 1 2 3 4 5 6 7 8 9 10 11 12 13+

112%

102%

100% 92% 90% 89% 87%80%

74%67%

Current Policy

35% costdifference

Number of flight hours at which business class travel is authorized

% of total current airtravel spend

Figure 3�: A company can save up to 35% of air travel costs by raising the threshold forbusiness class

Source: CWT Travel Management InstituteBased on 17,156 transactions for a European company, July – December 2006

Estimated variation in air spend depending on threshold for business class

43

1997

61%

39%30% 31% 32% 30%

22% 20%15%

32%

11%

70%69% 68%

70%78% 80% 85% 68% 89%

1998

1999

2000

2001

2002

2003

2004

2005

2006

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Economy class

Short-haul flights Long-haul flights

42%

58% 55%50% 49% 49% 41% 40% 39% 40% 38%

45% 50% 51% 51%59% 60% 61% 60% 62%

First or business class

Figure 40: Companies are increasingly restricting the use of business and first class air travel

Source: IATA/ACTE Survey on Business Travel, 2007

Tele

com

First Business Economy

Chem

icals

Tech

nolo

gy

Auto

mot

ive

Cons

ultin

g

Cons

umer

good

s

Hea

vyin

dust

ry

Phar

ma-

ceut

icals

Bank

ing Oil

81%

19%

1% 1% 2% 3% 1% 1% 2% 1%

43% 45% 50%62% 69% 74% 79% 81%

91%

56% 54% 50%36% 29% 25% 20% 17%

8%

% of air tickets per class on intercontinental routes by industry sector

Figure 41: The use of economy or business class varies widely among sectors

Source: CWT Travel Management Institute, based on transaction data, full year 2006

How does adjusting hotel category policyimpact savings?

The hotel categories allowed by companies areimplicit in the properties included in the travelprogram. Adjusting the selection of preferredhotels has a major impact on costs: the CWTresearch shows that the price differencebetween each category is approximately 20percent (i.e., first category rooms cost 20percent more than standard rooms, and deluxerooms cost 40 percent more). This is illustratedin Figure 42, which shows the hotel rates paidby clients for three major corporate traveldestinations, based on the CWT study of nearly180,000 traveler transactions.

As mentioned earlier (Page 35), 13 percent ofpolicies mandate the use of preferred propertieswhen available, while a further 76 percentrecommend their use. Many policies could beimproved by providing guidelines if preferredproperties are not available, such as asking thetravel management company for advice orimposing price limits per city and/or limits onhotel categories. Currently only 28 percent ofpolicies offer such guidelines, as mentioned onPage 35, Figure 32.

0 50 100 150 200

Average

Frankfurt

London

New York

143%

154%130%

100%

131%117%

100%

119%100%

74%

144%109%

100%74%

Deluxe

First

Standard

Economy/budget

Indexed rate(standard category = 100)

Figure 42: The price difference between each hotel category is approximately 20%

Price as a % of standard room rate in selected major cities

Source: CWT Travel Management InstituteBased on 178,328 transactions, January – March 2007In the sample analyzed, companies had no spend at budget hotels in Frankfurt and New York

45

Booking through the travel managementcompany brings tangible benefits: lower hotelrates and airfares, increased use of preferredsuppliers, and enhanced service and security.These benefits can be enhanced by using acorporate online booking tool in additionto offline services provided by the travelmanagement company. Moreover, companiescan more fully exploit these opportunities byimproving overall performance in terms of policydesign and compliance.

How significant are the benefits ofpreferred booking channels?

Lower hotel rates. Prices obtained bybooking through the travel managementcompany are significantly lower than thoseobtained through Web booking sites.

A 20 percent difference in hotel rates wasobserved in a CWT benchmark, whichcompared rates for rooms booked throughthe travel management company withrooms booked directly by phone, on a hotelWebsite or through a Web booking site, asshown in Figure 43.

Lower rates were observed for all types ofhotels—preferred and non-preferred, chains andindependent properties, all categories andespecially deluxe hotels—across all regions (seeFigures 44). In the case of preferred hotels, thestudy showed that when a traveler calling a hoteldirectly identified his or her company and askedfor rates, hotels failed to offer the company’snegotiated rate in 67 percent of cases. Whenthey did offer a corporate rate, it was on average6 percent higher than the correct negotiated rate.

5. Preferred booking channels

Figure 43: Hotel room rates are 18-21% lower when booked through the travel managementcompany

Source: CWT Travel Management Institute.Based on a CWT hotel price benchmark (262 price samples), June 2007 Web booking sites sampled: Expedia.com, Travelocity.com, HRS.com, Hotel.com and Kayak.com

CWT compared prices on eight majorbooking channels (CWT, direct calls tohotels, hotel Websites and five Webbooking sites: Expedia.com, Travelocity.com,HRS.com, Hotels.com and Kayak.com) forthe same hotels in the same conditions(e.g., booking inquiries made on the sameday for the same date of stay with breakfastincluded).

For a realistic simulation of traveler bookingconditions, the study was carried out incooperation with a major Europeancompany. In June 2007, a total of 262prices were obtained for 47 hotels in 25major travel destinations across 1�countries based on the company’s travelpatterns. The hotels included chains andindependent properties, both within andoutside the corporate program, and a rangeof hotel categories.

Bookings were requested in the name ofthe company to gain access to negotiatedrates where available. (Websites only postpublic “rack” rates.) The best rates obtainedthrough the alternative channels were thencompared with the best rates availablethrough CWT.

Rates were recorded only if rooms wereavailable.

Methodology for benchmarking hotel pricesper booking channel

47

Figure 44: Hotel rates are lower when booked through the travel management company

Source: CWT Travel Management Institute, based on a CWT hotel price benchmark (262 price samples)

Indexed rate(CWT rate = 100)

Hotel chains Independent properties

100 100

124117

107117 122 121

CWT Call to hotel Hotel Website Web booking site

0

30

60

90

120

150

Preferred hotels Other hotels

100 100111

103 104

122132 129

Deluxe First Standard Economy/budget

100

134 131126

100

112

122 124

100 100

119

141146

106 109 109

0

20

40

60

80

100

140

120

0

20

40

60

80

100

140

120


For preferred and other hotels

For all categories of hotels In all regions

For chains and independent properties

0

20

40

60

80

100

120

140

160

Europe Asia Pacific North America

100111115 118

100

117113118

100

133146

127


0

20

40

60

80

100

140

160

120


This price advantage of booking through thetravel management company is obtained withoutcompromising room availability and bookingflexibility (i.e., no extra cancellation penalties are

incurred). The only alternative that offers slightlybetter results is calling the hotel directly, asshown in Figure 45.

Figure 45: Booking through the travel management company provides competitive availabilityand flexibility

Source: CWT Travel Management Institute, based on a CWT hotel price benchmark (330 bookings)

Lower airfares. A similar pattern is true forair: prices are lower when booked throughthe travel management company comparedto booking through public and airline

Websites. In a price benchmark published in20072, corporate travel consultancy TopazInternational found a 13 percent differencein average ticket price (see Figure 46).

4�

2 Topaz International publishes regular comparative studies of corporate travel airfares booked bytravel management companies and those available on public Websites and airline Websites.

0

100

200

300

400

500

600

700

800

458

629 748572 558

483

583

594

503478

427

508

-US$75 (-13%)

Itinerary price (US$)

Average agency fare

20022001 2003 2004 2005 2006

Average Internet fare

Figure 46: Airfares obtained through travel management companies consistently cost lessthan those obtained through Web booking sitesPricing of business travel itineraries by booking channel

Source: Topaz International pricing benchmark, April 2007

Increased use of preferred suppliers. Oneof the key roles played by the travelmanagement company is to steer travelerstoward compliant bookings. The data indeedshows that travelers use preferred suppliersmore often when they book through the travelmanagement company than when they useother channels. For example, a study oftransactions made by three major companies(two North American and one European)reveals that travelers use preferred airlines 12percent more often for domestic transactionsand 6 percent more often for internationaltransactions (see Figure 48). In addition, astudy of eight companies reveals that travelersuse preferred hotels on average 15 percentmore often when they book through the travelmanagement company than throughalternative channels, as shown in Figure 49.

Travel managers acknowledge that bookingthrough the travel management company bringssavings directly and indirectly. Eighty-six percentof the travel managers surveyed by CWT say

travelers using alternative channels pay higherrates and weaken the company’s negotiatingpower with suppliers (see Figure 47).

Do you consider non-compliance with preferred channel policy as:

Leading to more expensive fares/rates

Weakening negotiation power with suppliers

>50%

Yes Partially Not Really No

39% 47% 10% 4%

64% 22% 12% 2%

25-50% <25%

Figure 47: Travel managers say that booking outside the travel management companyincreases costs


Booked through preferred channels

Booked through alternative channels

Figure 48: Travelers use preferred airlinesmore often when they book through thetravel management company

Source: CWT Travel Management InstituteBased on 26,291 CWT transactions and corporate credit card data forthree companies in Europe and the United States in 2007

0

10

20

30

40

50

60

70

80

62%

42%

18%

33%

19% 20%

30%36%

19%

33%

53%49% 47%

43% 42% 41%35%

48%

+15%

CompanyC

CompanyA

Booked through the preferred channels

CompanyL

CompanyB

CompanyG

CompanyD

CompanyE

CompanyF

Average

Booked through alternative channels

% of bookings with preferred hotels

51

Figure 4�: Travelers use preferred hotels more often when they book through the travelmanagement companyCompliance with preferred hotel policy

Source: CWT Travel Management InstituteBased on CWT client transactions and corporate credit card data, 2006

Reduced use of deluxe hotels. Travelerswho book through the travel managementcompany are also less likely to use deluxehotels. Figure 50 shows that travelers fromthree European companies who bookdirectly with hotels spend twice as much atdeluxe hotels than those who book throughthe travel management company.

Enhanced service and security. Seventy-eight percent of travel managers say travelerswaste time if they book through alternativechannels. In addition, 77 percent state theycannot effectively track travelers in anemergency if the designated bookingchannel is not used. Interestingly, more thana third of travelers do not acknowledge thelink between emergency tracking andbooking through the travel managementcompany (see Figure 51).

Figure 50: Travelers who book through thetravel management company are less likelyto use deluxe hotels

Source: CWT Travel Management InstituteBased on CWT transactions and corporate credit cards for threeEuropean companies in 2006 (US$69.8M total spend)

Source: CWT Travel Management Institute, based on a CWT survey of travel managers

Do you consider non-compliance with preferred channel policy as:

Wasting time fortravelers makingtheir own bookings

Preventing travelertracking in case ofan emergency

Travel managers

Travel managers

Travelers

>50%

Yes Partially Not Really No

31% 47% 16% 6%

59% 18% 22% 2%

6% 21% 36% 37%

25-50% <25%

Figure 51: Travel managers acknowledge that booking outside preferred booking channels hasan adverse impact on service and security

% of hotel categories booked through differentchannels

How does a corporate online bookingtool further increase compliance?

In its study Toward Excellence in Online Booking(2006), CWT demonstrates how the use of anonline booking tool can cut the average ticketprice by up to 10 percent. Online bookingboosts overall compliance with policy and inparticular, compliance with rules on preferredairlines and restricted fares.

Increased use of preferred airlines. Ananalysis of five key routes for a majorcompany indicates that travelers usepreferred carriers on average 20 percentmore if they use a corporate online bookingtool, as shown in Figure 52. Compliance isrelatively low here because the preferredairline is not the national carrier—as seen onPage 38.

53

Source: CWT Travel Management InstituteBased on 1,908 transactions for a major company in 2006

0

10

20

30

40

50

60

70

80

75%

29%33%

28%

71%

33%

23%

3%

46%

15%8%

23%

Paris

-Vie

nna

Paris

-Dub

ai

Paris

-Cas

abla

nca

Paris

-New

Yor

k

Paris

-Sin

gapo

re

Aver

age

+23%

% of bookings with preferred airlines

Offline booking Online booking

Figure 52: Travelers who book through the corporate online booking tool use preferred airlinesmore often

Increased use of restricted fares. An analysisof more than 320,000 transactions showsthat travelers who use a corporate online

booking tool tend to use restricted fares moreoften for international flights, for which thediscounts are larger (see Figure 53).

How much room is there for increasingthe use of preferred booking channels?

In terms of policy, travel managers acknowledgethe benefits of booking through the travelmanagement company but could reinforce theirapproach. Already, 87 percent of companiesmandate booking through the travelmanagement company for air travel and 79

percent for hotels, as shown in Figure 54. Incontrast, a significant 40 percent of companiesthat have an online booking tool do not evenmention the channel in their policy. Of those thatdo, only 26 percent mandate the use of thischannel for air travel and 2 percent for hotels. Inmost cases, the use of the online booking tool issimply recommended (see Figure 55).

Source: CWT Travel Management InstituteBased on 320,000 CWT client transactions, January – May 2007. Only companies that mandate or recommend the use of restricted fares areincluded. The countries selected are the top 8 in terms of the number of online bookings.

0

20

40

60

80

100

Ger

man

yN

ethe

rland

s

Domestic flights International flights

Spai

n

Aust

ralia

Unite

d Ki

ngdo

m

Fran

ceW

eigh

ted

aver

age

Switz

erla

ndN

ethe

rland

s

Spai

n

Belg

ium

Unite

d Ki

ngdo

m

Fran

ce

Ger

man

y

Wei

ghte

d av

erag

e

55

72

51

7770

52

61

42

89 8983

76 7672 70

61

80 79

61 60

6

43

6055

48

5

42

32

72

Offline booking Online booking

0

20

40

60

80

100

54

Restricted faresas a % of all bookings

Figure 53: Travelers who book through the corporate online booking tool use restricted faresmore often

55

Source: CWT Travel Management Institute, based on a CWT travel policy benchmark

Figure 54: Approximately 80% of companies require travelers to book through the travelmanagement company for air travel and hotelsInstructions for using the travel management company

Source: CWT Travel Management Institute, based on a CWT travel policy benchmark

Figure 55: Few companies mandate the use of the corporate online booking toolInstructions for using a corporate online booking tool

In terms of compliance, companies havesignificant room for improvement. Travelers’use of alternative booking channels varies widelyamong companies according to a unique studyby CWT, which compared transactions madethrough the travel management agency andtransactions recorded in credit card data. In theseven companies studied by CWT, travelers use

alternative channels for 2-22 percent of airtransactions and 23-66 percent of hoteltransactions, as shown in Figure 56. Bookingchannel compliance can be low even whencompanies mandate the use of the travelmanagement company, such as company E.Companies therefore have considerable scopeto improve compliance and the related savings.

According to the CWT survey of travelers, themost popular alternative to using the travelmanagement company is to book directly withsuppliers. Travelers who book outside the travel

management company most often use airlineWebsites (52 percent of travelers bookingthrough alternative channels) or call hotelsdirectly (42 percent), as shown in Figures 57-58.

Source: CWT Travel Management Institute, based on an analysis of CWT client transactions and credit card data

Figure 56: Travelers use alternative booking channels for 2-22% of air transactions and23–66% of hotel transactions

57

Source: CWT Travel Management Institute, based on a CWT survey of travelers (522 travelers)

Figure 57: Airline Websites are the alternative booking channels used most often


Figure 58: Calling a property directly is the most common way to book hotels outside thetravel management company

Use of alternative flight booking channels

Use of alternative hotel booking channels

What are the main reasons for non-compliance with preferred bookingchannels?

The main reasons travelers cite for bookingoutside the travel management company vary forair and hotel transactions, but in both cases theyare related to three major factors: price, bookingconvenience and product offering, as shown inFigures 59-60 and discussed below:

Price. Travelers say price (ticket price or roomrate and agency fees) is the main reasonthey book flights outside the travelmanagement company. It is also the secondreason cited for booking hotels throughalternative channels. In both cases, travelerperceptions contrast with the reality ofpricing benchmarks, as discussed above.Typically travelers are unaware of thediscounts their companies receive such asback-end rebates which are not visible in airticket prices. In addition, they often do notrealize that an apparently identical ticketfound on a Website may carry differentrestrictions. Similarly, a room rate bookeddirectly does not take into account the cost ofextra services that are often negotiated bycompanies (e.g., breakfast). This underlinesthe importance of effectively communicatingand educating travelers on the financialbenefits of complying with travel policy.

Product offering. The belief that it ispossible to find a product that better suitstheir needs is the main reason why travelersbook hotels outside the travel managementcompany and the second reason for bookingflights through alternative channels accordingto the survey. Twenty-two percent of travelerswho use alternative channels declare theycan find more suitable flights this way while

20 percent say they can find more suitablehotels. This non-compliance may indicate agap between traveler needs and the travelprogram or, in the case of hotels, may beinfluenced by a range of factors, includinglocation and availability.

Booking convenience. Travelers also citebooking convenience as a major reason tobook flights and hotel rooms outside thetravel management company. This raises theissue of whether the appropriate bookingchannels are available when required andwhether they offer sufficient quality ofservice.

Personal preference (e.g., the ability to usefrequent flyer programs) is hardly mentioned bysurveyed travelers as a reason for usingalternative booking channels. Another reasonthat is rarely discussed is the ability to use apreferred payment method (e.g., a traveler maybook air travel through the travel managementcompany using a corporate credit card but thenbook a hotel independently using an affinity cardthat offers loyalty points).

In addition to the CWT traveler survey, hoteltransaction data suggests further reasons whytravelers may book outside the travelmanagement company, as shown on -61.

5�

Source: CWT Travel Management Institute, based on a CWT survey of travelers (522 responses)

Lower fares

% of survey responses

32%

9%

15%

11%

22%

1%

1%

9%

No agency booking fee

Faster and simpler booking

Preferred channel unavailable

To find more suitable flights

Loyalty to airlines outside program

Freedom to select class

Other

Price

Bookingconvenience

Product offering

Personal preference

Other

41%

26%

22%

9%

2%

Figure 5�: For air bookings, travelers say they use alternative channels mainly because theybelieve they can find cheaper fares


% of survey responses

20%

8%

5%

19%

7%

14%

7%

5%

4%

11%

Hotel suiting my needs

Broader hotel choice

Freedom to select hotel

Lower rates

No agency fee

Faster and simpler booking

Preferred channel unavailable

Convenient hotel desk

Loyalty to hotels outside program

Other

Product offering

Price

Bookingconvenience

Personal preference

Other

33%

26%

4%

11%

26%

Figure 60: For hotel bookings, travelers say they use alternative channels mainly to find aproperty that suits their needs

Reasons for using an alternative air booking channel

Reasons for using an alternative hotel booking channel

A range of factors influence hotel bookingsoutside the travel management company A case study of one major European company shows considerable variation in booking channelcompliance for hotels in different cities (see Figure 61).

0

20

40

60

80

100 95%

85%

73%69%

38%

29%22% 21%

Weighted average(spend through alternative booking channels

across all hotels used by the companybeyond the top eight)

38%

% of spendthrough alternativebooking channels

New Delhi Moscow Abu Dhabi Singapore Paris Dubai London Rome

Figure 61: Travelers’ use of the travel management company for booking hotels variesconsiderably with local factors

Source: CWT Travel Management InstituteBased on CWT client transactions in 2006 (US$4.2M spend)

Hotel bookings through alternative channels for the top eight destinations for a major European client

61

This variation may be explained by a range offactors:

Location of hotels in the program. Aprerequisite for travelers using the travelmanagement company as a booking channelis to ensure that the hotels in the programare close to travelers’ place of work. Thecompany in the example includes numerousproperties in Paris, London, Rome and Dubaiin its travel program and its travelers usealternative booking channels less often inthese cities.

Local market deals. In some cities, such asNew Delhi, hotels may offer lower prices tolocal people booking directly. Similarly, hotelsmay offer special deals to locals, such as VIPsuites at no extra cost, which is the case inAbu Dhabi for the company studied. Suchdeals encourage international travelers tobypass their agency and ask local colleaguesto make bookings on their behalf.

Traveler knowledge. When traveling tounfamiliar, remote destinations, travelersoften entrust hotel reservations to localcolleagues.

Availability. Travelers book through theirtravel management company more often forcities that have high occupancy rates to savetime finding a room.

Other factors. Additional factors mayinfluence travelers’ decision to bypass thetravel management company, regardless ofthe city. First, frequent travelers who areprivileged customers of certain hotels tendto book directly, as they can often ensureroom availability even in periods of highoccupancy. Second, conference delegatesoften let meetings and events organizersmanage bookings on their behalf. Third,suitable properties may not be visible at thetime of booking due to errors in GDS rateloading, which can be reduced substantiallyby conducting regular rate audits.

Best performers in policy and compliance allunderline the importance of support frommanagement—not only senior managers whoendorse the policy, but team leaders who play akey role in promoting compliance. In particular,the following actions can have a major impacton how well the travel program is carried out:

Making senior management supportvisible. Ninety percent of companies havetheir travel policy endorsed by their chiefexecutive officer. But this is just a first step.Communicating on the policy through seniormanagement is probably the single mosteffective way to raise awareness of travelrules, overcome resistance to any requiredchanges and promote compliance with thepolicy. In concrete terms that means, forexample, sending the policy with an emailsigned by a senior executive to remindemployees of the objectives. An example isshown in Figure 62.

Escalating the approval process forexceptions to the rules. Travelers are farless likely to book outside the policy whenexceptions must be approved by a seniormanager. To that end, 46 percent ofcompanies require sign-off by the businessunit manager or vice president.

Involving management in pre-tripapproval when implemented. Post-tripaudits are increasingly favored over pre-tripapproval, especially in North America. Apartfrom going against a corporate culture whichempowers employees to “do the right thing,”pre-trip approval tends to delay booking andticketing (often leading to higher prices) andcan be a costly administrative burden. Somecompanies remain convinced, however, of itseffectiveness. They therefore need to ensurethat managers who approve requests receiveall the relevant information to query or refusenon-compliant bookings. This includes themissed savings associated with therequested booking, details onclass/category/route as appropriate andavailable alternatives. Currently, only 24percent of travel managers say the managersinvolved in pre-trip approval get all thisinformation.

3. Eight keys to success

1. Engage managementthroughout the organization

CWT has observed a number of best practices for designing travel policies and boosting

traveler compliance. These include: engaging management throughout the organization;

providing travelers with clear, comprehensive guidelines; standardizing the policy regionally

or globally; promoting compliance through communications and training; driving

compliance through point-of-sale measures; tracking progress and taking corrective action;

benchmarking industry performance; and leveraging travel management expertise.

Engaging team leaders in post-trip follow-up. When travel managers send detailedreports to team leaders, the latter can identifyindividuals who are under-performing andbenchmark their teams’ performance withinthe company. To this end, 46 percent oftravel managers surveyed by CWT sendreports on each non-compliant traveler tothe relevant team manager. Sharing regularperformance indicators with team leaders

encourages them to take the necessary stepsto reinforce compliance, bearing in mind thata reminder of policy rules is especiallyeffective when it comes from an employee’smanager. In addition, maintaining an ongoingdialogue with managers throughout theorganization can help travel managers bettersee areas of the program that could beimproved to better meet travelers’ needs.

63

Figure 62: Example of effective communications by email

To introduce changes to its travel policy, Company Y, a global consumer brands company, sent thefollowing email, signed by a board member, in English and the appropriate local language toemployees worldwide. The email included a link to the full travel policy.

Unsurprisingly, when support from managementis lacking, travel managers find it more difficult toimprove policy and compliance. Surveyed travelmanagers who claim they do not have the

necessary means to implement compliancemeasures cite a lack of management support asthe main barrier (see Figure 63).

Lack ofmanagement

support45%

27%

14%

14%

Insufficientinformation

and reporting

Sub-optimalonline booking

tool

Other

49%

% respondents

Yes

51%

Do you have all the necessary means to improve travel policy compliance? If not, why?

No

Figure 63: Travel managers say a lack of management support is the main barrier toimplementing compliance measures


The most effective travel policies provide clear,comprehensive guidelines in a user-friendlyformat. This is in contrast to many documentsobserved in the market that are long, difficult toread and imprecise. Ideally, a travel policy setsmandates—rather than simply making requestsor recommendations—where the corporateculture allows it. In addition, the policy shouldcover each of the five main areas that presentsignificant savings opportunities:

Advance air booking. Mandating booking atleast two weeks in advance wheneverpossible makes a significant difference to thenumber of tickets booked early and thesavings from lower ticket prices. Somecompanies specifically ask employees toplan their travel with this deadline in mind.

Restricted airfares. Companies make themost of this savings opportunity when theymandate the use of available restrictedairfares even if the traveler’s plans couldchange. When the cost of changes orcancelations is taken into account, savingsfrom lower up-front fares are still significant.Companies that ask travelers to take the“lowest logical airfare” should clearly stipulateif that means a restricted fare when available.

Preferred suppliers. The most effectivepolicies mandate the use of preferredsuppliers rather than taking the lowest fareor rate. Companies should include theprocedure to follow if preferred suppliers areunavailable and/or guidelines on price caps.

Traveler comfort (air class/hotel category).Companies generally make travelclass/category rules mandatory, basedmainly on the duration of a flight and thedestination city (for hotels). In addition, bestperformers specify circumstances wherehigher classes or categories are authorized(e.g., when traveling with clients or moresenior managers).

Preferred booking channels. Mandating theuse of the travel management company forbookings brings tangible benefits in terms ofsavings, service and security. When an onlinebooking tool has been implemented, it isimportant to mandate its use for simpletransactions (e.g., point-to-point flights) inorder to reap the full benefits.

In addition to these five main drivers of savings,policies should provide clear, comprehensiveguidelines on all areas of travel spend, processesand practical information. As an example,Figure 64 shows the travel policy frameworkrecommended by CWT.

65

2. Provide travelers with clear,comprehensive guidelines

Purpose and scope of travel policyOwnership and management endorsementEnforcement

SanctionsApproval for exceptions

Eligibility for travelContacts

1. General matters 2. Making travel arrangements

Use of corporate online booking toolUse of approved travel management companyApprovals Standard transactions Exceptions

3. Travel rules

AirPlanning/schedulingRestricted faresAir classElectronic ticketsTravelers traveling togetherUnused ticketsFrequent traveler awards

HotelPreferred hotelsCity price capsStaying in a private residenceCancelations

RailRail vs. airTravel classPersonal discount cards

Business expensesMealsEntertainmentTelephone chargesNon-reimbursed expenses

CarCar rentalEmployee’s private carTaxisParking charges

Corporate and personal credit cardsBusiness expense reportingMonitoring

4. Travel expenses and reimbursement

Emergency travel assistance

5. General advice to travelers

SecurityTraveler trackingDestination information Personal securityData security & confidentialityInsurance information

Pre-flight checksEntry regulationsCheck-in timesReconfirmation of flightsLuggage regulations

Figure 64: The CWT travel policy framework

Different travel policies in variousbusiness units or countries

One global travel policy+ tailoring to local business unit needs

One global travel policyacross all company units

67

Figure 65: Travel policies are mainly global

By aligning travel rules and processes acrossbusiness units and regions, travel managers canshare best practices and reduce costs—thesavings are on average 12 percent of total travelspend, as described in the CWT publicationGlobal Horizons: Consolidating a Travel Program(2007).

Companies acknowledge these benefits: 60percent of travel policies analyzed by CWT arealready global, including 15 percent which aretailored at a local level but remain at least as strict(see Figure 65). Local initiatives mainly involvebooking processes and selecting preferredhotels. In contrast, preferred airline policy isalmost always defined at a global level.

3. Standardize the policyregionally or globally

Geographical scope

Source: CWT Travel Management Institute

As highlighted in the research, one of the mainreasons travelers book outside their company’spolicy is to find lower prices. This underlines alack of understanding of the travel program, aswell as the intricacies of effective travelmanagement and the value of compliance. Inaddition, only 55 percent of surveyed travelerssaid they had a good or very good knowledge oftheir company’s policy, while 70 percent oftravelers who had made a non-compliantbooking believed that the travel rules were notmandatory. Low usage of online booking toolscan also indicate insufficient awareness or aneed for training. Companies may wish to takethe following measures:

Explain the stakes. The best-performingcompanies explain to travelers the savings orother benefits (e.g., security) at stake withregard to different aspects of the travel policy.This provides an incentive for cost-consciousemployees to comply and makes it harderfor travelers to justify booking outside thepolicy. As an example, one Europeanconsumer goods company sent a chart totravelers by email, signed by a boardmember, showing the price impact ofadvance booking in their particular countryand urging them to book earlier (see Figure66).

Make the policy easily accessible. As apractical working tool, the policy should beavailable online (typically on the corporatetravel portal or intranet) to all users and inlocal languages. Companies that circulate

global documents only in English canencounter lower rates of awareness andcompliance among certain employees dueto a weaker understanding of the languageand the rules. It is important to ensure thatany changes are communicated in a timelymanner to travelers and that only the latestversion of the policy is in circulation.

Provide training. Best-performing companiesensure that all travelers and travel arrangersreceive thorough training in the travel policy,booking processes and tools. For example,some companies organize monthly Webconferences to train new hires and follow upwith additional sessions as the policy and/oremployees’ roles evolve (e.g., when amanager becomes responsible for overseeingcompliance for his or her team, he or sheshould understand how booking behaviorcan impact the company’s financialperformance).

Report on progress and continue tocommunicate. Progress reports can be apowerful way to raise the profile of a travelprogram and improve traveler compliance. Inparticular, they provide an opportunity tohighlight savings, thank travelers for theirefforts and encourage further improvement.These reports are particularly valuable whenthe information is adapted to local teams orspecific divisions (see Figure 66). Tocommunicate most effectively, travelmanagers can leverage expertise from otherdepartments within the organization such asinternal communications, human resourcesand finance/auditing.

4. Promote compliancethrough communicationsand training

6�

Figure 66: Example of effective communications by email

One year after introducing changes to its travel policy (see Figure 62), Company Y, a global consumerbrands company, sent an email to employees worldwide to thank them for their efforts and promoteadvance booking. The content of this email was adapted to each country. The following is the emailsent out in Germany. It was written in English and in German.

Compliance can be considerably improved byintegrating the policy into the booking process,both on- and offline to channel travelers towardcompliant options.

Online booking. The corporate onlinebooking tool can be very effective in drivingcompliance in four main ways. First, the toolcan clearly indicate (e.g., through a color code)which options are compliant or non-compliantto produce “visual guilt,” which makes thetraveler more likely to comply. Second, if atraveler tries to book outside the policy, the toolcan provide a reminder that the booking isnon-compliant and, if applicable, that pre-tripapproval is required and/or a non-compliancereport will be filed. Third, the online bookingtool can be configured to filter out non-compliant options from the screen. Finally, itcan also proactively propose related services(e.g., a compliant hotel and car rental service toaccompany an air booking) to encouragetravelers to make bookings through thepreferred channel.

Offline booking. Companies should clearlydefine the level of involvement expected fromagents when travelers attempt to make non-compliant bookings. This may includeinforming the traveler that the transaction isnon-compliant, sending a pre-trip approvalrequest for exceptions, or refusing to make thebooking and filing a non-compliance report.They may also redirect travelers to their

company’s online booking tool or a travelerhelp desk if the traveler is unfamiliar with thetool and/or policy. Just as online booking toolsare programmed to do, agents canrecommend compliant options and also pushrelated services to travelers making a booking.

5. Drive compliance throughpoint-of-sale measures

Measure performance regularly. Keyperformance indicators are critical tools for thetravel manager—insufficient information andreporting are recognized as a major handicapto effectively managing compliance, as seenearlier in Figure 63 (Page 64). At the top ofthe list of indicators, as shown in Figure 67, isthe cost of non-compliance, which provides astrong argument for managers to justify the

policy and benefits. In particular, comparingperformance by business unit or division andsharing that information with team leaders canreinforce efforts to boost compliance (seeFigure 68 for an example of a reportingdashboard).

71

6. Track progress and takecorrective action

Cost of non-compliance

Use of online booking tool when appropriate

List of individual non-compliant travelers

Compliance with class/category constraints

Compliance tracking per policy item

Overall air compliance

Overall compliance

Compliance per business unit

Compliance per route

Overall hotel compliance

Year-on-year compliance tracking

Gap analysis of compliance vs. target level

Compliance per destination (hotel)

Performance indicators Not relevant Nice to have Important Critical

What do you consider the most relevant performance indicators for managing compliance?

% of total responses: 0-20% 20-40% 40-60% 60-80%

Figure 67: Travel managers consider the cost of non-compliance to be the most importantperformance indicator for driving compliance

Source: CWT Travel Management Institute, based on a CWT survey of travelers

Divisions 7-day advancepurchase

Self bookingadoption

Preferred hoteladoption

Averageticket price

Combinedair-hotel booking

Missed Q2savings

vs. compliancegoals

(By numberof transactions)

CurrentQ %

Trend fromlast Q

CurrentQ %

Trend fromlast Q

CurrentQ %

Trend fromlast Q

CurrentQ

Trend fromlast Q

CurrentQ %

Trend fromlast Q

Division A

Division B

Division C

Division D

Division E

Division F

Division G

Division H

Division I

Total

Performance up on previous quarter

Performance down on previous quarter

At or above goal

Approaching goal

Below goal

Goal 70% 60% 32% US$475 70%

74%

60%

35%

20%

18%

39%

28%

23%

38%

35%

43%

52%

51%

48%

70%

48%

63%

28%

29%

13%

US$602 US$1,313,230

US$4,636,530

US$791,424

US$923,739

US$878,537

US$319,435

US$202,143

US$115,353

US$85,821

US$6,847

US$663

US$879

US$995

US$693

US$588

US$610

US$587

US$540

75%

81%

46%

57%

70%

76%

68%

80%

92%

54%

79%

67%

63%

68%

67%

48%

23%

30% US$676 63%53%

Figure 68: Sample dashboard for reporting on compliance and savings

73

Take targeted action to reinforcecompliance. As seen earlier (Page 23), asmall proportion of travelers tend to beresponsible for the majority of non-compliantbookings. It can be worthwhile identifyingthose travelers, along with their reasons fornon-compliance, and taking action. Forexample, the vice president of global travel ata global pharmaceutical company sends apersonalized email to individuals who bookoutside the travel management company toremind them they are required to use this

preferred booking channel and that non-compliance may result in non-reimbursement(see Figure 69). This has resulted in unusuallyhigh levels of compliance within a year—98percent for air (compared to 80 percentcompliance for air at some companies).Although more than a third of all companieshave no disciplinary process for non-compliance (see Figure 70), the trend istoward stricter enforcement, as shown inFigure 71.

Figure 6�: Sample email sent to travelers who have booked through non-preferred bookingchannels

Company A, a global pharmaceutical leader, sends a personalized email to travelers who book outsidethe travel management company unnecessarily. This includes a reminder of the company’s strictmandate that employees should use the TMC or online booking tool for all business travelarrangements at the risk of not being reimbursed for travel expenses.

Figure 70: 34% of companies have no disciplinary process to enforce their travel policy


Compliance measure

Require TMC to systematicallyrefuse non-compliant bookings

Systematically identify and reportnon-compliant travelers

and implement targeted action

Reinforce actions againstnon-compliant travelers with heavier

or more systematic sanctions

Identify and target action atoverindulgent managers who

systematically approve exceptions

31%

21%

28%

29%

55%

44%

22%

20%

% of companies for which measure is:

PlannedAlready in place

Figure 71: Travel managers intend to reinforce compliance measures


75

Adjust the travel program wherenecessary. Non-compliance reports canindicate areas of the travel program that needto be reviewed. For example, an unusuallylow rate of compliance with the use ofpreferred suppliers may suggest that currentsuppliers do not adequately match travelers’needs. Key factors to consider for the airprogram include the frequency andconvenience of preferred airlines’ schedules,connecting flights and airport locations. Forhotels, travel managers should regularlyreview the range of cities covered, theconvenience of hotel locations, and the rangeand quality of services offered to travelers.

Benchmarking industry performance in terms of policy design and traveler behavior can helpensure the company’s program remainscompetitive in its sector.

Benchmark policy. Travel policy shouldreflect a company’s culture and businesspriorities. To ensure that the policy remains inline with standards in their sector, however,companies can benchmark elements such asthe minimum flight duration required forbusiness class; whether or not connectingflights can be proposed as an alternative tonon-stop long-haul routes; whether low-costcarriers are used; and which hotel categoriesare authorized.

Benchmark traveler behavior. Companiescan identify savings opportunities or highlightabove-average results by benchmarking theirpeers’ performance in key areas of the

program. Comparative information isparticularly useful when it is difficult to definestrong performance. An industry average canoften provide an indication. A good exampleis capacity-controlled negotiated fares (i.e.,available on a quota basis). As travelers willno longer have access to these fares whenthe quota is met, companies can not aim fora 100 percent usage rate. For instance, whena company knows that the average rate ofuse among benchmarked companies isapproximately 40 percent, its 36 percent ratewill not appear to be particularly low.

Working closely with a travel managementcompany facilitates travel policy design andimplementation, as well as compliance. Travelmanagement companies are also wellpositioned to help monitor and improveperformance. Their specialized professionals andtechnology can play a key role every step of theway. In particular, the following areas are worthhighlighting:

Travel policy design. Major travelmanagement company professionals have aparticularly clear view of effective travelpolicies. They continuously monitor evolvingmarket and supplier trends, as well asindustry best practices, and are capable ofbenchmarking the travel policies of multipleclients working in a variety of industries aroundthe world. Travel management companies caneasily spot gaps in coverage and effectivenessand advise clients on the items and wordingthat constitute a well-designed policy.

7. Benchmark industryperformance

8. Leverage travelmanagement companyexpertise

Implementation. The technology andprofessional expertise travel managementcompanies provide play a critical role in thesuccessful implementation of travel policies.Communicating the travel policy is the firststep toward compliance. Many travelmanagement companies offer multi-lingual,Web-based traveler portals that hostimportant information, including thecorporate travel policy. The corporate onlinebooking tool is often integrated into thesetraveler portals and must be programmed toreflect the travel policy and guard againstnon-compliant bookings. Travel managementcompanies can also regularly audit globaldistribution systems to ensure that clients’negotiated airfares and hotel rates areaccurately loaded.

At the point of sale, travel counselors canhelp drive compliance. By being perfectlyfamiliar with their clients’ travel policy andinforming travelers of companyrequirements, they can help to educatetravelers and re-direct non-compliantrequests. When authorized to do so, they caneven refuse non-compliant bookings andrequire travelers to book within the policy.

Performance monitoring. Travel managementcompanies provide the consolidated data andreporting that enable companies to track andimprove their performance. By providingrelevant and timely information that not onlyspans the globe but drills down to severaldifferent levels—from business units toindividual travelers—travel managementcompanies can identify missed savings andreasons for non-compliance. By reconcilingcredit card expense data with agencybooking data, they can also flag bookingsmade through non-compliant channels.

Finally, travel management companies cananalyze the data and recommend solutionsand best practices that will improve policydesign and compliance on an ongoing basis.

77

Case studiesCompanies that implement measures to improve their travel policy andtraveler compliance realize a fast return on investment. The following casestudies illustrate the significant impact different best practices have had atmajor global companies.

0

20

40

60

80

100

% of bookings

17%

Q12005

Q22005

Q32005

Q42005

Q12006

Q22006

Q32006

Q42006

43%

20%

20%

18%

47%

16%

19%

17%

35%

18%

30%

17%

34%

23%

26%

10%

33%

27%

30%

9%

29%

27%

35%

10%

26%

23%

41%

13%

23%

25%

39%

14+ days 13-8 days 7-3 days 2-0 days

Introduction of pre-trip approval process for bookings fewer than14 days in advance

Figure 72: Company H has increased advance air bookings by 20% after implementing pre-trip approval

Source: CWT Travel Management Institute, based on transaction data for one CWT client(all routes, travelers and classes)

Case Study 1 Improving advance air booking.Company H, a global pharmaceutical leaderbased in the United States, introduced a newprocess requiring travelers to obtainmanagement approval for any trip booked fewerthan 14 days in advance and to state theirreasons for doing so. The process included dailyauditing of late bookings by the corporate travelteam, who communicated results to senior

management. Subsequently, the proportion ofadvance air bookings increased significantly fromquarter to quarter, with a 20 percent increaseover 15 months (from second quarter 2005 tothird quarter 2006), as shown in Figure 72. Withexpected savings of 2 percent for each additionalday booked in advance, this initiative generatedan estimated 6.6 percent savings on air travelspend in one year.

0

10

20

30

40

50

60

70

80

Paris-Madrid

Paris-Tokyo

Paris-Beijing

Overall

% of bookings withpreferred suppliers

Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007

Control of exceptions strongly reinforced as of September 2006

Figure 73: Company X saved 17% of spend on 3 key routes by increasing the use of preferredairlines

Source: CWT Travel Management Institute, based on transaction data for one European company

Case Study 2 Increasing compliance withpreferred airline rules. Company X, a leadingautomotive manufacturer based in France,instructed travelers to use alternatives to AirFrance on selected long-haul routes. To enforcethis policy, given that travelers generally favortheir national airline, a strict monitoring andcontrol process was introduced. First, travelagents encouraged travelers to take preferredairlines, sending a pre-trip approval request tothe travelers’ departmental manager if he or sherefused. After each booking with a non-preferredairline, the agent also completed a report with

the name of the traveler and the person whoapproved his or her request, the preferred airline,the airline with which the booking was made andthe difference in ticket price.

Based on this report, the travel manager coulddiscuss non-compliance with each business unitdirector, as well as leniency on the part ofdepartmental managers. The result was adramatic increase in travelers’ use of preferredairlines from 47 percent to 73 percent, as shownin Figure 73. This initiative produced 17 percentsavings on air spend across the relevant routes.

7�

2005

Use of preferred hotels

Coverage of the hotel program

Accuracy of GDS fare loading

Web hotel catalogue - number of page views

46%

59%

77%

24,000

66%

75%

94%

30,000

2007

Figure 74: Company C has increased compliance with preferred hotel policy by 20%

Source: CWT Travel Management InstituteBased on transaction data for one European company

Case Study 3 Improving compliance withpolicy on preferred hotels. Company C, aworld-leading pharmaceutical group, realized 13percent savings on hotel spend over three yearsthrough actions to improve compliance with itspolicy on preferred hotels. Working closely withthe travel management company, the groupaudited transactions per city quarterly andidentified ways to improve the program’s fit withtraveler needs to drive compliance.

For example, significant volume with a propertyoutside the program suggested a potential newsupplier to add to the program. Conversely, lowor no volume with a preferred property indicateda need for corrective action, such as ensuring thehotel’s rates were correctly loaded into the GDSor removing the property from the program if itsquality was insufficient for travelers. In addition,

the travel management company was asked toanalyze new hotels coming on to the market toidentify additional new preferred suppliers. Theseinitiatives to continually improve hotel policywere backed up by improved service at the pointof sale through dedicated hotel agents.

The main result was an increase in the use ofpreferred hotels, representing 66 percent ofhotel transactions in 2007 compared to 46percent in 2005. This was helped by improvedprogram coverage (preferred suppliersaccounted for 75 percent of travel spendcompared to 59 percent previously), togetherwith a rise in the number of times travelersconsulted the company’s catalogue of preferredhotels on its intranet site (30,000 consultations,compared to 24,000). These results are shownin Figure 74.

Conclusion

This CWT Travel Management Institute researchshows how companies can save on average 20percent of total travel spend by improving theirtravel policy and traveler compliance.

It is hardly surprising that the majority of travelmanagers surveyed—approximately 70 percentaccording to CWT—review their policy annually.But as the study indicates, many companies canstill boost their performance. In many sectors,policies have become stricter regarding class oftravel. More commonly, however, companies arefocusing less on tightening the rules—some areeven relaxing them—than on clarifying policy andreinforcing measures that promote compliance.

Compliance is all the more important whencompanies aim to fulfill their duty of care toemployees, helping to ensure their well-beingand safety wherever they are. Managing demandfor travel and eliminating unnecessary trips willtake on growing importance as more attention isplaced on employees’ work-life balance.

At the same time, companies are increasinglyaware of their duty toward the environment andthe need to reduce their carbon emissions.Although the vast majority have not yet included“green” measures in their travel policy, this looksset to happen.

In the future, travel managers will also integratemeetings and events into travel policy to exploitsynergies with their transient travel program.While this remains a largely uncharted territoryfor many companies, the high potential returnon investment provides an incentive for change.

Many of the best practices observed by CWT aremeasures that are within reach of all companies.To successfully implement them, travelmanagers need to work as a team with theirtravel management company, senior executivesand managers throughout their organization—not just to define the right policy, but to ensurethat travelers play by the rules.

81

For more information about how CWT expertscan help your company successfully optimizeits travel policy and compliance, pleasecontact your CWT sales or account manageror email us at [email protected]

List of companies mentioned in Playing by the Rules: Optimizing Travel Policy and Compliance(selected transaction analyses and case studies):

Appendix

Company

A...........................B...........................C...........................D...........................E...........................F............................G...........................H...........................I............................J............................K...........................L............................M..........................N...........................O...........................P............................Q...........................R...........................S...........................T............................U...........................V............................W...........................X...........................Y...........................

Sector

TelecommunicationsTelecommunicationsPharmaceuticalsElectronics and systemsHeavy industryChemicalsConsumer goodsPharmaceuticalsElectronics and consumer goodsConsultingFinancial servicesTelecommunicationsEnergyGovernmentFinancial servicesFood and beveragesConsumer goods PharmaceuticalsTelecommunications Heavy industryHeavy industryFinancial servicesFinancial servicesAutomotiveConsumer goods

Headquarters

EuropeEuropeEuropeEuropeEuropeEuropeEuropeNorth AmericaEuropeNorth AmericaNorth AmericaEuropeEuropeEuropeNorth AmericaEuropeEuropeEuropeEuropeEuropeEuropeEuropeEuropeEuropeEurope

83

All research published by the CWT Travel Management Institute is available on

www.carlsonwagonlit.com

study by carlson wagonlit travel on travel policy and compliance

Documents