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Selecting a travel management company.

Article Excerpt
The business of travel management companies has changed rapidly throughout their history, a fact of life that only is growing more menacing as corporations focus more than ever on minimizing travel due to cost cutting or security concerns. This is also a time when the value of implementing automation to cut jobs has never been greater.

As all kinds of travel distributors relentlessly try to eek out a margin by shaving expenses and chasing revenues, the lines between different types of distributors increasingly are becoming difficult to draw. Many travel management companies have built technology to handle what traditionally would be known as global distribution system functions. Traditional GDS providers, meanwhile, also are transforming themselves in the corporate market. Sabre is becoming a TMC of sorts through its GetThere and Travelocity units; Galileo is emerging as part of a vertical travel giant in Cendant; and Worldspan is backing two of the newest corporate agency competitors: Expedia and Orbitz.

When it comes to selecting a travel management company, corporate buyers this year are finding an expanded variety of choices. Not only can they consider local, regional or multinational agencies, but they also now are looking at online agencies. The competitive market is merging as traditional agencies continue to grow the number of self-service transactions they process using technology from their GDS partners and others--making them more like online agencies--while the online agencies are laying the groundwork for more traditional and phone-based services.

These changes and differences are stark in a few examples. Expedia went out and bought a regional corporate agency. Amex, TQ3, WorldTravel and others have set up e-fulfillment centers powered, in part, by technology from the same company that supports Expedia: TRX. Orbitz is using Rosenbluth for its fulfillment, while Travelocity is keeping it all in house.

Many see the two groups--online and traditional--coming at each other from two ends of the market, with the online players' natural territory being in the small market and the megas coming from the large, global client base. While either type of player could offer modified services to the other's natural base, the biggest battles are being waged in the middle.

The outline below details the basic steps in the selection process:

1. LAY THE GROUNDWORK

A. Before beginning to choose a travel management firm, be sure to understand your company's overall vision for the travel program.

1. Is the priority to save money, improve efficiency, provide traveler service or a combination?

2. Is the goal to have a regional, national, domestic, multinational or global program? Where are the volume densities and opportunities for earliest implementation? If you decide to go global, make certain that you understand the cultural issues, operational differences, pricing variations and language barriers that exist around the world. using a North American approach is not always well accepted or understood by foreign locations.

3. Get management involved by working with a key executive to determine senior-level priorities and opinions of travel services and expenditures. Solicit feedback from as many subsidiaries as possible to ensure you have their support early on.

4. Have a clear understanding of your company culture. Is it centralized, where divisions and units are accustomed to following a single vision, or decentralized, where business units have been encouraged to do their own thing?

5. Survey travelers and travel arrangers about their perceptions of your current service in order to establish a benchmark of performance for the new supplier. Also use focus groups of travelers and travel arrangers to identify what is important to each group, and what they like and would like to see changed.

B. Set up an agency selection committee of managers from various divisions, including finance, purchasing, information systems and human resources, as well as representatives from all branch and international offices and legal to streamline later contracting. You may want to include representatives from various levels within the organization, such as administrative assistants and frequent travelers.

C. Define service requirements and objectives of your bid solicitation. Establish grounds for financial analysis-cost avoidance and savings for travel expenditures versus the return to the company after the administrative costs are deducted from any revenue stream. Make sure each line item is defined clearly to simplify comparisons among bidders. Be clear about what support you expect from the agency, including account management, communicating with travelers and negotiating with vendors. Detail how the agency should measure and report its progress in achieving goals.

D. Based on your expertise and experience, decide whether to involve the purchasing department or hire an independent consulting firm to assist in the process.

Consider:

1. The consultant's client base and industry expertise

2. How much time the person responsible for travel has to devote to the task. Consultants offer expertise without a learning curve and can take over the process and basic analytical comparisons short of making the ultimate decision.

3. The cost versus the potential savings

4. If the incumbent agency has strong supporters within the organization, yet travelers have numerous service complaints, a third party can help to settle the issues.

E. Prepare incumbents. Communicate early with incumbent agencies. Do they fit the overall objective of your program (e.g., does the agency have...

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