Change Agents
Despite the apparent threat to their business, travel agencies are some of the biggest proponents of self-booking tools, acting as resellers of well-known products or, in some cases, developing their own proprietary software. American Express has a six-person team working with 1,400 clients to implement such products, and Rosenbluth International, based in Philadelphia, says its new do-it-yourself software is "a key aspect of our future strategy."

Why are travel agencies so happy to have the phones stop ringing? Part of the reason is that they see a new and lucrative role for themselves as consultants, helping clients learn to negotiate discounts from travel suppliers and to manage the huge volume of information that powers booking tools. "The majority of our revenues will come from the support services around booking, be it consolidation of data and integration with expense management tools or supplier negotiations," says Rosenbluth chief operating officer and president Alex Wasilov.

Independent consultants are also cropping up; Travel Analytics's Gillespie is one. Companies pay him $20,000 to $60,000 to analyze their travel data; armed with better information, they can save hundreds of thousands of dollars on airfare, hotels, and rental cars. Strategic sourcing of travel can boost a company's bottom line by 1 to 3 percent, claims Gillespie, and almost any company has a shot at such deals. "I've heard of companies with less than a million dollars in annual air-spend getting reasonable discounts from airlines," he says, "provided they can promise to direct more spending to key suppliers and have a strong travel policy in place to meet that promise."

It worked for Schering-Plough. Two years ago, director of administrative services Mike Doran began loading historical travel spending data into Dacoda, a software product from Rosenbluth that handles scenario planning and keeps track of compliance with existing contracts. Knowing the incremental savings associated with switching carriers, Doran says, helped him negotiate more effectively with vendors. As a result, the company saved 17 percent over the lowest published airline fares last year, compared with an 8.2 percent savings the year before.

Bargaining shouldn't be limited to travel suppliers — it's possible to establish new financial arrangements with travel agencies as well. With airlines cutting the commissions they pay to travel agents, those agents are no longer sharing part of that revenue with corporate clients; annual rebates have shrunk dramatically or disappeared. Some companies have responded by forgoing the traditional flat upfront fee for services in favor of an à la carte approach. This arrangement has been a boon for Bose Corp., even though it relies on agents for about 90 percent of its reservations. "Going from a management [flat] fee to a transaction fee let us weed out the services we didn't use, and we were able to reduce the total fee per transaction by about 40 percent," says Gary Polito, corporate travel manager at the audio-equipment maker.

Plane Talk
The transaction-fee arrangement has its pitfalls, though. "If someone changes a ticket three or four times, the transaction fees could be more than the ticket," says Sheila Kittle, vice president of corporate travel at Raymond James Financial, a brokerage firm based in St. Petersburg, Florida.

To push the envelope even further, companies can use the shrinking commissions paid by airlines to travel agents to their advantage, by negotiating deeper discounts from airlines on the grounds that they must now pay more for travel-agent services. "The airlines generally won't tell you about this, but they'll do it to stay competitive," says Polito. "And even if the final ticket price is the same as before, the up-front discounts really help with cash flow." In the so-called net deal structure, Bose now gets as much as 30 percent off tickets that previously would have carried a 17 percent discount plus a portion of the agency's commission.

By bringing technology and a tougher negotiating stance to bear on air travel, companies may pave the way for a similar approach to hotels and rental cars. Because reservations for these are often made directly by the traveler, companies have struggled to capture the data necessary to win deep discounts. Software from Concur, Extensity, and other firms tracks such spending on the back end, which can provide negotiating leverage.

Saving money on travel is not just about winning better prices from suppliers, though. Employees can be enticed to join the effort. To encourage workers to opt for lower fares, for example, Cibavision adds $1,000 to the paychecks of international travelers who choose coach over business class, and a 33 percent rebate to employees who forgo direct flights. Those initiatives have saved as much as $4,000 per ticket, netting the company $2 million over the last two years, and giving employees plenty of cash to spend during those perhaps not-so-interminable layovers.

New Tools of the Trade
Companies can cut travel costs and manage expenses with a range of products and serivces.
Sources: Bear, Stearns & Co. estimates; company reports; Factset Research Systems Inc.

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