Executive Travel : Travel Audits Help Companies Cut Costs

It’s happened to every business traveler at one time or another. You’re on a flight to Chicago you paid $500 for, and the person sitting next to you paid only $200 for his seat.

But increasingly the corporate travel department of the big-spending traveler may get some detailed questions about that higher-priced ticket as cost-cutting efforts continue to reach through all segments of U.S. companies.

That’s where firms like Portland, Ore.-based Topaz Enterprises Inc. come in. Topaz, along with a handful of other companies across the country, specializes in auditing travel agencies to make sure they are delivering the best possible prices to corporations, given their travel policies.

It’s a tougher job than it seems.

The company grew out of the turmoil of deregulation in 1978, Topaz President G. Elliott Troutman said.

At the time, everyone was confused about what was going to happen, and the question Topaz founder Jeanie Thompson-Smith heard repeatedly was: “How can I find out whether my agency is doing the job?”

Topaz was one of the first companies to offer agency audits for corporations concerned about their travel expenses. Although today it competes with companies such as American Express, Topaz still holds the largest slice of the agency auditing market.

More recently, agencies themselves have become clients.

Topaz gathers electronic data from agencies within a few minutes of a ticket transaction so it can compare the ticket purchased to all the other tickets available in the same time frame.

Timing is critical, Troutman says. “Fares are so dynamic. There are one quarter of a million fares changing on a given day.”

Given rapid fare changes, it’s easy to see why companies might fear they aren’t always getting the lowest ticket price, he said.

“Without trying to be a Big Brother, we’re kind of their back-up system,” Troutman said. “It’s not punitive, but it helps companies insure their procedures are being followed.”

In the first quarter of 1995, for example, Topaz found that the most common error in international ticketing among its clients was failing to split the ticket to take advantage of favorable currency exchange rates. Instead of booking one round-trip ticket, agents can book two one-way tickets, one for each direction of travel. Sometimes the one-way ticket for the return may be issued in the currency of the country of origin and the agency may be able to take advantage of ticket prices that haven’t been changed to account for changing currency rates.

The average cost to travelers--or their employers--was $262 per error.

The most expensive international error made by travel agents during the quarter was not selecting the least expensive route, an average of $1,804 per error.

This kind of data is useful to companies. “All senior management has the question on their minds: ‘How do you know your agencies are doing the job?’ ” said Earl Foster, corporate travel operations manager for Hewlett-Packard in Palo Alto.

Foster, who manages a $600-million travel budget, said audits and the ability to compare his company’s travel spending patterns with other companies in similar circumstances have helped shape the corporation’s policies.

“We use that information very, very wisely,” he said. For example, Hewlett-Packard used to allow a $100 leeway around the purchase of the lowest logical fare, he said. But with a corporate travel budget of Hewlett-Packard’s magnitude, that strategy no longer made economic sense. “We’ve brought it back to dollar one,” he said. Now the company goes with the lowest logical fare, period.

Travel agencies themselves are interested in such information.

Many agencies use the auditing services so they can monitor their own procedures and offer assurances to their clients that they will always get the lowest fares.

It’s a good marketing tool, Troutman said. “If you try hard enough and long enough, you can always beat a fare,” he said. By being audited, agencies can prove their performance.

But auditing travel agencies is only half the equation when it comes to lowering corporate travel costs. The other half is the corporate travel policy itself.

Sometimes the difference between the fares paid by the proverbial two travelers sitting next to each other simply reflects the ability of one to schedule the trip early enough to take advantage of advance discounts. Also, some companies encourage or require employees to stay over Saturday night by paying for a weekend at a hotel in the destination city, while other firms do not let employees choose the airline or flight times.

In addition to auditing travel agencies, Topaz also provides benchmarks so companies can see how their travel expenditures stack up against their competitors.

And taking comparisons one step further, Topaz will help companies compare their own practices against various scenarios.

For example, requiring the traveler to provide a four-hour window for departure time instead of two hours can save a lot of money.

But travel tends to be a very sensitive subject among corporate policy-makers, according to Troutman. “It gets to be a cultural / political thing.” You don’t want to make changes that inconvenience people without a major payoff.

“The biggest thing we see happening is the move toward use of non-refundable tickets over the last 12 months,” he said. (Non-refundable tickets typically have Saturday night requirements or other restrictions, but offer a deep discount.

“A year ago, the percentage of tickets purchased in the non-refundable class was in the mid- to high-30s,” he said. “Now it’s as high as 55%.”

Other common changes being instituted in corporate travel policies are to encourage use of alternative airports and to use connections as long as they don’t cause a delay of more than about an hour.

But companies need to think about policy changes, Troutman said. “There can be a tremendous amount of traveler backlash.”

If travel policies change, employees will cooperate better if senior management follows the rules. “If the president or the CEO is sitting in the back of the plane, you can be sure they will be too.”