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Tips and Tricks for Negotiating Air, Hotel and All Things Travel

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Title: Tips and Tricks for Negotiating Air, Hotel and All Things Travel


1
Tips and Tricks for Negotiating Air, Hotel and
All Things Travel
  • University of Notre Dame
  • Nancy Fulcher Assistant Director Strategic
    Sourcing
  • Kara Finch Procurement Specialist Travel

2
Introductions
  • Kara Finch, Procurement Specialist Travel
  • Kara Finch, CPSM, joined Procurement Services in
    November 2007 as a Procurement Specialist for
    Science and Engineering. In early 2010 she
    shifted to managing the travel commodity, which
    up to then had not been a centrally managed area
    of spend. She is a core member of the travelND
    team, which launched the Universitys travel
    program, including the implementation of an
    online travel booking and expense management
    tool. Since that time she has issued the
    Universitys bids for their football and
    basketball air charter services and  has
    negotiated contracts for rental car services, the
    Universitys preferred airline carrier, various
    hotels, and charter buses. Kara also manages the
    Universitys relationship Anthony Travel
    International. Kara received a B.A. from Purdue
    University. She later received a J.D. from Thomas
    M. Cooley Law School in Lansing, Michigan and is
    a licensed attorney in Indiana. Kara is married
    and has three small children.  She resides in
    Elkhart, Indiana.
  • Nancy Fulcher, Manager of Strategic Sourcing
  • Nancy Fulcher, C.P.M., joined Procurement
    Services in August of 1990. She was hired to help
    the department with the backlog of paperwork.
    Then, as a Procurement Specialist she held
    responsibility for numerous commodities.
    Currently, as the Manager of Strategic Sourcing,
    she manages the Sourcing Team and has
    responsibility for procurement transactions,
    sourcing strategy, commodity and supplier
    management, and cost management initiatives
    within Procurement Services. Additionally, Nancy
    is a core member of the travelND team, a travel
    and expense management program. Nancy holds an
    MBA from Bethel College and a BA from the
    University of San Francisco. She has received the
    designation of Certified Purchasing Manager
    (C.P.M.) from the Institute for Supply
    Management.  Nancy serves on the board of Great
    Lakes Region NAEP.  She has 5 grown children and
    almost 10 grandchildren.

3
Agenda
  • Why Procurement Services Elected To Manage Travel
  • What We Did To Manage Travel
  • How We Are Going to Meet the Strategic Sourcing
    Goals
  • Lessons Learned

4
Why Did We Elect To Manage Travel?Answer
Untapped Area of Spend
5
Travel Expense Assessment Findings (2008)
  • 28 - 30M annual spend
  • 25,000 expense reports filed annually
  • Opportunities existed to
  • Provide guidance and assistance to travelers
  • Increase process efficiencies
  • Decrease environmental impact
  • Reduce departmental and grant-related travel
    costs
  • Travel is a complex spend category very personal
    in nature (no surprise)

6
What We Did to Manage Travel
7
  • Comprehensive travel program
  • Managed by Procurement Services
  • Considerations
  • Travel Management Company
  • Booking
  • Expense Reports
  • Travel Card
  • Travel Vendors

8
Quantify the Opportunity
Results of a 2008 Strategic Sourcing Assessment
with Huron.
9
Know Your Campus - Savings Drivers
Procurement Dependent
Behavior Dependent
  • Travel Card Rebate
  • Aggregate card spend (with Chase) ? ?
  • Negotiate best financial terms ? ?
  • Increase utilization of travel card ? ?
  • Travel Supplier Contract Discounts
  • Establish agreements with travel suppliers ? ?
  • Negotiate best financial terms ? ?
  • Drive spend to contracted suppliers ? ?
  • Behavior Changes/Demand Management
  • Reduce last-minute bookings ? ?
  • Choose lower cost travel options ? ?
  • Avoid 3rd party transaction fees ? ?

Driven/influenced by travelND/ATI
10
Meeting the Strategic Sourcing Goals
11
Learn the Industry
  • Resources
  • Global Business Travel Association (GBTA)
  • Society for Collegiate Travel and Expense
    Management (SCTEM)
  • Travel Publications and Blogs Scott Gillespie,
    Travel Procurement Magazine
  • Partner with your Travel Management Company (TMC)
  • Meet with your travel reps

12
Airline Discounts
13
Air Lingo
  • Fare basis - KLUT Determines how many
    restrictions apply
  • Class of Service Coach, Business, First
  • FMS Fair Market Share
  • LLA Lowest Logical Airfare
  • GDS Global Distribution System contains
    information on availability, pricing and related
    service. TMC provide GDS

14
Fare Basis/Class of Service
  • F
  • A
  • J
  • D
  • I
  • Y
  • B
  • M
  • H
  • K
  • L
  • U
  • T

Highest Price
Few Restrictions Deeper Discounts
First
Business
Economy
Less Discounted Many Restrictions
Lowest Price
15
Fare Market Share
  • Neutral share probability a traveler will use
    an airline in a given market
  • Ignores price and loyalty programs
  • Based on each airlines schedule in each city
    pair
  • Airlines use a service by PRISM to get data
  • GDS data
  • Direct Connect data not included

16
What Makes an Airline Soar?
  • Movement and profit margin drive discounts
  • FMS what can an airline reasonably expect to
    gain
  • Higher Ed. only has a chance of changing FMS
    significantly if they mandate specific airline
  • ND increased Deltas market share by 10 points
    78K savings with contract
  • Dont overpromise (must be reasonable and
    possible)
  • United has current market share of 25 and Delta
    has 40 I cant reasonably or realistically
    promise each of them 70

17
Business Case Airfare
  • Analysis UND Spend By Carrier

18
The Truth About Ancillary Fees
  • U.S. airlines collected over 5 billion from
    baggage and change/cancellation fees alone in
    2010
  • Airlines do not capture ancillary fees when they
    report contract spend - it is your responsibility
  • After nearly a decade of unprofitable flying,
    airlines have finally found their money maker
  • Airlines continue to increase checked baggage
    fees
  • Hint they are not going away
  • Maybe they arent so bad after all

19
Athletic Air Charters
  • 2010 and 2011 Football Season charter bids issued
    through Procurement Services
  • From 2009 to 2011 the cost/seat/mile decreased
    18 while the cost of fuel increased 86
  • 2011/2012 Basketball Season charter bids issued
    through Procurement Services
  • Charter services add over 1M to overall air
    spend

20
Get the (Bed) Bugs Out of Hotel Negotiations
21
Learn the Hotel Lingo
  • High-stay 25 room nights/year (or is
    preferred)
  • Low-stay 1-24 room nights/year, inside an area
    (cluster)
  • Unused no room nights but inside a cluster
  • Orphan not preferred, less than 25 nights /
    year, not inside a cluster
  • BAR - Best Available Rate
  • LRA Last Room Availability
  • NLRA Non Last Room Availability
  • Flat Pricing a negotiated flat/static rate
  • Dynamic Pricing a discount off fluctuating BAR
  • Squatter rates hotel that knows your rate
    access code and loads a rate without a contract

22
Past, Present and Future
  • Pre-travelND
  • 5 star and economy based on budgets and who
  • Relied on hotels for data
  • Different groups on campus received different
    rates at same hotels
  • No formal price agreements
  • Early travelND
  • Ask and you shall receive discounts , including
    many local hotels
  • Increased data through expense tool and hotels
  • Rates at preferred London, Dublin based on campus
    communications
  • Current travelND
  • Local hotel program
  • Chicago hotel program
  • London hotel program
  • Future travelND
  • Hotel programs in other high stay locations
  • Chain wide discounts

23
Hotel Demand in 2012
  • Q4 09/Q1 10 demand was low/prices were low
  • Revenue/avail. room rate in NYC was down 25
  • 2011 demand increased / prices increased to make
    up for the prior year losses
  • 2012 prices are already increasing
  • What does this mean? Negotiate now vs. later

24
Hotel Sourcing Cycle
  • Data Collection
  • Find where you are staying city and brand
  • Sourcing strategy
  • Properties chains, brands, properties
  • Rates fixed or dynamic, LRA or NLRA
  • Consequences Non-compliance of hotels, payments,
    and booking channels
  • Communications Selling, not telling (Push vs.
    Pull)
  • RFP / RFB
  • Implement and Manage

25
Clustering Its Not Just for Nuts
  • What is Clustering?
  • Know your high stay locations
  • Small geographic area (1-3 miles)
  • Include non-preferred and unused
  • Eliminate artificial boundaries zip code, state
    lines, city lines
  • Arlington vs. Alexandria Hoboken vs. Manhattan
  • Classify your clusters
  • Map and label (High-Stay, Low-Stay, Unused,
    Orphan)

26
Why Cluster?
  • Tells your story
  • Where are you staying?
  • Where should you be staying?
  • Do you have enough coverage?
  • Could you tier down?
  • Manage compliance, incl. squatter rates
  • What should your overall strategy be?
  • Tier down
  • Roll up clusters by chain/brand
  • LRA vs. NLRA
  • Flat pricing vs. dynamic pricing

27
How to Cluster
L
  • Step one Plot the high-stay/preferred

H
U
H
  • Step two Plot the low-stay hotels

H
L
L
U
  • Step three Look for the clusters

U
  • Step four Bring the unused hotels into the
    cluster

L
H
  • Step five Identify and eliminate the orphan
    hotels

H
28
Hidden Benefits in Ground Transportation
29
Theres More to a Contract than Price
  • Car Rental Contracts
  • Discounted rates (web fares may be lower)
  • Added value in negotiated contracts
  • Younger driver concessions
  • Discounted GPS
  • Reduced city surcharges
  • Status matching
  • Discounted one-way rates

30
The Wheels on the Bus
  • Before managed program
  • 1.2MM spend on local charters
  • 2 main carriers with no discounts offered
  • After managed program
  • RFB kept 2 companies
  • 10-15 off standard rates
  • Discounted rates for airport service
  • Communicate to campus

31
Lessons Learned
32
Lessons Learned - Keys to Success
  • Executive level support
  • Traveler/user satisfaction
  • Change Management Support
  • Communication
  • Vendor management
  • Mandate where possible

33
Notre Dames Approach
  • Centrally funded ATI to drive usage to Agency
    (8/10)
  • T-card charges flow into ER
  • Allow choice
  • Assumed ER usage will drive travel usage
  • Availability of travel data for expense reports
  • Agency fee no longer applied to individual
    budgets
  • Contract pricing available
  • Choice and convenience in booking
  • Phased roll out of Expense and Travel beginning
    10/2010
  • Mandated Use of Expense 7/1/2011

34
Lessons Learned - Travel Really is Personal
  • Behavior is hard to change unless mandated
  • Dont make life too easy, then ask them to change
  • Eliminated Agency Service fee which increased
    usage of Agency
  • Our intention was to gain data before we
    implemented on-line tool
  • Then we asked them to do their own bookings
  • Look what happened!

35
Travel Booking Vision
36
Reality
37
Next Steps
  • Reporting
  • Vendor spend
  • Meeting needs at budget unit levels
  • Tracking the Savings
  • Card Rebates
  • Bookings
  • Behavior Change/Demand Management
  • Increase on line bookings vs. agency bookings
  • Savings Avoided Costs
  • Report Savings to Executive Leadership
  • Use New Data to Negotiate Deeper Discounts with
    Travel Suppliers
  • Strategize to increase use of booking tool
    Mandate?
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