CWT Solutions Group - Carlson Wagonlit Travel

carlsonwagonlit

CWT Solutions Group - Carlson Wagonlit Travel

Looking to leverage transient

and M&E? Start with hotels

| 4

Innovation propelling

CWT Solutions Group forward

| 6

New intelligence challenges usual

thinking on airline booking classes

| 8

APAC – Understanding India:

travel management in a

booming country

| 10

EMEA – Hotel city caps help

buyers cover their bases

| 12

NORAM – Guest interview:

Håkan Ericsson, president,

CWT Americas

| 14

LATAM – Brazil a main focus

for LATAM travel programs

| 16

Insights into Eff ective Travel Management

Q2 2012


Co-Editors in Chief

Christophe Renard

Nick Vournakis

Email

cwtvision@carlsonwagonlit.com

Web

www.carlsonwagonlit.com

CWT contributors:

Hélène Buchfi nck

André Carvalhal

Philippe Chausson

Philippe Chonion

Cristian Domnisoru

Michael Durand

Brent Eisenach

Håkan Ericsson

Selina Grocott

Fernanda Kodama

Vincent Lebunetel

Rachel Lunderborg

Gaspard Mahieu

Suresh Makhija

Artwork/Photos

Photos: Cover © Getty Images, pages 4, 12 & 16 © istockphoto and page 10 Dreamstime.

All other artwork by CWT

CWT Vision is published quarterly by the CWT Solutions Group, the CWT Travel Management Institute,

and CWT Corporate Marketing & Business Intelligence teams.

31 rue du Colonel Avia

75904 Paris Cedex 15

France

Please consider the environment before you print this publication in part or in full.

All monetary references in this publication denote U.S. dollars unless otherwise noted.

Copyright © 2012 CWT

Brendan Mc Mahon

Mike Orchard

Jair Suárez

Luiz Valente

Joel Wartgow

Kari Wendel

Shauna Whitehead


New ways of thinking

Christophe Renard

Nick Vournakis

| Q2 2012

Welcome to the Q2 issue of CWT Vision! Another year is nearly halfway complete, and thankfully,

2012 has been relatively quiet compared to 2011’s steady stream of natural disasters and political

uprisings. As you’ll read in the following pages, this has freed up CWT and its clients to focus on

exciting initiatives such as continued expansion into booming markets, innovative new products and

services, and more.

We highlight some of these eff orts for you in our global articles this quarter, beginning with a look

at some groundbreaking progress CWT Meetings & Events and a global client have achieved in

combining the organization’s transient travel and group meetings volume under one hotel program.

With forecasted annual savings of nearly $3 million from a program that is already highly sophisticated

and well managed, this eff ort proves that undiscovered opportunities still exist for almost any program.

CWT Solutions Group leaders from around the world also share their perspectives on the many

exciting eff orts underway within CWT’s consulting practice as it seeks to “bring innovation into the

equation” for clients by equipping travel buyers with more insightful information than ever before. One

of those developments is further highlighted in our article on airline booking classes and how buyers

can increase the probability of securing tickets in negotiated classes.

Taking a deeper dive into each region of the world, India and Brazil are highlighted in the Asia

Pacifi c and Latin America Regional Spotlights, with a focus on the many nuances of traveling to and

doing business in each of these destinations as more and more travelers visit them. The continued

importance of hotel city caps throughout Europe is also addressed, given a limited construction

pipeline and strong demand will keep occupancies high in key cities there for the foreseeable future.

Finally, our North American update this quarter comes from a particularly well qualifi ed source –

Håkan Ericsson, president of CWT’s newly combined Americas region. Håkan shares his thoughts on

the biggest challenges and opportunities for buyers in that part of the world, and the strategy behind

aligning CWT’s business in a new way to better serve clients.

We hope this issue of CWT Vision will inspire you with its focus on new ways of thinking about travel

management topics, both old and new. We continue to invite you to play a role in determining what

you read in these pages in the future, by sharing your feedback and ideas.

Enjoy the upcoming summer months, and we’ll look forward to being back in touch via the next issue

of CWT Vision in September!

Christophe Renard, Co-Editor in Chief Nick Vournakis, Co-Editor in Chief

Vice President, Corporate Marketing Vice President, CWT Solutions Group

& Business Intelligence

3


4

Copyright © 2012 CWT

GLOBAL PERSPECTIVE

Looking to leverage transient

and M&E? Start with hotels

The goal should be to look at those properties in the program that can meet the

needs of both types of travel, and focus there. Another opportunity is to take a

chain-wide approach, negotiating for both transient and M&E volume with one

or several large national or global hotel chains. In this case, it is likely that within

the chain’s portfolio are properties that are ideal for meetings only and transient

only, as well as some properties that could work for both, which enables buyers

to leverage more of their total volume.

As organizations have embarked on combining transient and M&E hotel volume,

their expectations for working with suppliers have changed, and hotels have had

to respond accordingly. Buyers increasingly expect to work with a single hotel

As more and more organizations have brought their meetings and events (M&E)

under tighter management in the past 5-10 years, many have also begun seeking

opportunities to leverage combined M&E and transient travel volume in negotiations

with suppliers when applicable. The Global Business Travel Association (GBTA) has

helped to further this practice by adding a groups and meetings section to its widelyused

hotel request for proposals (RFP) template about six years ago, in response to

increasing desire by travel buyers to combine this spend in negotiations when possible.

CWT Meetings & Events and its clients have had particular success accomplishing this

with hotels, which can be a natural starting point given the signifi cant portion of

spend that hotel represents for both transient travel and M&E.

The key for travel buyers to understand when combining these two areas in negotiations

is that not all volume can be leveraged with a common set of suppliers. The number

of properties that could meet the needs of both types of travel will vary based on the

organization’s existing preferred suppliers, the types of properties it prefers to use for

transient travel and M&E, etc., but there will never be 100% overlap. For instance,

many hotels are appropriate for transient travel but cannot accommodate meetings

because they lack meetings space, food and beverage capability, etc.

Transient

hotels

M&E

hotels

Hotels appropriate for both

transient and M&E

contact, rather than separate contacts for transient and M&E, prompting the hotels most serious about pursuing this business

to adjust how they staff . Contracting is another area that has evolved to support the combination of both types of travel:

organizations are now negotiating a shared set of terms and conditions for the upcoming year to cover all of the volume. In

some cases, M&E pricing will then be set for the year, just as it is for transient travel. This represents a signifi cant shift for hotels,

because in the past every meeting was a separate sale with specifi c pricing and terms based on location, seasonality, and more.

This too impacts how they staff , as well as how they project revenue for the year.


| Q2 2012

CWT Meetings & Events off ers the following recommendations to

organizations interested in pursuing some combination of hotel spend

across transient travel and M&E:

Establish a meetings and events policy. The success of

combining volumes is dependent on the organization’s ability to

drive travelers to preferred properties. This cannot be accomplished

without a meetings policy, which few organizations have in place, in

addition to the more common transient travel policy.

Gather data. Collect and review as much data as possible on the

organization’s current hotel volume for both transient and M&E.

Look for commonalities and patterns in terms of chains or individual

properties used, locations most frequently visited, etc.

� Capture small meetings. Be vigilant about identifying hotel

costs that appear larger than a transient trip but smaller than a

large meeting – these may represent small meetings, which are

diffi cult to track but represent the majority of M&E spend for many

organizations. Small meetings also off er the best opportunity for

combined transient and M&E volume because, based on the

group size, they are often fl exible enough to be held at more

traditional transient hotels when needed, or at smaller facilities

within larger M&E-focused properties.

Dedicate resources. While there are substantial savings and

other benefi ts to be gained by combining transient and M&E hotel

volume, it defi nitely requires an upfront investment by organizations.

Be sure to dedicate suffi cient internal resources, the time of external

consultants like CWT Meetings & Events, or both, to give this eff ort

the attention it deserves for maximum impact.

Sell the business to suppliers. As discussed above, this approach

can require signifi cant eff ort and adaptability on the part of hoteliers

in terms of staffi ng, contracting, and more. Buyers must be able to

articulate the benefi t to suppliers of partnering with them on this.

Examples include guaranteed M&E business for the hotelier for the

entire year, the ability for hotel salespeople to focus elsewhere once

the deal is done rather than having to sell every meeting, increased

penetration throughout the organization, etc.

Be a true partner. Buyers who take a partnership approach

with their suppliers will likely experience greater success overall,

including when combining M&E and transient hotel spend. Meet

with suppliers outside the typical negotiation environment to outline

the organization’s strategy, hear about their goals and objectives,

and discuss how each party can support the other. Ask open-ended

questions like, “What makes it hard to do business with me?” and

“How can I become a more valuable partner to you?” and expect

to receive those types of questions in return. These dynamics will

impact the partnership whether addressed directly or not, so it is

best to discuss them. v

CWT Meetings & Events

recently worked with a global

pharmaceutical client to

achieve signifi cant success

implementing a combined

hotel program for transient

travel and M&E. Following

are some quick facts on the

achievement:

2

number of chain-wide partnerships

negotiated to support the program

(consolidated from many supplier

partners in the past)

18

number of countries with

contracted properties to cover

transient and M&E

68

number of cities with

contracted properties to cover

transient and M&E

1,050

number of RFPs issued to

source combined program

$2.9M

amount of forecasted savings this

new approach will deliver in its

fi rst year of operation alone

5


6

Innovation propelling

CWT Solutions Group forward

Earlier this year the CWT Solutions Group launched its own website, updated its branding, and off ered a sneak peak at a number

of innovative new products and services in the works that move the group far beyond its historical foundation of airline and hotel

consulting. CWT Vision recently caught up with the CWT Solutions Group’s three regional leaders in their respective parts of the

world – Mike Orchard in Asia Pacifi c; Vincent Lebunetel in Europe, the Middle East, and Africa; and Joel Wartgow in the Americas

– to get their take on all of the activity currently underway.

CWT Vision: Vincent, of all the innovations the CWT Solutions Group currently has in development, which would

you say is the most forward thinking?

I believe it is the travel stress index, because it seeks to quantify the cost to the organization of the stress that employees

can incur from traveling, and use that information to help buyers make better travel policy decisions. Without this

information, many organizations unknowingly follow the old adage of “penny wise and pound foolish.” For example,

a company might adopt a travel policy that saves $1 million a year by pushing more travelers into economy class, but

what they don’t realize is that the impact of that decision is actually costing $3 million a year in lost productivity or other

traveler stress that reveals itself in sick days, etc. The travel stress index will consider all of these factors so buyers can

make more informed decisions.

This type of examination allows other areas of the organization to get involved beyond travel, such as human resources.

It’s important to note that no matter who you are and how much you travel, there is some type of stress associated, and

much of it is based on the circumstances of each trip. As a frequent traveler, when I travel to London from Paris, I have

very low stress because it’s a familiar route and I can take the train, which allows me to avoid airport security, work en

route, and arrive in the city center when I get there, etc. This is very diff erent from a trip I took from Paris to Los Angeles

a few years ago, where I found myself fl ying in economy class and discovered upon arrival that my luggage was lost

and I had no appropriate clothing for a big presentation I had the next day. These experiences are distinctly diff erent,

and their impact on my personal stress level was also quite diff erent.

CWT Vision: Mike, which of the CWT Solutions Group’s current initiatives excites you most?

In Asia Pacifi c, one of the most exciting things happening right now is the expansion of our team throughout the region.

Our goal is to triple the size of our Asia Pacifi c presence in the next three years to ensure we have people on the ground

in the countries necessary to best serve our clients – places like India, China, Japan, and others.

Copyright © 2012 CWT

Joel Wartgow

Americas

GLOBAL PERSPECTIVE

Vincent Lebunetel

Europe, Middle East, Africa

Mike Orchard

Asia Pacifi c


| Q2 2012

Anyone who has done business in Asia Pacifi c will understand that Singapore and Sydney are very diff erent from Tokyo

and Dubai. We need people with intimate knowledge of those types of key markets, including the culture, business

practices, language, etc., to help our clients best execute their travel programs within this region. We also fi nd that

suppliers respond better to working with local contacts when we’re negotiating on behalf of our clients.

CWT Vision: Joel, you graced these pages in our last issue, talking about how companies should consider

managing different employees differently, but we know you’re also passionate about another traveler-focused

CWT Solutions Group innovation. Tell us more.

Yes, in general I’m most passionate about how companies can manage travel spend at the traveler level. It’s about giving

the right traveler the right type of experience to accomplish the most they can from their trip, while of course being

cognizant of the amount of money spent to do it. As I’ve discussed in the past, that may mean spending more on some

travelers, such as frequent travelers, while asking other travelers to spend less. There are signifi cant gains to be made by

better managing traveler behavior, but unfortunately they can be very diffi cult to achieve based on the non-mandated

cultures of many companies. Even so, almost any company can do more to address this, driving savings in the process.

One exciting way the CWT Solutions Group is planning to help our clients tackle this, which I didn’t mention last time, is

through our traveler scorecard, which will track travel spend and policy compliance at the individual employee level. This

will help travelers better understand the overall cost impact of all the big and little decisions they make while traveling,

and not just during a single trip, but aggregate over all the trips they take. From there, companies can identify travelers

with the most room for improved compliance and educate them directly, allowing travelers to better understand where

they need to adjust their decision making.

CWT Vision: Vincent, the discussion up until now has focused on the traveler-specifi c aspects of managing

programs, but we know you’re especially passionate about the supplier side. Can you explain this a little more?

Absolutely – I believe the CWT Solutions Group exists to empower travel buyers, and one key way is by helping them

have more informed discussions with their preferred suppliers. Products we’ve developed, from our booking class

availability model to the hotel missed savings tool, help our clients negotiate more eff ectively and better manage their

programs on an ongoing basis. Take the hotel missed savings tool, for instance. One of the coolest features is that it not

only leverages post-trip data but also pre-trip data, which means the traveler hasn’t traveled yet and there is still time to

infl uence their behavior and maybe even bring the price down if the company-negotiated rate has not been secured.

It allows the client to seek corrective action, whether it is with the traveler or the supplier. In this way, clients are able to

become much more proactive in managing their programs, rather than having to be so reactive.

CWT Vision: Mike, with everything the CWT Solutions Group has going on, can you tie it all together in some way?

As you’ve heard here, the innovations we’re working on either relate to how our clients can better manage their supplier

relationships or their travelers’ behavior. On the traveler side, many of our projects link back to the challenge of travel

policies and how travel buyers can enforce policy compliance at a time when it is getting more diffi cult to do thanks to

the access travelers have to information via technology. A lot of what the CWT Solutions Group is doing is helping travel

managers reconsider how they manage the employee piece, and how they can infl uence traveler behavior without

having to rely on the traditional “stick” method of punitive reinforcement.

All that said, regardless of whether the focus is on travelers or suppliers, the CWT Solutions Group’s goal is to deliver

tools and services that help us be there for clients at every step of the process, ensuring they have continual access

to insightful information that helps them adjust their program along the way. The tagline we’ve chosen for ourselves

is “bringing innovation into the equation” because that’s what we’re here to do on behalf of our clients at all times. v

Learn more about our efforts by visiting our new home on

the web: www.cwt-solutions-group.com

7


8

Copyright © 2012 CWT

GLOBAL PERSPECTIVE

New intelligence challenges usual

thinking on airline booking classes

Airline contracting has increased in complexity in recent years, as carriers have grown more sophisticated at managing inventories

and yield, which can reduce travel buyers’ visibility into where to focus their airline negotiation eff orts. Travel buyers are also under

increasing pressure to drive cost savings in the face of rising supplier prices, much of which can be accomplished by being able to

eff ectively infl uence traveler behavior to support the organization’s travel program goals.

The CWT Solutions Group has responded to this increasing need with an off ering that helps buyers better understand the value

of their airline contracts and how travelers can be infl uenced to purchase tickets at optimal points in time. This enables buyers

to negotiate with airlines in a new way, based on a better understanding of the airlines’ inventory management practices and

relying less on their organization’s own historical data and more on real-time, external statistics to guide negotiations. Further,

buyers can use this information to better direct traveler behavior on when to book an airline ticket to increase the probability of

securing the negotiated class of service and the best possible price.

To help buyers begin to consider the potential value this type of negotiating approach can have for their organizations, the CWT

Solutions Group off ers the below insights.

Booking classes explained

Each airline takes a slightly diff erent approach to segmenting the seats on its planes into a variety of categories, called booking

classes. While there are typically 2-3 classes of service on a plane, such as business and economy, each of these service classes

is further broken down into a variety of booking classes. Each booking class category is priced diff erently and carries a diff erent

level of fl exibility or restriction on the associated terms. Each category is also adjusted based on demand, which enables the

airline to maximize the yield it gets from each seat (see below chart) by adjusting the price within classes of service as well.

Airlines manage this inventory by weighing how many days there are until departure against the current available inventory

within each class. Their objective is obviously to drive as much volume as possible to the highest priced seats in each class of

service and to minimize the number of seats sold in the discounted classes. When it comes to corporate contracting, airlines

have also tightened the discounts they are willing to off er organizations in the most fl exible booking classes.

Service Classes IATA Booking Classes Common airline booking classes

First

Business

Economy

First class premium � P

First class � F

First class discounted � A

Business class premium � J

Business class � C

Business class discounted � D, I, Z

Economy class premium � Y

Ecomony class discounted �

B, M, H, K, L, N, Q, T, V, S

P

F A

J

Y

C D

B M H, K

Q, L, T, V...

Flexibility

Restrictions

Flexibility

Restrictions

Flexibility

Restrictions


When travel buyers sit down to negotiate airline contracts with carriers, they have historically been forced to rely on data from

their own organization’s past trips to determine the booking classes they have used the most, and negotiate accordingly. For

example, if 60% of their historical volume has fallen into booking class B, that is likely where they will focus negotiations for the

future. However, as stated above, past booking behavior by the organization and historic class availability by the airline are not

reliable indicators of what the program may need, or what will be available, in the future. By working with the CWT Solutions

Group, buyers can improve the eff ectiveness of their negotiations by better understanding how airlines manage booking

classes, which has evolved as more sophisticated and automated yield management tools have become available. While the

assumption has long been that an airline closes out a booking class once it has sold the number of seats it wishes to sell in

that category, CWT data reveals that is actually not the case. As seen in the below chart, booking class availability fl uctuates over

time as the airline makes adjustments based on timing and demand, which means that if class B is not available today, it may

be available again in another few days or a week – it has not been completely closed out as many once thought.

Booking class probablity trending for CWT clients

Probability

of securing a

ticket in each

booking class

| Q2 2012

80%

70%

60%

50%

40%

30%

20%

10%

0%

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61

Days prior to departure

Source: CWT client data for an undisclosed market based on 4-year trending

J class (flexible)

C class (flexible)

D class (flexible)

I class (restricted)

Z class (restricted)

This type of information provides travel buyers a level of insight into their airline negotiations that they have never had before, but

given that airlines manage booking class inventories at the individual fl ight level, it is also complex and potentially overwhelming.

For this reason, the CWT Solutions Group recommends its clients focus this eff ort on their most frequently traveled routes to

begin. Additionally, this information helps buyers and airlines set more realistic goals for the organization’s performance against

the contract, and can help both parties understand the reasons behind lower-than-expected performance when it occurs.

Traveler behavior: new thinking on advance booking

Beyond sourcing, the other signifi cant opportunity this analysis opens up to clients is around traveler behavior. Once buyers

understand that booking classes aren’t closed out and that they typically cycle between being available and not being available

leading up to a fl ight, there is opportunity to redirect travelers’ booking behaviors accordingly.

Contrary to the conventional wisdom that the further in advance a ticket is purchased the cheaper it is, in this scenario it may

make sense for travelers to wait to book their tickets if their company’s negotiated booking class is not available when they

fi rst attempt to purchase the ticket, given the understanding that the booking class will open up again one or more times prior

to departure. To eff ectively guide traveler behavior, this requires very specifi c instruction about the best day and time to book

a ticket, which may be diffi cult for a travel buyer to manage. However, there may be potential to mitigate the level of eff ort

required by the travel buyer by programming the online booking tool (OBT) to deliver appropriate messaging at the point of

sale, and/or using other automated travel messaging tools to educate travelers on this topic.

Booking classes and their availability remain a complex and dynamic element of buyer-airline negotiations. By better understanding

how the airlines approach this, and potentially even directing traveler behavior in a new way, travel buyers can ensure that the

agreements they reach with their preferred carriers will generate the best possible returns for their organizations. v

9


10 REGIONAL SPOTLIGHT: Asia Pacifi c

Understanding India: travel

management in a booming country

India is among the Asia Pacifi c region’s

fastest growing countries, particularly as it

relates to travel. Aggressive expansion into

India by global companies has resulted

in an infl ux of travelers, with a variety of

global airlines and hotels eager to set up

operations in the country to support the

demand and capitalize on the growth.

Below is a brief glimpse into India’s

economic and travel landscapes, provided

by CWT’s team of travel management

professionals based in India.

Similarities and diff erences with

Asia Pacifi c

Like many other countries within the Asia

Pacifi c region, India has been experiencing

substantial economic growth in the past

decade or so, particularly as international

organizations and brands establish a

presence there. India benefi ts from a stable business environment, and a large consumer base to purchase the goods and

services available in the country. The population is large for a country of its geographic size, and many residents speak English,

which further enables the expansion of foreign organizations into the area.

India is not immune to the eff ects of economic uncertainty in other parts of the world given its global connections, as shown by

the recent depreciation of its currency, the Rupee. Even so, the country overall continues to experience strong growth of 7-11%

most of the past 10 years, has high employment rates, and continues to enjoy momentum in terms of foreign investment.

While similarities exist between India and the rest of the Asia Pacifi c region, the country also has a distinct culture that diff erentiates

it from neighboring nations. India is home to 18 major languages – though again, English is understood by many – and to

diff ering cultures and even regional weather patterns. In major cities like Delhi and Mumbai, the Western cultural infl uence is

strong, which foreign business travelers will quickly recognize when visiting. Travel buyers with responsibility in India benefi t

most by visiting the country themselves and experiencing the cultural variances from place to place fi rsthand.

Copyright © 2012 CWT


REGIONAL SPOTLIGHT: Asia Pacifi c

Travel suppliers abound

India’s travel landscape is populated by many travel suppliers. Six domestic airlines call India home, including legacy airlines Air

India, Jet Airways and Kingfi sher Airlines, and low-cost carriers IndiGo Airlines, SpiceJet Airlines, and GoAir. Domestic airline prices

have recently increased signifi cantly, based on domestic traffi c growth of more than 15% in the past 12 months. This growth

was expected to be even higher but was impacted by declining capacity resulting from Kingfi sher’s schedule reductions in the

midst of fi nancial diffi culty. This situation has also increased load factors on the country’s other carriers. Domestic passenger

traffi c for the next 12 months will increase by 8-10%. Many international airlines also serve India, led by carriers based in the

nearby Middle East including Emirates, Etihad Airways, and Qatar Airways.

India leads the rest of Asia Pacifi c in new hotel inventory under construction, with 61,000 rooms currently in the pipeline,

according to Smith Travel Research. Almost every major international hotel brand is in the process of dramatically increasing its

presence in India, often with more upscale off erings than typical for their home markets based on the higher expectations for

quality in this part of the world.

In terms of ground transportation, India’s public transport is well organized in metropolitan areas, particularly in Mumbai with

its suburban train network. Even so, foreign business travelers often prefer to rent a chauff eur-driven private car to avoid the

crowds. While this ground transportation option may be too expensive to be feasible in other locations, throughout India it is

typically reasonably priced.

Managing travel in India

When many organizations send travelers to India, they may arrange for extended trips to maximize the investment made to

transport travelers there. Buyers should understand that visitors staying for an extended period of 180 or more days must go

through a local registration procedure at a government offi ce within 14 days of arrival. Hotels are typically helpful in reinforcing

this requirement.

As already mentioned, there is an expectation

of high-touch service that begins with Indian

citizens and is executed by suppliers based in

the country, which in turn can alter the ongoing

expectations of foreign visitors who have

experienced it fi rsthand. Given that upscale

off erings are widely available, travel buyers must

determine whether it is necessary to adjust

travel policies for travelers visiting the country to

ensure they can obtain the necessary services

onsite. Safety and security is another key

consideration that makes using higher quality

vendors a wise choice in many situations.

Congestion in India’s major cities is a challenge,

and infrastructure in some places has not kept

up with demand, causing transportation delays

that can complicate travelers’ plans. Buyers

should instruct travelers to plan plenty of time to

get from one destination to another, particularly

when heading into important meetings or to the

airport. This is another reason it can be worth the

extra money to pay for a hotel that is centrally

located where business will be conducted. v

CWT’s local presence throughout India

CWT Mumbai

CWT Pune

CWT Bangalore

CWT Gurgaon

CWT Hyderabad

CWT Chennai

CWT Kolkatta

11


12 REGIONAL SPOTLIGHT: Europe, the Middle East, and Africa

Hotel city caps help buyers

cover their bases

With the world’s major business destinations

experiencing near-record hotel occupancy

rates that leave many properties sold out on

peak nights of the week, it has perhaps never

been more important for hotel programs to

incorporate city caps, which represent one of

the few remaining, signifi cant opportunities

for well-managed hotel programs to drive

incremental savings. While city caps can be

benefi cial anywhere in the world, they are

particularly relevant in Europe’s top markets,

such as Paris, London, and Madrid, where

travel levels are high and new hotel supply

has been and will continue to be limited

going forward.

City caps specify the maximum per-night expense for the total cost of stay (room rate, taxes, amenities, etc.) allowed by the

organization when negotiated corporate rates are no longer available. They are typically used to direct traveler behavior in the event

that the negotiated room rate is completely sold out at a property in a high occupancy city, and the traveler must either purchase an

upgraded room, or fi nd a diff erent property to use. City caps can also be useful in cities where the organization does not have any

preferred hotel agreements, because they still keep travelers’ spending within a threshold deemed acceptable by the organization.

City caps can be defi ned in a variety of ways. One example is a cap that specifi es the maximum total cost of stay to be paid in

each of the organization’s most frequently visited cities based on variances in local economies, currencies, and more. These are

typically more useful in directing behavior and driving savings than caps that take a more global or regional approach by listing

one acceptable rate that applies to an entire region or even globally. This is especially true in Europe given the many countries

represented, each with very diff erent economies that drive very diff erent pricing.

The CWT Solutions Group helps clients determine where to set city caps by analyzing the destinations where the organization

directs the most spend and how many preferred properties the organization has at that destination. From there, average occupancy

rates in the city are considered, and a comparison is made between the company’s average room rate paid at the destination and

the maximum negotiated rate the organization has with a preferred hotel in the city. All of this contributes to the determination of

a city cap that is relevant and realistic, by allowing travelers to secure a room when needed, while also keeping costs down to the

extent possible.

Copyright © 2012 CWT


REGIONAL SPOTLIGHT: Europe, the Middle East, and Africa

Following are recommendations from the CWT Solutions Group for travel buyers seeking to establish hotel city caps in some or all

of their most frequented destinations:

Determine applicable cities. Organizations should seek to apply city caps in those cities that will drive the most value for the

overall program. This will vary greatly depending on total hotel spend – for some organizations, this may be their top 50 markets,

whereas for others it may be their top 100, 200, or more.

Understand how to apply them. An organization must have tools in place to apply city caps in order for them to be eff ective.

This includes an online booking tool that only shows properties that fall within the city cap threshold when preferred properties

are sold out. Alternately, when necessary, properties with prices above the city cap can be shown, but buyers may require

executive approval and a reason for the exception.

Communicate with travelers. Travelers must understand why city caps exist and how to use them when necessary, which

may include while they’re on the ground in a city and must make a quick decision. Educate them in advance of these situations

and help them understand how city caps protect them and the organization.

Track compliance. Like any other aspect of a managed travel program, traveler compliance to city caps must be monitored to

understand the impact they are making for the program. This also enables buyers to follow up with additional communication

to travelers as needed.

Adjust annually. Just as the hotel program is renegotiated annually, city caps must be revisited each year to remain in line with

adjustments in overall corporate rates, to take into account changes in a company’s top markets, and more.

Don’t neglect other options. While city caps are a logical next step for sophisticated hotel programs, there are plenty of other

options for less managed programs to drive savings. These include adding or reducing the number of preferred properties in a

given city to positively impact pricing, establishing last room availability (LRA) to minimize the frequency of negotiated rates being

sold out, and improving traveler compliance to the program more broadly. v

Hotel pricing model and city caps mechanism

City cap

Negotiated rate

(hotel program)

Source: CWT Solutions Group

Book public Best Available Rate

when it is lower than negotiated rate.

Check what is included in the rate

to estimate total cost of stay

(breakfast inclusion, internet

inclusion,cancellation policy,

payment conditions)

When negotiated rate is not available

book available rates only when they

are below city caps

Book negotiated rate when public

Best Available Rate is more expensive

Best available rate Global chain discount

When travelling in non-covered

destinations, book discounted

rates with partner hotel groups

Bookings

,

with

13


14 REGIONAL SPOTLIGHT: Americas – North America

Guest interview: Håkan Ericsson,

president, CWT Americas

CWT Vision: Can you provide

more insight on the rationale

for aligning CWT’s North

America and Latin America

regions under one Americas

region? How do you feel this

move benefi ts CWT clients in

these geographic areas?

CWT Vision: A key

consideration in this

realignment was preserving

necessary autonomy and

recognition of country-level

nuances. Can you explain how

this critical element is being

retained within CWT’s new

Americas region?

Copyright © 2012 CWT

CWT Vision recently caught up with Håkan Ericsson, president, CWT Americas, for an update on the fi rst

six months in his new role since relocating to the United States from CWT’s Europe, Middle East, and

Africa (EMEA) region. With a regional realignment underway at CWT and countless opportunities to

further assist clients with their travel programs, there were plenty of topics to cover. Below is an excerpt

from the discussion:

M

any of CWT’s clients are managing the Americas as one region as well, and therefore

they also want to approach travel management in this part of the world in a holistic

manner. It makes practical sense because we share time zones and other commonalities,

and it also makes strategic sense because there are many best practices organizations based

in these countries can learn from one another, especially as they seek to manage travel

seamlessly across geographic boundaries.

Specifi cally for U.S.-based corporate clients, we have implemented what we believe is a great

benefi t by bringing together a team with end-to-end responsibility for all client-facing activities,

including sales, program management, and an even closer relationship with our operational

team. This enables us to be even more client focused and integrated throughout the cycle of

the client relationship.

From CWT’s perspective, this move improves our effi ciency, as many of our leaders now

manage their functions across the new, expanded region, sharing expertise and knowledge

with one another that benefi ts everyone. This is particularly important in our highest growth

areas across the region, such as within the energy and oil sectors, particularly in Brazil, and

meetings and events, which is applicable in all locations.

I

personally have a very strong view of the importance of local leadership residing locally,

whether at the regional or country level. With the appointment of André Carvalhal as

CWT’s leader for the Latin American countries, we now have a leader who actually lives there

and fully understands the nature of doing business in each of these countries. That is just

one example of how CWT is preserving autonomy for each geographic region within our

broader Americas structure. Having said that, it is at the same time vital to leverage global

harmonization and process effi ciency – combining local strength with global harmonization is

something that makes CWT unique.


REGIONAL SPOTLIGHT: Americas – North America

CWT Vision: You’ve been

leading CWT’s business in the

Americas for six months now.

What can you share about

your experience thus far?

CWT Vision: What challenges

are facing travel buyers in the

Americas in particular, when

compared with buyers in other

parts of the world?

CWT Vision: Well, that leads

to our fi nal question, which

centers around what you

see as the most signifi cant

untapped opportunity for

managed travel right now.

15

This is consistent with CWT’s overall approach for organizing ourselves and conducting our

business – we are a vast, global organization, but one made up of many strong, local teams

in key markets around the world. This is also what has driven CWT’s acquisition strategy in

recent years – the ability to establish a local presence, where we don’t already have one, in

important places like Costa Rica, Brazil, Finland, and India.

I

remain very excited about working here in the Americas. I thrive on the fast-paced business

culture here and have really enjoyed getting to know so many CWT employees, clients,

and other partners in these fi rst months on the job. Of course, the fact that I previously had

responsibility for Latin America has made the transition easier, as has the fact that even when

based in Europe, I worked a lot with the teams in the United States and Canada as well.

I

actually think the challenges are quite similar regardless of where a buyer is located. There

is the challenge of the overall global economy, and the fact that uncertainty in one place

has an impact in many places because today’s world is so interconnected. Other challenges

include safety and security and the need for clients to take further ownership of duty of care

for employees; meetings and events (M&E), with few clients currently managing this to the

extent possible; and, of course, focusing on the traveler and enabling them with mobility and

other productivity tools while keeping costs down. There is no shortage of challenges, but the

good news is, most of them can actually be viewed as opportunities as well.

W

ell, there are truly several, so I must mention more than just one. From a fi nancial

perspective, I believe it is M&E. For many organizations, work remains to be done to

bring more of this volume under management, particularly as it relates to small and mid-size

meetings, which are frequently overlooked but often represent the majority of spend. Even

companies doing this well today have additional opportunity to combine transient travel

and M&E volumes and leverage them with suppliers where applicable. Beyond that, there

is signifi cant opportunity to do more in direct contact with the traveler, including having a

proactive travel policy that is easier for them to follow; infl uencing their behavior before,

during, and after trips; and working to improve their overall satisfaction with the business

travel experience.

As the travel management partner to our clients, CWT shares in our clients’ challenges

and opportunities as we help buyers tackle these initiatives. Beyond that, I’ll mention an

opportunity I see that is specifi c to CWT: we have an opportunity to off er our clients even

greater access to unique rates and fares on airlines and hotels. We are in the process of

taking more responsibility for negotiating on behalf of our clients by leveraging our global

footprint to secure pricing and terms many could not obtain on their own. We’re calling these

CWT Fares and CWT Value Rates, and our clients will be hearing much more about these in

the near future. v


16

Brazil a main focus for

LATAM travel programs

Copyright © 2012 CWT

REGIONAL SPOTLIGHT: Americas – Latin America

Among Latin America’s many booming economies, Brazil stands out as a powerful driver of growth and prosperity

in the region, thanks to the country’s strong economic performance and the fact that in the next several

years it will play host to two of the most signifi cant sporting events in the world – the World Cup

and Olympic Games. The country is busy getting ready for both events, and those

preparations have a direct impact on business travel to Brazil, today and

in the coming years. In fact, the Global Business Travel Association

(GBTA) recently shared its outlook for business travel spending in

Brazil, which it expects to increase by 13% in 2012 and nearly 16%

in 2013. Following is some additional information on conducting

business and managing travel in Brazil.

Brazil’s national economy

Brazil is known for its strong local agricultural industry. One challenge

it faces is a historically high interest rate that currently hovers at

around 9%, which has the potential to limit the country’s ability to be

competitive against other economies. Brazil’s government is working

on ways to reduce the interest rate and has taken other measures to stimulate the local economy through payroll tax

cuts, broader fi scal incentives for organizations with high export rates, and more.

Visiting Brazil

Brazil applies reciprocity when it comes to its policies for visitors. For example, this means that if a country requires a

visa to grant entry to a Brazilian citizen, Brazil will typically request a visa for citizens of that country to gain entry as well.

Given this arrangement, travel buyers must understand Brazil’s entry requirements and necessary medical clearances

for their travelers, which often mirror the requirements the traveler’s native country applies to Brazilian citizens.

Depending on where a traveler is from, the business culture in Brazil may be somewhat unfamiliar as well. Professionals

tend to wear more formal business attire on a daily basis than in other parts of the world. A formal approach is also

taken to meetings, which ideally should be arranged two weeks in advance; impromptu meetings that have not been

pre-arranged are considered disrespectful. During the meeting itself, it is considered polite to begin by spending a few

minutes discussing personal topics, such as family or soccer.

As discussed in the Latin America regional spotlight in the Q1 issue of CWT Vision, many economies in the region

operate on a cash basis, with suppliers not yet accepting credit cards. While this is also the case in Brazil’s rural areas,

credit cards are commonly accepted in the country’s major cities.


REGIONAL SPOTLIGHT: Americas – Latin America

The local travel landscape

Travel suppliers such as hotels are adding signifi cant capacity in Brazil in preparation for the World Cup and Olympic Games; for

example, Accor is adding an additional seven hotels to its existing nine properties in Rio de Janeiro and has 23 more planned

in other World Cup host cities, with an additional 11 hotels being considered. Among the 12 cities hosting the World Cup, Belo

Horizonte is set to gain the most hotel inventory, with more than 4,700 rooms coming online. Rio de Janeiro and São Paulo, each

of which experience high occupancies and high room rates, will gain fewer new rooms: Rio is expecting nearly 3,500 more, while

São Paulo will gain only an additional 900 or so.

While hotels are rapidly expanding throughout Brazil, airline expansion is more limited given airport infrastructures and the number

of existing carriers servicing the country. Even so, the Brazilian government has privatized São Paulo’s Guarulhos International

Airport, Brasília International Airport, and Viracopos-Campinas International Airport to encourage accelerated investment that will

support increased traffi c for the upcoming sporting events, and São Paulo International Airport recently unveiled a new terminal.

On the airline side, the merger of Brazil’s TAM and Chile’s LAN to form LATAM Airlines Group was projected to close at the end

of Q1 2012, but is now expected to be completed in the next few months. For now, organizations continue to hold separate

corporate contracts with each airline, with changes expected after the new airline begins operations.

Buyer advice

Travel buyers sending travelers to Brazil should understand that currently, hotel and meeting space are extremely limited, because

the new hotels being built for the upcoming sporting events are not yet available and high demand makes availability scarce. The

best way to mitigate the impact of this situation is by booking well in advance, and when possible, considering visits to secondary

and tertiary cities to avoid the crowding and high prices of Brazil’s major business hubs.

2014 FIFA World Cup Brazil host cities

Source: www.FIFA.com

Rio de Janeiro -

also host of the

2016 Summer Olympics

17

As the World Cup and Olympics

approach, travel buyers should

proactively communicate with their

preferred suppliers, particularly hotels, to

understand the impact that the additional

increase in volume will have on their

travelers. Questions buyers should ask

include:

Does the hotel intend to increase

the number of blackout dates in my

contract during the years these events

will be held?

Will my negotiated rate increase for

the year based on an overall increase

in demand?

How can my preferred partners

ensure my business needs continue

to be met during the World Cup

and Olympic Games? Are there any

opportunities to use other affi liated

properties at a discount? v


18 INDICATORS

As the price of fuel has fluctuated, sometimes drastically, over the past 18 months or so, many airlines have expanded

the practice of assessing fuel surcharges in addition to the base fare for certain airline tickets. This new Indicator chart

is intended to provide travel buyers clarity around the current state of average fuel prices and airline fuel surcharges,

and illustrate the ongoing evolution in the relationship between the two.

140

130

120

110

100

90

80

70

RELATIONSHIP BETWEEN OIL PRICES AND AIRLINE FUEL SURCHARGES

2011 Q1

100 112 108

2011 Q2

NOTE: The monetary reference in this chart denotes Euros.

2011 Q3

Source – fuel surcharges: Amadeus global distribution system

Source – fuel price information: U.S. Energy Information Administration

Starting with Q1 2012 data, this chart encompasses all classes of service for 19 legacy carriers with headquarters in every region of the world.

Previous quarters represent data for 12 international carriers.

Domestic = travel within any given country

Continental = travel originating in any given region to international destinations within that same region

Intercontinental = travel originating in any given region to destinations outside of that region

Values have been recalculated using fl at exchange rates to eliminate artifi cial price variations

Copyright © 2012 CWT

108 104

2011 Q4

113

2012 Q1

Fuel Index

Domestic

Intercontinental

Continental

Total All Airlines


US$

1600

1200

1000

800

600

400

200

0

INDICATORS

Europe, Middle East & Africa - Percentages indicate the variation of Q1 ’12 vs. Q1 ‘11

1400

US$

1400

1200

1000

800

600

400

200

0

2011 Q1

2011 Q1

AVERAGE TICKET PRICE

2011 Q2

ECONOMY

2011 Q3

2011 Q4

2012 Q1

BUSINESS

Domestic Continental Intercontinental Continental Intercontinental

ECONOMY

-8%

-5%

+3%

Source: CWT client data, worldwide on top 20 round-trip routes

Domestic = travel within any given country

Continental = travel originating in any given region to international destinations within that same region

Intercontinental = travel originating in any given region to destinations outside of that region

Top 20 round-trip routes: 20 most frequently purchased round-trip routes per category (domestic, continental, intercontinental) & per region, based on 2010 and 2011 CWT ticket sales

Values have been recalculated using fl at exchange rates, versus previous editions of this publication, to eliminate artifi cial price variations.

Copyright © 2012 CWT

US$

5500

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

2011 Q1

North America - Percentages indicate the variation of Q1 ’12 vs. Q1 ‘11

2011 Q2

2011 Q3

2011 Q4

2012 Q1

4%

7%

-1%

2011 Q2

2011 Q3

BUSINESS

2011 Q4

Domestic Continental Intercontinental Continental Intercontinental

US$

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

2012 Q1

19

+5%

2011 Q1

2011 Q2

2011 Q3

2011 Q4

2012 Q1

0%

0%

+21%


20 INDICATORS

Asia Pacifi c - Percentages indicate the variation of Q1 ’12 vs. Q1 ‘11

US$

1200

1000

800

600

400

200

0

US$

1600

1400

1200

1000

800

600

400

200

0

2011 Q1

2011 Q1

AVERAGE TICKET PRICE

2011 Q2

ECONOMY

2011 Q3

2011 Q4

2012 Q1

BUSINESS

Domestic Continental Intercontinental Continental Intercontinental

ECONOMY

+4%

-2%

-1%

Source: CWT client data, worldwide on top 20 round-trip routes

Domestic = travel within any given country

Continental = travel originating in any given region to international destinations within that same region

Intercontinental = travel originating in any given region to destinations outside of that region

Top 20 round-trip routes: 20 most frequently purchased round-trip routes per category (domestic, continental, intercontinental) & per region, based on 2010 and 2011 CWT ticket sales

Values have been recalculated using fl at exchange rates, versus previous editions of this publication, to eliminate artifi cial price variations.

Copyright © 2012 CWT

US$

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

2011 Q1

Latin America - Percentages indicate the variation of Q1 ’12 vs. Q1 ‘11

2011 Q2

2011 Q3

2011 Q4

2012 Q1

+1%

+7%

+9%

2011 Q2

2011 Q3

BUSINESS

2011 Q4

Domestic Continental Intercontinental Continental Intercontinental

US$

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

2011 Q1

2011 Q2

2011 Q3

2011 Q4

2012 Q1

2012 Q1

-2%

3%

+2%

+12%


INDICATORS

Copyright © 2012 CWT

BUSINESS & FIRST CLASS USAGE

Europe, Middle East & Africa

%

50

45

40

35

30

25

20

15

10

5

0

%

50

45

40

35

30

25

20

15

10

5

0

2011 Q1

2011 Q1

2011 Q2

Continental Intercontinental

2011 Q2

2011 Q3

2011 Q3

2011 Q4

2011 Q4

Continental Intercontinental

2012 Q1

2012 Q1

%

50

45

40

35

30

25

20

15

10

5

0

%

50

Source: CWT client data, worldwide

Continental = travel originating in any given region to international destinations within that same region

Intercontinental = travel originating in any given region to destinations outside of that region

North America

45

40

35

30

25

20

15

10

5

0

2011 Q1

Asia Pacifi c Latin America

2011 Q1

2011 Q2

2011 Q3

2011 Q4

Continental Intercontinental

2011 Q2

2011 Q2

2011 Q4

Continental Intercontinental

2012 Q1

2012 Q1

21


22 INDICATORS

%

80

70

60

50

40

30

20

10

0

%

80

70

60

50

40

30

20

10

0

2011 Q1

2011 Q1

AIR BOOKINGS MADE 14+ DAYS IN ADVANCE

Europe, Middle East & Africa North America

2011 Q2

2011 Q3

2011 Q4

2012 Q1

Domestic Continental Intercontinental

Domestic Continental Intercontinental

%

80

Source: CWT client data, worldwide

Continental = travel originating in any given region to international destinations within that same region

Intercontinental = travel originating in any given region to destinations outside of that region

Copyright © 2012 CWT

70

60

50

40

30

20

10

0

%

80

70

60

50

40

30

20

10

0

2011 Q1

Asia Pacifi c Latin America

2011 Q2

2011 Q3

2011 Q4

2012 Q1

2011 Q1

2011 Q2

2011 Q3

2011 Q4

2012 Q1

Domestic Continental Intercontinental

2011 Q2

2011 Q3

2011 Q4

2012 Q1

Domestic Continental Intercontinental

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