An in-house corporate travel department can offer flexibility and control – but it’s a move that needs thought and planning
By Mark Rowh
Maybe somewhere in another universe, the biggest challenge travel buyers face could be deciding whether to go for that second cup of coffee. Wouldn’t it be great if things were that problem-free? Back in the real world, however, challenges persist.
For travel managers, the idea of starting up and running a corporate travel department could have a certain appeal. And while a CTD may not eliminate all the challenges of managing business travel, it does offer an alternative approach to the tasks at hand. Under this model, an organization acts as its own travel agency. Instead of the more common strategy of working with a travel management company, business travel services are provided by employees internally. While an in-house agency may not be everyone, for some companies it offers real potential for cost savings and greater control.
Most corporations like to have control of the type of travel services being delivered to their travelers, according to Greeley Koch, managing director of 490 Consulting. To do this, they have decided to outsource the travel program to those providers set up to run such operations. But some companies have determined that operating a corporate travel department gives them greater control of the whole program. That includes how their travelers are being taken care of as well as insights into any revenue that is being “earned” for their bookings.
“The CTD approach will bring transparency that might not be seen in a typical outsourced travel management company arrangement,” Koch says. “Your true cost of operating the travel department is known when operating as a CTD, and your revenue from the GDS, commissions and other incentive money is available to offset the expense.” BTE Think Tank member Jennifer Steinke notes that through this approach, a company can potentially reduce or eliminate costs associated with a TMC as revenues reduce the cost or break even. “Simple analysis can be done to explore the options of in-sourcing vs. outsourcing,” says Steinke, who is director of travel, meetings and fleet at Moderna. At the same time, she notes, there can be an improvement in service levels for travelers along with increased compliance to policies and suppliers.
Command & Control “The beauty of a CTD is that you can opt to in-source or outsource any component," Steinke says. That could mean, for example, that an organization might in-source all tech and outsource accounting services. "You can in-source everything or outsource everything," she says.
These advantages were among those seen by Cheryl Benjamin, travel and expense manager for Gordon Food Service, when she used the CTD model while serving a previous employer. “When you control the process, you know that the organization's spend is properly accounted for," she says. “Accurate data is critical to your program, and if you manage the process and put the proper procedures in place, you can be more confident in what you report out as spend.”
Another plus is greater flexibility in making changes. "Since you have all your clean data, you can monitor trends and adjust as needed," Benjamin notes. "You make the rules, and it is not a one-size-fits-most approach."
Andrew Menkes, CEO of Partnership Travel Consulting and the guru of CTDs over the past 25 years, argues that staffing levels need not be an inhibiting factor. “Managing the CTD doesn’t mean you have to hire a bunch of agents,” he says. “It can be as few as one corporate employee, or fully outsourced staffing. The advantage is in control and transparency.”
The ability to choose partners that reflect what fits best for your organization is another positive, according to Benjamin. That includes the capacity to tailor those relationships while picking and choosing what you actually need. In Benjamin’s case, the experience included substantial time working on rules for a mid-office program (audit and QC) to automate the agent process.
The potential for cost benefits is another factor to consider. "With a CTD you have a revenue stream that helps offset the costs of your program such as commissions, rebates and incentives," Benjamin says. "These sources of revenue can offset all or a good portion of your operational costs."
Not for Everybody Despite the potential advantages, this scheme won’t appeal to everyone. Koch notes that the marketplace is evolving at a rapid pace coming out of the pandemic, and new technology for accessing content and then completing the booking experience is being developed by some well-funded startups and established organizations. Businesses may not want to dedicate internal resources to similar purposes. “The core competency of companies needing a travel service isn’t creating and running an in-house CTD operation and diverting capital to build or acquire new travel technology,” he says.
Success in this area also requires diligence in staying on top of industry developments. “You’re in control and do not have an agency passing off information to you,” Benjamin notes. “You need to stay involved in the industry.”
Gaining understanding from others in the organization may bring other challenges. “Finance and Procurement may understand the value of your internal department, but HR or other groups may not,” Benjamin says. “You must keep your focus on the program at all times and be prepared to answer the questions around the ROI.”
Finding and retaining qualified staff could also be an issue, especially given the current climate. “We’re seeing a shortage of good, qualified agents now, especially those that can handle complex reservations,” Koch says. “A CTD operation shouldn’t have to worry about staffing and finding qualified agents that now can command higher salaries.”
Successful Transitions In making the move to a CTD, Koch notes, the foundation of success is having a well-thought-out business case that lays out why this approach is better for your company than the traditional travel program. “That business case must be fully supported by senior management, not only with the decision to proceed, but also with the financial funding needed to get the program up and running,” he says.
If a decision is made to go forward with a corporate travel department, Benjamin advises making sure to have a champion within the organization, as well as determining that the corporate culture will support such a setup. She also suggests doing a complete financial review of your current operation, with projections for the next three years.
"This analysis should include every expense and revenue stream you can identify, right down to newsletters and subscriptions," she notes. Once developed, original projections can be used in reviewing growth in spend and revenue. If updated monthly, this information can support tracking trends and also provide a baseline for annual business reviews.
In creating a baseline, Menkes advises including an internal survey of your travelers and travel arrangers. Steps should also be taken to understand fully the operating costs in terms of fees paid and revenues imputed to the TMC. In addition, the variety of technology options in the market should be identified. “Make sure you discuss them with your TMC to see if they would support the various providers, or see them as competitors,” he adds.
“The decision to adopt a corporate travel department can’t be taken lightly and must be thoroughly researched,” Koch says. He advises talking to other companies that operate CTDs to find out the lessons they learned when building the business case, receiving the funding, and then operating the in-house travel department. “Take those lessons to make sure you go into this process with your eyes wide open and that your senior leadership is supportive of the CTD arrangement,” he cautions.
New Kid on the Block Paul Tilstone, managing partner at travel consultancy Festive Road, agrees that the reasons for buyers to consider a CTD are numerous, from service configuration and quality of service to cost, greater control and transparency. “But there’s a new kid on the block,” he suggests. “Advancements in technology have provided the opportunity for buyers to consider far more than moving to a CTD setup when they’re thinking through their service configuration.” He argues that we’ve entered an open-IT era giving buyers the opportunity to shape their program from the top down by applying a micro-services approach to heighten the service in key areas and/or broaden the service offering.
“Of course, whether it’s a traditional CTD or a wider, modern micro-services approach to travel management that’s considered, the implications for specialist IT knowledge, understanding the set-up cost versus financial return and the willingness for company leadership to want to go down the pathway are all needing careful consideration,” Tilstone advises.
Koch adds that the pandemic has shown us that travel transactions can disappear overnight and then have a rocky road to recovery. He recommends asking yourself, in this type of environment is it better for us to run our travel program in-house or outsource it to others like we might do with other corporate services? The answer, he says, might be that those outsourced providers can react more quickly and then carry the burden of making sure your program is supported correctly.
For those interested in this model but uncertain if it’s a good fit, Benjamin recommends hiring a qualified consultant with experience with CTDs, or reaching out to a travel manager who runs one. “This professional insight was a big part of my success in making the business case for the CTD,” she says.
Don’t shy away from the model, Steinke advises. “It is worth exploring and may be a viable option for your organization,” she says. “You can’t judge what you haven’t explored.”
Benjamin agrees the concept merits a close look. “It’s a great business model for many organizations.” The key point is to remember it is not a one-size-fits-all approach, she says. The fact is, you can in-source all of the program, or just parts of it. “Of all the CTD travel managers I have spoken to over the years, I can't think of one who ran the exact same program as I did.”
Of course the real moment of truth comes with figuring out how well a corporate travel department might support the unique goals of your company. In the process, projections as to what extent revenues might offset TMC costs will be a key. “It may not always be a break-even and there may be some investment,” Steinke says. “But if it helps you to achieve your overall program goals then it may be worth it.”