Monthly Archives: January 2015

Uneven Chip Card Migration Will Require Awareness Programs

Corporate cards with chips finally are coming to the United States en masse. How travel departments should deal with them depends on the circumstances. Chip cards requiring a PIN for authentication are more secure and more widely accepted globally than chip-and-signature cards. But many corporate program managers aren’t getting chip-and-PIN from their payment firm.

Payments industry analyst Frank Martien of First Annapolis Consulting said chip-and-signature may be the interim step, with banks ultimately going to chip-and-PIN.

chip card

Image: Thinkstock

Open Society Foundations global travel manager Chris Gremski said the topic has been “a pain point for us a for long time.” In exploring chip-and-PIN during the past few years, he found that “U.S. issuers were dismissive of that setup.”

Some companies provide chip-and-PIN cards to international travelers because certain merchants outside the United States require that flavor for card transactions. Gremski noted that chip-and-signature cards may not work at unattended train ticket kiosks or gas stations. Although some terminals allow for PIN or signature, merchants may not understand the difference.

These hurdles can create corporate policy compliance and data reporting issues.

“I think the United States is going in the wrong direction with chip-and-signature,” said Meritor global travel manager Jack Reynaert.

All Meritor cardholders as of last July have chip-and-PIN cards via a small bank issuer on the MasterCard network and, in Europe, a major bank issuer on the Visa network. The company started first with international travelers about four years ago. Acknowledging that chip cards are more expensive for issuers to supply to clients, Reynaert argued that it’s a good investment because of greater utilization — and corporate program compliance — through wider acceptance.

Representing the world’s largest managed travel program, the U.S. General Services Administration isn’t taking “signature” for an answer. GSA this month began a program to issue more than 1 million chip-and-PIN cards by year-end. The move follows a presidential executive order in October 2014 to improve government payment security and promote wider adoption of more secure cards and transaction terminals that can read them. GSA’s SmartPay program includes travel, purchasing, integrated and fleet cards. The contracting banks are Citi, J.P. Morgan Chase and U.S. Bank.

David Shea, director of GSA’s Office of Charge Card Management, in an email explained that SmartPay is going with chip-and-PIN technology “to avail government cardholders of the maximum additional security possible for card present transactions.” GSA noted that most vendors accepting GSA SmartPay travel and purchasing cards will convert their systems by October 2015. Most fuel vendors for the SmartPay fleet card will convert by October 2017.

U.S. Bank has been providing chip-and-signature cards that also have PINs, covering travelers faced with either scenario. “We really began migration in earnest about three or four months ago,” said U.S. Bank senior vice president Mary Miklethun. “Every new card we issue is chip-enabled. We are doing some early reissues over the course of this year for the corporate travel portfolio.”

About three years ago, Bank of America opted to go with chip-and-PIN based on customer demand. Why not chip-and-signature cards with PIN capability? “The experience at the point of sale is quite cumbersome and makes you have to think more whereas simple chip-and-PIN will be increasingly ubiquitous around the globe,” said Bank of America Merrill Lynch head of global cards and comprehensive payables Kevin Phalen. He noted that all new programs as of about 18 months ago have been chip-and-PIN enabled and that “a large percentage” of existing corporate travel clients will complete migration this year.

Flipping The Switch

Martien anticipates more banks will “flip the switch” on PIN cards because of an October deadline. At that time, the networks of American Express, Discover, MasterCard and Visa will transfer liability for certain types of fraudulent transactions. Traditionally held by the issuer, liability often will fall on merchants that haven’t installed terminals to read chip cards. Despite the shift, Miklethun and Phalen said their firms would continue assisting clients exposed to fraud. “It’s probably no impact, perhaps a non-event,” Phalen said. “We tend to get involved and resolve [incidents of fraud] with the merchant, without clients getting in the middle of it. We won’t bring them into this conversation.”

Those issuers that for now favor chip-and-signature cards do so because they are “faster to implement, lower cost and less complicated for consumers to adjust to,” said Randy Vanderhoof, executive director of the Smart Card Alliance, a non-profit that promotes new card technologies.

American Express has been providing chip-and-signature cards as replacements and renewals for existing corporate clients and for new accounts. “In the U.S., there is still work that must be done and investments that must be made across many payment industry stakeholder groups, including issuers, acquirers and merchants, to ensure seamless chip-and-PIN usability at the point of sale,” according to a spokesperson. Amex for a while has issued chip-and-PIN cards in the United Kingdom, France, Germany, Spain, Australia and Canada.

Chip-and-signature cards still are more secure than traditional magnetic stripe-only cards. “The PIN adds protection in case of a lost or stolen card, a piece of data that presumably only the cardholder knows,” Miklethun explained. “But lost and stolen fraud is by far the smallest component of fraud that exists in the market today.”

According to Vanderhoof, the October milestone will raise questions on why some cards have chips and some don’t, and why some merchants will accept magnetic stripe swipes and some won’t. “It is going to be a tough time to be a major bank, retailer or payment brand for the next few years until the hysteria around all this change subsides and consumers and payments providers and acceptors get used to the technology,” he wrote in a January Smart Card Alliance member bulletin. “It is really hard to get one’s mind wrapped around the prospect that another 500 million cards are going to be issued in the next 12 months, and an estimated 7 million EMV-capable terminals will start rejecting card swipes in favor of chip insertions by the start of the 2016.” EMV represents standards for chip cards.

Knowing What To Do

Traveler education campaigns should help corporate card program managers switch to chip cards (which have gold or silver metallic squares on the front, but also still have mag stripes on the back). New processes at the point of sale seem simple enough (dipping a chip card in a reader rather swiping it, or inputting a PIN rather than signing a receipt). But any change to a decades-long norm may take some getting used to.

With chip-and-signature, if a merchant doesn’t accept the card, travelers should know what to do. With chip-and-PIN, resetting a forgotten PIN en-route during travel “can be holy havoc,” said Meritor’s Reynaert.

“That was one of the points of friction we anticipated in the U.S. environment,” Miklethun said. It’s a reason why U.S. Bank maintained signature authentication as an option for its chip-cardholders.

She added that program administrators still will field lots of questions from travelers. “The biggest thing they can do is communicate with their cardholders as they hear from their issuing banks. We are trying to minimize that by getting [corporate clients] information ahead of time.”

Bank of America executives shared a similar message, noting the benefits of tailoring education to traveler types. “It’s about being super-proactive and handing clients sample written instructions that they may want to provide to cardholders in advance,” said Harmeet Soin, the bank’s managing director of product management.

According to some estimates, chip technology will be present in about half of U.S. payment cards and larger retailers by the end of this year.

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Sabre’s Planned Acquisition Is Likely Asian GDS Abacus

Sabre Corporation on Monday revealed in a financial filing that this quarter it may agree to an acquisition for its Travel Network GDS division. The acquired company would cost around $500 million, add about $250 million in revenue and improve earnings starting next year. Sabre declined to identify this firm, but it looks a lot like Abacus International.

Sabre already owns 35 percent of the Singapore-based regional global distribution system. It would buy the rest from Abacus International Holdings. The consortium of eleven Asian airlines includes All Nippon Airways, Cathay Pacific, China Airlines and Singapore Airlines.

Equities analysts at Bernstein and Oppenheimer speculated that Abacus is the target. Other sources said Sabre has been trying to buy Abacus for years, but the airlines have resisted. Processing travel bookings can be more profitable than flying passengers. Owning systems used by travel agencies and booking tools can offer operational and marketing advantages.

abacusThe existing Abacus ownership structure limits Sabre in some Asia-Pacific markets. As Sabre has noted in regulatory filings, “The airline owners may not agree to provide incentive consideration to travel agencies at the same rate as our GDS competitors. Subject to some exceptions, we are also prohibited from competing with Abacus by directly or indirectly engaging in the GDS business in Asia, Australia, New Zealand and certain Pacific islands.” That would seem to all go away if Sabre owned the whole company.

The acquisition would boost Sabre’s GDS presence in several nations with faster-growing economies than its biggest market, the United States. Revenues at Abacus grew a hefty 28 percent from 2011 to 2013, when it recorded $335 million. Sabre already collects from Abacus fees for data processing, development and ancillary services ($92 million in 2013). Abacus made a profit of $42 million in 2013.

Perhaps most important, buying Abacus better positions Sabre for the coveted Chinese market as regulations there loosen up. Currently only the government-owned TravelSky GDS is permitted full GDS operations in China. After obtaining authorization, foreign GDSs may book non-Chinese carriers. Abacus in August announced it became the first foreign GDS to issue air tickets in China.

Some change management is to be expected, but it’s not likely that corporate and agency clients will see major problems from a Sabre acquisition of Abacus. The company already offers many Sabre products. Simplified management and streamlined decision-making should result.

Another result in affected markets could be the end of so-called tying agreements. Through such deals, airlines require travel agencies or corporations to use their GDS. These were common in the U.S. market before U.S. carriers sold off their GDS ownership interests.

Abacus operates in 31 Asia-Pacific markets and claims more than 20,000 agent users. A deal would push Sabre’s global GDS revenue past Travelport’s, eclipsing the $2 billion mark. Both trail Amadeus by about $1 billion.

Sabre acquired its existing share in the joint venture that owns Abacus in 1998. In the Monday filing, Sabre indicated it “makes no assurances that this acquisition will occur.” If it does, Sabre expects the deal would close in the June quarter.

Note: This article is based on contacts with more than a dozen industry experts. Those who did not have specific knowledge of a Sabre play for Abacus said they thought it made sense. Four of the sources familiar with Abacus and Sabre were convinced the company in question is Abacus.

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Fares Following Fuel? Maybe Not

Some think an obvious consequence of dramatically lower fuel prices is lower airfares. But it’s not that simple. It may not even be likely.

“Lower fuel prices translate into lower operating costs for airlines, and, sometimes, air carriers pass along these savings to travelers in the form of lower air ticket prices,” according to an ARC/Expedia report published in December. “This correlation is neither universal nor consistent.”

Fuel and faresDuring Delta’s earnings conference call on Tuesday, executives suggested cutting fares is not top of mind. CEO Richard Anderson discussed “yield preservation” … “regardless of fuel prices.” He also said that Delta would use any windfall from falling oil prices first to pay down debt and then return more cash to shareholders.

Alluding to the cyclical nature of the industry and the volatile nature of oil prices, Anderson added that Delta’s conservative planning always assumes high oil prices. Anderson and Delta president Ed Bastian also noted downward pressure on fares in markets hit hard by falling oil rates, such as Brazil, Russia and Venezuela.

The International Air Transport Association predicted global 2015 fares on average would drop more than 5 percent from 2014.

For now, at least in North America, fares do appear to be on the decline. According to ARC data, average December 2014 roundtrip fares dropped year over year for each travel agency type and advance-purchase period. ARC tracked particularly big declines for Boston-Chicago O’Hare (10 percent), O’Hare-Minneapolis (12 percent) and O’Hare-New York City (14 percent).

By another measure, the average December fare booked by corporate travel agencies dropped $15 to $472, the lowest for that month since 2010. That’s according to Prime Numbers Technology, an analytics firm owned by Atlas Travel & Technology Group. Based on more than 220,000 bookings, the company calculated that the average December 2014 published fare dropped to $708. It’s the lowest Prime Numbers measured for that month in eight years of publicly providing data.

New forecasts call for the trend to continue, reversing several earlier industry predictions for modest average fare hikes this year. Carlson Wagonlit Travel and the GBTA Foundation last summer predicted 2015 North American business travel fares would increase on average by 2.5 percent. GBTA in an October report raised that to 4 percent growth, but last week revised the forecast downward to a 0.9 percent decline for the year.

Meanwhile, many industry watchers wonder why carriers don’t cut fuel surcharges. That would lower overall air travel costs, if such cuts aren’t offset with higher base fares (a distinct possibility).

Some foreign airlines have reduced or eliminated fuel surcharges. U.S. carriers, which usually apply them to intercontinental but not domestic flights, have not. When asked in which markets Delta faces pressure to cut fuel surcharges, Anderson wouldn’t bite.

Rick Seaney of FareCompare in a Jan. 13 blog post wrote that fuel surcharges for flights this spring to Europe may ease a bit. “Pressure is building and politicos aren’t the only ones questioning the high add-ons,” he wrote. “Passengers are, too.”

Upward Pressure

Though it sounds counterintuitive, lower oil prices don’t always or immediately translate to lower airline fuel costs. Fuel hedging, for example, is risky business. It protects airlines from soaring fuel costs, but also can have the reverse effect if oil moves the wrong way. It depends on exactly how airlines set their hedge contracts.

Delta said it took a $1.2 billion charge in the December quarter “for mark-to-market adjustments on fuel hedges settling in future periods.” (Even so, at current fuel prices, Delta for 2015 expects $2 billion in fuel cost savings this year, net of its hedges).

Beyond fuel, there are other upward pressures on airfares. Some airlines are growing their operations, but continue to do so slowly. Capacity remains tight.

At the same time, there’s plenty of evidence that travel demand — and U.S. business travel demand in particular — starts 2015 with relative health. Part of that comes back to low oil prices, which can mean more discretionary spending for many consumers and businesses. “Steady demand,” according to Seaney, “means that airlines have little incentive to lower ticket prices.”

And they also have little incentive to back off from the fees they charge for optional services. Those are generally not taxable and not open to negotiation with corporate clients. Unlike the price of fuel, but similar to fuel surcharges levied by airlines, fees seem to go only way.

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Airbnb Adds Risk Management Support In Further Appeal To Corporate Travel

International SOS for a few months has been taking data from Airbnb to help joint clients locate employees in a crisis. Sources said Airbnb also is soliciting other types of support from travel risk management companies to increase its appeal to corporate travel programs.

Meanwhile, Airbnb seems to be expanding its business travel sales and account management capabilities. The home rental facilitator is creating a business development team dedicated to business travel, according to recent posts for job openings. This team will “source, track, negotiate and close sales with companies and business travel partners.” Airbnb is looking for people with years of experience selling lodging and booking systems to corporations.

Airbnb-iSOSThe developments make it more difficult to dismiss Airbnb’s potential for managed corporate travel.

Airbnb last July launched its business service with more than 30 clients, including Evernote, Eventbrite, Lyft and Salesforce. The Wall Street Journal reported at the time that Facebook, too, was a user.

Airbnb offers more than 1 million rental properties and rooms of all kinds. The business service highlights those that are available for immediate booking and include WiFi.

Most companies have not endorsed Airbnb as an option for their employees. Top of mind are concerns about product consistency and reliability. BCD Travel’s Advito consulting group this month published a paper outlining key issues.

By working with risk management firms, Airbnb may be developing a way to further prune its properties based on safety and security parameters. In theory, there’s nothing stopping it from creating service standards as well, much like the big hotel franchisors.

For traveler tracking, Airbnb is providing data on bookings by a small number of corporate clients to International SOS. The medical and security response provider claims 1,000 clients use its TravelTracker product. The vast majority of booking data come from global distribution systems and travel management companies, but other sources exist. Southwest Airlines’ Swabiz business booking portal for years has been the most notable example. Clients pay a fee to International SOS for non-traditional data connections.

International SOS had integrated with Airbnb before Airbnb in December hooked up with Concur TripLink. International SOS also takes feeds from TripLink, which can import booking data from the websites of InterContinental and Starwood. TripLink then integrates such booking information with Concur’s expense reports and itineraries.

Presumably there’s an airline booking along with that Airbnb, InterContinental or Starwood lodging segment. But matching them in the same record for risk management purposes can be tricky. Is that James Murray who booked on Airbnb the same James Murray who booked an airline ticket through the TMC? Such matching “can happen,” said International SOS executive vice president Tim Daniel, but “we spend a lot of time trying to figure out the best way to match.”

Daniel noted that as of late fall, more than half of the booking data International SOS imported came straight from travel management companies using Web services and XML. While in the past it was 99 percent, now less than half of the information comes from reading GDS queues.

Airbnb did not respond to requests for comment. Officials have said the service is not for every road warrior, but rather for “larger groups, longer stays and relocations.”

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Energy Sector Taking Its Belt-Tightening Turn

When crude oil prices in 2008 peaked at around $140 a barrel, then-Continental Airlines president Jeff Smisek said oil and gas clients were “living large and flying all around the world up front and spending money like drunken sailors.” The global financial recession shortly thereafter hit prices hard, but oil rebounded to more than $100 a barrel by 2011. Prices now are falling down a well again and the message from the sector isn’t very rosy.

It’s the oil companies’ turn to tighten their belts. Some are bracing for reduced discretionary spending this year, including some corporate, meetings and event travel.

energy sector travel management

CWT Energy, Resources & Marine published its 2015 forecast in December. In it, the specialist division of Carlson Wagonlit Travel suggested clients facing mounting cost pressure are “looking for new ways to operate more efficiently and re-evaluating their travel policies.”

The oil and gas industry, in some ways like the mining and marine sectors, has unique types of business travel. The actual travel is but one component of staggeringly complex logistics management. So-called “upstream” operations include exploration, drilling, piping and any other activity needed to find, extract and transport natural resources. A lot of the complexity relates to moving crews around, maybe by the hundreds or thousands, to remote, risky onshore and offshore locations.

Crew rotations involve scheduling, visas and passports, updated training and certifications for health and safety, and so on. Timeliness is key. A tanker may not wait for one late-arriving crew member. An oil rig costs a lot to operate and won’t stay idle because one worker didn’t make a connection.

“You can save them a lot of money on airfares etc., but its about completion — getting the right people into the right places in time,” said Matt Forestieri, U.S.-based director of marine and offshore for Australian travel agency Corporate Travel Management (CTM).

In addition to the obvious cost-cutting achieved by reducing travel, energy companies may consider other methods to lower expenses and realize efficiencies. Some are specific to the sector while others are traditional travel management tactics. They include greater use of marine and offshore fares, new technologies (maybe virtual payment cards) and, perhaps, seeing how travel management companies can help.

At least in the United States, CWT has been the go-to provider. London-based Griffin, recently acquired by Anglo-Dutch TMC ATPI, also has had a presence. Now, several other TMCs are showing interest in the sector.

CTM in the past few years augmented its global energy sector focus by purchasing U.S. agencies TravelCorp, Avia International and USTravel. Expedia’s U.S.-based Egencia unit purchased Via in the Nordics while Australia’s Flight Centre through its FCm brand and U.K.-based HRG also have been boosting activities in energy sector hotbeds. Other TMCs, too, have applied resources to pursue some of the business.

It doesn’t mean oil, gas and related companies will switch TMCs. Those relationships oftentimes are long-lasting, deeply embedded and mutually beneficial. But the cost-cutting focus might push them to entertain options.

Automating Logistics

Perhaps with the help of a TMC or another third party, some energy sector clients are looking to apply new technologies. The idea is to automate otherwise tedious manual tasks, integrate with pre-existing workforce management systems and promote intra-company connectivity. Merging the travel reservations process with logistics requirements is a goal for many.

A good bit has come from work done for mining sector clients by firms in Australia and New Zealand. Some of it could be useful to the wider world of corporate travel and meetings management.

CWT and New Zealand-based Serko each offer a bulk booking tool suited for “fly-in-fly-out” (FIFO) oil, gas and mining crews. They enable users to arrange commercial flights simultaneously for hundreds of workers originating in many different locations, going to the same place and then going back their separate ways. That can save man-hours.

CWT in December also announced a new “one-stop, fully integrated booking solution” to streamline remote site travel management. Built with Australian workforce management solution provider Osmotion, the tool offers travelers “a single traveler itinerary for all their commercial, charter and site logistics.”

Innovating In Payment

Payment processes also need to be up to snuff to accommodate the crucial task of cost allocation. Managing hotel payments in high-risk destinations is a challenge.

“With rig crews, etc., it’s all about charging the right project or cost code,” said HRG director of global partner relationships Susan Lancaster. “We have done a few integrations straight into SAP, to take that booking — that expected charge — and match it. Many companies in this sector employ contractors and so credit cards are not used. Everything is based on billback and invoice and they need to flow that information in daily.”

Virtual cards represent another travel management advance that can help companies in this space. They provide a payment mechanism for travelers not carrying plastic. Employers enjoy better fraud prevention, reconciliation and accounting. Virtual cards also can specify exactly how much workers can spend and on which expense items.

There are challenges. Not all hotels want to (or can) work in this way. “Ideally, virtual cards would be a great solution,” Lancaster said. “We do use them in isolated cases, but they are by no means mature enough in the world yet.”

Customizing Rates

Another nuance of the energy sector is the marine fare (oftentimes used interchangeably with “offshore” fares, though the origins and specifics of the two are a bit different).

Marine and offshore fares are one-way, changeable and refundable. Flexibility is critical for workers going to far-flung places, oftentimes plagued by bad weather or other risks. According to CWT, “more than 40 percent of bookings made in this sector will be rescheduled at least once.”

Fare rules can vary but in general airlines base them on point of origin rather point of sale. “It means other countries in our network can see the fares available, making it a quicker search for our agents,” Lancaster explained.

Marine/offshore fares generally are cheaper than published fares but costlier than typical corporate negotiated fares, which usually don’t offer the same degree of flexibility or baggage allowance.

Not all airlines offer them. American, Delta and United play in the space to different degrees. Delta, along with alliance partners Air France and KLM, may be the most aggressive among the three.

Executives representing those partners presented during a 2013 Global Business Travel Association oil, gas and marine symposium in Copenhagen. At that time, according to the presentation, the marine and offshore business represented about  €800 million in annual revenue, growing at a 5 percent to 10 percent clip. Delta/Air France-KLM claimed it was capturing 25 percent to 30 percent of that market.

Travel agency vet Eric Henderson, who has experience serving the energy sector, noted that “one of the first things Air China and Korean Airlines did when entering the Houston market was offer seaman’s fare contracts to those who could utilize them, and I’d fully expect both EVA and ANA doing the same as they look to secure booking traction for their imminent 2015 entrance into the Houston market.”

Marine fares generally comprise a small portion of an energy company’s travel. It may depend on eligibility. More likely, users are the “boots” — those in the field involved in exploration, drilling and related activities. Sales, marketing and distribution “suits” involved in “downstream” operations typically aren’t eligible.

In many cases, energy, resource and marine companies will use a combination of marine or offshore tickets and lowest available airfares, depending on where and why an employee is traveling, and how airlines are pricing in those markets at that time.

Contractors handle many upstream activities. They range from big players like Halliburton, Schlumberger and Transocean, to smaller companies most never heard of. Not unheard-of, though, is big energy companies integrating contractors into airline and travel programs. Leveraging spend can help both, as well as TMCs that serve the sector.

“Small companies that do cabling, piping, remote operated vehicles — lots of specialist work not done by massive companies — when you combine all the volume like we do, then airlines listen,” said CTM’s Forestieri.

It’s one way to cut costs. Big energy companies may look to optimize their air programs by including more contractors. Another way is to use more marine and offshore fares when possible, and when corporate rates won’t meet needs.

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Rivals, Employees Accuse Flight Centre Of Deceptive Practices

[UPDATE, Sept. 12, 2016: Channel 4 Dispatches on British television in spring 2016 leveled some related accusations. Channel 4 included a Flight Centre response saying the “Dispatches’ allegation that Flight Centre has a policy or culture of applying opportunistic or excessive margins to particular customers or demographics is completely unfounded.” The travel company, though, acknowledged the program may “highlight some isolated behavior that is against our company policies and ethics. We are taking this very seriously and will deal with it immediately.”]

Though they should be a company’s travel confidant, travel agencies can lose their clients’ trust. Consultants and clients sometimes accuse agencies of playing “shell games” with supplier revenue when it should figure into contracts. Travel consumer protection is an industry in itself, though of course not all travel companies are bad actors.

Australia-based Flight Centre is no stranger to consumer protection. It is appealing a December 2013 court decision and AU$11 million penalty for contravening Australia’s Competition and Consumer Act. [UPDATE: Flight Centre has won the appeal. UPDATE, Dec. 15 2016: Flight Centre lost a subsequent appeal to a higher court.] It’s an aggressive company with a wild corporate culture. Leisure travel is its primary focus, with corporate travel accounting for 30 percent of sales. In recent years, Flight Centre introduced in North America a business travel management approach that pushes boundaries. The company is “evolving from a travel management company to a new-age business travel retailer,” according to its latest annual report.

Flight Centre employs an atypical compensation structure. This includes financial incentives that, overtly or otherwise, encourage agents to engage in trickery. Flight Centre calls its compensation program an “attractive remuneration package consisting of base plus uncapped commissions.”

The company makes extensive use of its own negotiated airfares and alternative forms of payment. This opens the door to disguised markups on fares or even exchange fees.

In two cases known to sources, Flight Centre settled disputes with business clients after they uncovered overspending due to agency activity.

Canadian travel agency executives surfaced some of the allegations 10 months ago in an Association of Corporate Travel Executives group on LinkedIn. According to North South Travel general manager Liz Fleming, “some competitors” were “offering low upfront service fees for corporate clients followed by in-house billing of tickets and exchanges in order to conceal large mark-ups.”

Participants in the discussion never named Flight Centre. But several other sources with knowledge of Flight Centre’s agents and clients confirmed that the company has engaged in such activity. Other companies have replicated some of Flight Centre’s tactics to remain competitive, according to sources.

Presented with a list of allegations, Flight Centre defended itself in an email exchange last month.

“We don’t use in-house credit cards to conceal unapproved mark-ups,” according to Flight Centre Canada president Greg Dixon. “We were one of the first agencies to provide clients with credit. In order to do that we would use our own credit card agreement to assume the risk which allowed us to assist our clients with payment terms and in consolidating and reconciling their travel spend. We negotiate with our suppliers to obtain the best fares in the market and then on-sell these at retail to our clients with their approval. We don’t perform a service, then charge a fee and retroactively seek approval. Our standard practice on each occasion is to provide the cost involved and seek the client’s approval to proceed.”

International Air Transport Association Resolution 890 prohibits travel agency use of its own credit card to buy tickets for clients. Dixon indicated that Flight Centre acts “in absolute accordance with IATA regulations and I’m sure you’ll understand if we keep our operational protocols confidential in a highly competitive industry.” Sources suggested airlines can make exceptions to IATA’s rules. An IATA spokesperson did not confirm whether those exceptions can address bulk ticket purchases or net rates.

That Flight Centre does not condone shady practices doesn’t mean its agents don’t use them. According to 16 reviews on jobs site Glassdoor.com by former or current Flight Centre employees — out of 89 total for the company — agents feel pressure to make their income by marking up rates and fees on unsuspecting clients. Here is a sampling of comments.

A lot of travel consultants are not completely ethical when it comes to overcharging people and management turns a blind eye in the name of exceeding sales targets.

Earnings can be great (if you don’t mind marking up fares with abandon and possibly losing accounts if they find out).

Making money means marking up airfare, hotels, whatever you can — charging travelers more than the actual cost.

Compensation plan makes agents mark up the product too high and accounts get upset.

Similar sentiments about Flight Centre are available elsewhere, such as the comments posted at the end of this article. Or this Canada-specific jobs board.

According to the case judgement against Flight Centre in the consumer protection enforcement brought by Australian regulators, agents “enjoyed relative autonomy in their dealings with would-be passengers … a travel consultant was permitted to sell air travel for a fare either above or below the published fare on the GDS.”

Is it unfair or deceptive for an agent to quote a marked-up fare that is higher than what’s available online, knowing the traveler doesn’t, say, use the Internet? Buyer beware, some say.

It may be hard to believe, but something like that can fly undetected in the corporate market. Not all businesses are scrupulous about travel spending, and even if they are, audits can be difficult and expensive. Sources said managers at Flight Centre corporate clients in Canada and in the United Kingdom found nefarious activity through audits.

“Those of us in the TMC end of the business have spent decades building credibility and trust,” noted David Elmy, president of The Travel Group in Vancouver, on the ACTE LinkedIn group. “These guys — particularly one chain — are cannibalizing the reputation legitimate TMCs have built. Corporate clients don’t get it. They just don’t seem to believe they are being ripped off to a shocking degree by these ‘low-fee/no-fee’ entities.”

Flight Centre denied any wrongdoing against clients — or, at least, against contracts with clients.

“We respect and act rigidly in accordance with the contracts we have with our clients and we do not condone inappropriate and unfair practices,” according to the company’s emailed statement. “Our travel managers offer our clients the best available fare based on the travelers’ needs and instructions. We offer a full suite of highly valued offerings, including 24/7 concierge service, for which we charge a fair margin.”

Flight Centre operates several corporate travel brands, including FCm Travel Solutions for larger clients and Corporate Traveller for small and midsize customers. Corporate Traveller has a consumer feel. Related investor material promotes a “choice of payment options” and “no contracts.” Corporate Traveller’s Canadian website highlights “a one-time fee per airline ticket, with no extra service charges for changes, cancellations, hotel or car reservations, after-hours service, reporting or any other services offered.”

Recent financial statements show mainly strong results for the firm’s corporate travel operations in North America. Although profits were down a bit, Canada “delivered good top-line growth” and in fiscal 2013/2014 exceeded CA$1 billion in total transaction value for the first time. The U.S. corporate travel business “has again been the major profit driver and is on track to deliver more than AU$1 billion in total transaction value” in the 2014/2015 year.

Additional info: The Company Dime puts serious consideration into the validity of our sources. We acknowledge deficiencies in using information from anonymous reviewers on job sites. We decided to quote these anonymous sources because about a dozen corporate travel industry sources corroborated the described behavior. We also noted that the comments were unique to this company. Carlson Wagonlit Travel had nearly double and BCD Travel had about the same number of overall Glassdoor.com employee reviews as Flight Centre, but not one of the reviewers on those companies mentioned pressure for mark-ups. Same for Egencia and HRG, with 28 and 18 total reviews, respectively. In choosing to quote these sources, we also considered Glassdoor’s community guidelines.

We declined to describe all of the questionable practices Flight Centre was accused of because we were not comfortable that the evidence we gathered proved their existence. The reader also should understand that while we collected an abundance of secondhand information, we did not acquire a single firsthand account of fraudulent or deceptive behavior. We were told that those who detect it tend to be unwilling to admit they had been hoodwinked. And those who took action and settled are bound by non-disclosure agreements.

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How To Get Executives To Focus On Travel Risk Management

Nothing important gets done without executive buy-in, but what if no one in the C-suite is listening? That’s the conundrum facing some professionals as they try to establish robust travel risk management programs. When regulations or the news don’t get executives’ attention, experts advise giving them something tangible.

“People who have never experienced a crisis don’t often see that it could happen to them,” said Tom Winn, who directs the University of Houston-Downtown master of security management for executives program. “The reality is that they may be right. But you can try to pry them loose for a tabletop exercise or if you have some kind of scorecard.”

travel risk managementAt FCm Travel Solutions, a risk management self-assessment now is part of every annual multinational client review. The travel management company partnered with iJet International to use a light version of its Travel Risk Management Maturity Model. With minimal training, FCm account managers help clients examine their travel risk management programs. Analysts at iJet use the results to create a scorecard report, which clients can review with their execs.

“Getting senior management attention is a broad problem,” said FCm Travel Solutions senior director for global risk management Charles Brossman. “I am often asked, ‘How do I change their perception? How do I get them to pay for risk services?’ You need a business case.”

FCm is the first travel management company to adopt iJet’s self-assessment in this way. Two more agencies are looking at it, said iJet vice president of partnerships and indirect channel development Theresa Thomas.

After an honest assessment, executives may be uncomfortable with what they learn. That’s okay. “A pat on the back does no good,” said Brossman. “Many mature programs are around level three (out of five) for varied reasons. It’s a vehicle for continued process improvement.”

Scenario planning also can make travel risk management more tangible. “It allows people to engage more deeply with the experience and make better future real-life decisions,” according to Anvil Group managing director Matthew Judge. “It allows the team members to reflect and learn in a safe environment.”

Firms can map travel patterns against actual historical crises to bring real-world feel to the hypothetical.

According to Shell International global travel security specialist Jan Visser, “Outlining how much business travel takes place and what destinations are visited and what can happen in those destinations — combined with real life incident examples — are great triggers to start a conversation at the board level.”

Scenarios don’t have to involve bombings and machine guns.

“It’s much more likely that a traveler gets sick,” said Winn. “Then there’s the cost of getting them help, and the business they’re not doing.”

Some of the biggest challenges could be related to perception. Senior execs may not think of risk management as a core travel management component. Can travel professionals speak “security”?

Travel pros should seek interdepartmental collaboration. Members of risk management, security, legal or safety departments ought to be willing to explore common ground.

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More Duty Of Care Laws Coming

Duty of care is a top priority for travel managers, and doing it right means complying with all local rules where employees travel. Legislation and labor codes with travel safety provisions exist in several countries, including China, France, the Netherlands, Singapore, the United Kingdom and parts of Australia. More are set to take effect this year in New Zealand and possibly another Australian jurisdiction.

The primary purpose of such legislation is to make organizations and their leaders more responsible — and accountable — for worker safety. Criminal prosecution and steep fines may scare many into compliance. In some cases, the laws apply not only to businesses based in that country, but also those based elsewhere that have operations in or send employees to that country. They also may apply when a traveler from an organization based in a country under such law runs into trouble elsewhere.

corporate manslaughterAccording to experts speaking during a September 2014 webcast conducted by New Zealand-based tech firm Serko, corporations and their travel service providers have plenty of obligations. That means being more proactive and diligent in addressing corporate travel risk.

Alena Titterton, a partner at law firm Norton Rose Fulbright Australia, said companies must develop and maintain travel policies addressing health, safety and security. She said they should provide instruction to individuals on how to use travel risk systems and processes.

Titterton also suggested organizations vet travel service providers’ safety and security credentials during the procurement process. She explained that travel agencies have obligations too, and clients should know them.

Tony Ridley, CEO of consultancy Intelligent Travel, agreed that agencies must take part in travel risk mitigation. “If you are part of the mechanism that put people at risk, that’s a duty shared,” he said, “and your exposure to that begins for many at the pre-travel process.”

Seven of nine Australian jurisdictions in the past few years have implemented Work Health and Safety laws. In a nutshell, employers must do all that is “reasonably practicable” to keep workers from harm.

In Western Australia, a draft version is open to public comment through the end of this month.  [The government in Victoria (home to Melbourne) announced the state “will not adopt the national model workplace health and safety laws in their current form. Existing occupational health and safety laws and regulations remain in effect.”]

In New Zealand, the federal government expects the similar Health and Safety at Work Act to take effect in the second half of this year.

Meeting Standards

Research suggests that when countries codify risk management into law, travel managers and other corporate executives working in those countries take notice. AirPlus in a late 2013 U.K. travel manager survey found traveler safety to be the most established of 14 trends listed.

In a post to its website last year, Covington Travel wrote that the U.K.’s 2007 Corporate Manslaughter Act “has become the standard for corporate travel safety worldwide,” but cautioned that liability is a complex issue.

According to a 2013 Carlson Wagonlit Travel report on travel manager priorities, “Given that companies can be held to account by local and/or foreign laws, it is advisable for them to apply the highest possible standards of duty of care in all the countries in which they operate.”

CWT highlighted the France Labor Code as “particularly strict,” noting that “employees are considered to be at work at all times during a trip, meaning that any injuries incurred by business travelers are work-related in the eyes of the law.” CWT added that in the Netherlands, employers must “provide travelers with advance written information on possible risks linked to foreign assignments.”

Intelligent Travel’s Ridley said duty of care diligence in relation to travel all comes down to a “demonstrable process.”

“Fundamentally many organizations have either anchored themselves to a belief, or a process or a legacy application and have fallen well short of the legislation and some of the basic requirements,” he said. “Most organizations are not applying the appropriate standards and methodologies to travel. It’s not about the maturity of the model, its about meeting the standards.”

Some relevant legislation and resources:

Australia: Work Health and Safety Act 2011 and Safe Work Australia

China: Criminal law

New Zealand: Workplace Health And Safety Reform

Singapore: A Guide to the Workplace Safety and Health Act

United Kingdom: Corporate Manslaughter and Corporate Homicide Act 2007 and FAQ

[Note: This article originally included a listing of state U.S. workers’ compensation laws, but we deleted them after travel industry lawyer Mark Pestronk pointed out in our LinkedIn Group here (subscribers only) that they’re not related to duty of care.]
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New Client Database Could Alter American Express Global Business Travel’s Integration With Booking Tools

American Express Global Business Travel is planning a new client database that could change how booking tools, agents and mobile devices connect. Benefits would include a more consistent traveler experience and improved travel disruption management.

This repository of client policies and preferences is the top priority in a tech vision that the company expects to nail down by the end of the second quarter. New products and services will emerge this year, but execution of the bigger plan could take longer. “My experience is that you never do complicated core systems in less than one year,” said new GBT chief technology officer Philippe Chereque. “And more than two years can happen.”

Philippe Chereque

American Express Global Business Travel CTO Philippe Chereque
Photo courtesy of Amadeus

After pulling together most of its executive team last year, GBT also is assembling a technology and products team. Last month the company appointed consultant and former mobile app developer Evan Konwiser as vice president, digital traveler.

Chereque has been meeting with customers for feedback on the emerging tech plan. Several large clients told The Company Dime they want to know what GBT is doing with the $900 million invested in the GBT joint venture last year.

One spending area is signing bonuses for large clients. Sources said GBT recently retained Johnson & Johnson, Microsoft and Philips, among others.

Customers also are curious about how GBT will confront booking leakage and improve data reporting quality.

Chereque talked about several technology topics in an exclusive interview last month, but also said a lot remains undetermined. He said the new client database could mean a significant change in how GBT interacts with online booking tools. At issue is the often-unreliable synchronization that occurs between travel agency systems and booking tools. Travel management companies track client policies, preferred suppliers, pre-trip approval workflows, corporate hierarchies, cost centers, project codes, payment procedures, traveler preferences and other facets. These can differ across markets for GBT’s multinational clients, creating significant complexity. Today, when a traveler books online and later calls an agent, customer profile information available to that agent may not match what’s in the booking tool.

“I want to define what I will call a multichannel global platform,” said Chereque. “The OBT is one channel, but if you look at corporate travel, some travel management also is offline or uses the digital hardware or terminals the traveler is carrying. The functions on the three channels could be different, but the information has to be the same. With this core strategy, our partners have to understand they will have to synchronize with us [using web services]. I doubt they will all like it. We’re talking to our customers and then when the core strategy is decided, we’ll talk to the OBTs and see how we play together.”

GBT isn’t the only travel management company with such thoughts. For example, Carlson Wagonlit Travel senior vice president for global marketing Nick Vournakis in November described something similar: “We need to be omnichannel and offer a consistent experience.” He talked about a “big blender” for trip info, profiles, policies and social data to help CWT “participate in the future digital economy.”

Budgeting And Building Or Buying

GBT’s Chereque said that if a “multi-GDS, multi-market” database already existed, GBT would buy it. Instead, the company must determine the extent to which it will engage a development partner. As with other possible initiatives, such as new data reporting functionality, building versus buying will depend on the desire for speed to market and competitive differentiation.

One example of a differentiator is GBT’s Digital Travel Record. GDS bookings and card transaction data enable traveler messaging, pre-trip auditing and risk management. Chereque said DTR will continue to be a key part of the tech mix.

As a former top Amadeus executive, Chereque is well-versed in airline technology. He’s “looking very closely” at how GBT can better service travelers in the event of flight disruptions by integrating with airline systems. “Amadeus and Sabre host most airlines, and I believe technically it’s feasible,” he said. “When weather or a strike or volcano or whatever delays your flight, you’d like to have the answer on your mobile rather than going to the airline desk or calling someone. It should tell you we rebooked your hotel and changed your car, etc.” Chereque argued that time spent by travelers dealing with disruption can be a big hidden cost.

He did not to reveal his budget for technology: “It depends on the make or buy decision, how fast we want to go, how clever or unique the product is. If you buy a license, you spend a different amount of money. So all these questions have not been answered yet.”

One thing GBT won’t reengineer is the passenger name record. “We don’t want to rebuild the GDS or direct connectivity to airlines,” Chereque said. “I don’t believe in the box on top of the box. There are too many problems with synchronization and availability. We need to answer what corporations want to do, but I personally believe it’s our duty to show them what’s efficient or not. If the corporations believe they find a fare on a website we cannot provide, we need to find a solution for that but I’m not convinced open booking is that solution. We should not develop unnecessary technical solutions to solve financial flaws or issues. To build something else always costs more and someone will have to pay for it.”

Even so, he did acknowledge a potential need to invest in better access to hotel content.

A Deep Bench

Chereque has no shortage of management experience around him. The bench is deep enough to warrant doubts about too many cooks.

GBT’s chairman is industry veteran Greg O’Hara (Sabre, Worldspan, One Equity Partners). Former American Express Company exec Bill Glenn is president and CEO. GBT chief administrative officer Patrick Bourke has a key role. Chief legal officer and corporate secretary Eric Bock joined from Travelport. Chief human resources officer JoAnne Kruse spent about a decade at Cendant/Travelport. GBT also hired former Hertz head of sales and marketing Elyes Mrad to be managing director for EMEA. Former Radius exec Kieran Hartwell is vice president and general manager for EMEA multinational sales.

Andrew Winterton of American Express and Carlson Wagonlit Travel fame and Expedia’s Dhiren Fonseca now are partners at private equity firm Certares. Led by founder and managing director O’Hara, Certares last year joined with BlackRock, the Qatar Investment Authority and Macquarie Capital to buy half of GBT for about $900 million. American Express Company retained the other half.

Certares also owns part of Travel Leaders, whose chairman Mike Batt is a Certares advisor.

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Travel Coordinator Busted Using Company Points For Personal Travel

Small business programs can help companies without negotiating clout get something from travel suppliers in return for their business. But like anything else, they’re vulnerable to fraud if no one is minding the store.

That’s the situation at shipbuilder Austal. A defense contractor with a U.S. base of operations in Mobile, Ala., the company last year sued one of its travel coordinators for using Delta SkyBonus points for $56,000 in personal travel. Like many airlines, Delta rewards points to enrolled organizations when they buy tickets. Those points are redeemable for future travel. It’s a frequent flyer program for companies.

Loyalty program fraudAustal signed up in 2003, according to documents filed as part of the case in the U.S. District Court in Southern Alabama. Defendant Courtney du Plessis worked as a travel coordinator for the company starting in February 2012. According to the U.S. Attorney’s Office, du Plessis shortly thereafter began using Austal’s SkyBonus points to book personal travel for herself and others “without her employer’s authorization or knowledge.” Those actions “depleted the account of most of the points stored.”

The defense claimed that while Austal prohibited employees from using SkyBonus points for personal travel, the company never told du Plessis of that policy. In striking a deal in September 2014 after an initial not guilty plea, the defense acknowledged the company also never expressly permitted such behavior.

Now employed by Carnival Cruise Lines, du Plessis as part of the plea agreement admitted she “effected transactions with one or more access devices issued to another person or persons [the company’s SkyBonus account and accrued points] to get things of value totaling $1,000 or more during a one-year period.”

The court scheduled sentencing for January 16. It will decide how much, if any, prison time du Plessis will face. The maximum for her offense is 15 years behind bars and a financial penalty of as much as $250,000.

There’s also mandatory restitution for this offense, to be determined by the court. That raises questions about what loyalty program points are worth.

Austal initially sought $56,570, reflecting the value of the tickets du Plessis booked, but then cut that to about $29,000. The defense argued that the court “should calculate the actual or intended loss in determining an adjustment,” i.e. the value of the points to Austal rather than the value of the tickets purchased.

The defense hired Gary Leff as its loyalty program expert to help calculate the value of the 5.26 million SkyBonus points du Plessis redeemed. In his assessment filed with the court, Leff wrote that “Delta SkyBonus points cannot be said to have a cash value for the company.” He added that “it’s impossible to put a precise valuation on something as amorphous as points that cannot be transferred, which are not property and for which there is no ready market.”

But he made the attempt. Leff determined that a SkyBonus point is worth four or five times less than an individual Delta SkyMiles frequent flyer point. A SkyMile point, he contended, is worth between a penny and a penny and a half. All that math ends with a midpoint restitution estimate of $13,150.

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Disruptors Turn To Veteran Travel Managers For A Little Order

[UPDATE, April 8, 2016: We published new information related to this article here.]

Disintermediation of distributors gets a lot of attention, but the corporate travel profession also has doomsayers. Fears abound on outsourcing, realignment to procurement, generational challenges and technological change.

Mobile computing has disempowered corporate policies and mechanisms of all sorts. Industry discourse has turned to “traveler-centric” management. Adjusting to a more empowered business traveler could put the travel manager out of the picture. Yet, recent hiring activity by some of disruption’s darlings shows traveler centrism doesn’t mean no travel manager.

Tesla Motors last month posted an opening for a “seasoned” corporate travel manager to build a new program. The upstart car company wants someone with at least a decade of experience to run an in-house ARC-accredited Corporate Travel Department. Tesla is looking for “unparalleled service and choice … and to make Tesla more mobile, more cost effective and more fun!” Tesla’s ad notes that the manager of its “innovative,” “sustainable,” “exciting” and “cool” travel program will need “personality.”

Tesla won’t be a stranger to the nuts and bolts, and plans to measure program adoption and compliance, cost savings and customer satisfaction. Beyond the basics, a good cultural fit for new hires is essential at firms on a mission to shake up their industries.

Dropbox, Uber and Workday this year hired experienced travel managers and buyers to build new programs.

Netflix Headquarters

Netflix Headquarters

Also a marquee disruptor, Netflix emphasizes “freedom and responsibility” in its management philosophy. Several years ago it revealed a five-word travel policy: “Act in Netflix’s best interest.” The company last year sought a manager to handle card and travel agency operations, among other areas. It’s looking for a cost-conscious but “high-quality” travel experience for employees.

Sean Parham joined eight year-old Riot Games a few months ago to build a new travel program. “Tech companies like mine are looking at travel as a personal commodity,” said Parham, whose title is global travel wizard. “It’s really about the traveler experience.” When it comes to travel, Riot Games prioritizes safety, satisfaction and savings, in that order, he said.

The immediate travel management problem many of these companies aim to fix is chaos. They’re dealing with multiple travel agencies and card programs, and may have no written policies. As companies grow beyond about 1,000 employees, many find they need a travel manager to, as one of them said, “stop the madness.”

Travel management at such firms is not the same as in a decades-old bank or manufacturing company. There are unique challenges for travel managers running new programs in young, hard-charging cultures. Despite the potential cost savings, for example, it’s particularly difficult to establish policies with teeth. Weaning firms in talent-strapped industries off high classes of travel service also can be a struggle.

CWT Solutions Group national sales director Chris Slagle addressed traveler-centric management at a 2013 GBTA Canada event. According to Slagle, this approach requires “acknowledging the movement of the traveler to the center of the buying decision.” It means recognizing that huge volumes of content and social feedback inform that decision. And it accepts that corporate policies are not priorities for employees with a “new level of confidence in buying choices.”

Slagle suggested companies in such a position focus on flexible travel policies, emphasize duty of care, use demographic studies to rethink traveler behavior and review the travel department’s communications strategy.

In Demand?

A few examples of newish companies hiring travel managers and buyers doesn’t counter the personal observations and concerns of some longtime travel professionals. “I’m seeing so many of my fellow travel managers leaving on their own or being ‘invited’ to leave the position,” said Kevin Maguire, a Global Business Travel Association board member and travel director at HGST Inc. Mike Lyons is regional head of travel services at HSBC and also United States regional chair for the Association of Corporate Travel Executives. “I don’t see a lot of new ‘young blood’ travel managers,” said Lyons. “That’s worrisome.”

Available research is inconclusive. The U.S. Bureau of Labor Statistics tracks occupational health but doesn’t have a category for travel manager or travel buyer. BLS expects employment of financial managers to grow 9 percent by 2022. Its prediction for administrative services managers is 12 percent and for meeting and event planners is 33 percent. But employment of purchasing managers, buyers and purchasing agents will grow by 4 percent, less than half the average. And BLS expects employment of travel agents to fall by 12 percent through 2022.

Salary surveys by Business Travel News and GBTA show rising compensation for travel management pros in recent years. That could be a sign of higher demand for the travel management function. Yet, there also appears to be plenty of competition for openings. Within three weeks of its posting, the Tesla job had more than 70 applicants, according to LinkedIn.

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