'Fly thrifty,' companies are telling executives on the go
Until recently, when a Hart Schaffner & Marx executive ordered airline tickets he could pass up a 7 a.m. bargain fare in favor of a costlier flight at a more civilized hour and no one at the office would know.
But now the clothing manufacturer gets a computerized report from its travel agent indicating whenever a manager has not taken the lowest fare. If an executive knows his boss will find out, ''soon his schedule will change and he'll get up for the flight, says Kay C. Nalbach, corporate director of administration at the Chicago-based company. ''This report will be very helpful in controlling expenses.''
With profits under pressure from the recession, a growing number of US companies are seeking ways to trim the $8,400 the typical executive traveler spends on the road each year. As a result, the relative freedom managers used to enjoy to pick their own flights and hotel accommodations is being curtailed.
''With the increasing cost of travel and the economy the way it is, companies are under pressure'' to make sure travel funds are spent efficiently, notes Edmund Rathke, chairman of the National Passenger Traffic Association, a group of corporate travel managers.
Companies are trimming their transportation and entertainment costs by:
* Forming new relationships with travel agencies. Some companies, like Aetna Life & Casualty, have arranged to have the cost of a corporate travel department partly paid for by the firm's travel agent.
* Developing more detailed reports on where their travel dollar is spent, thus allowing the company to negotiate for fatter discounts from hotels and car rental agencies.
* Cutting frills like first-class seats and in-house car pools. Shell Oil, for example, recently eliminated its fleet of 35 pool cars and now rents vehicles when they are needed.
* Keeping a tighter watch on cash advances. More companies are issuing credit cards to cut down on the cash they have to give travelers.
Travel costs are a fertile area for cost cutting. They have been rising faster than inflation since 1973-74, when the price of oil quadrupled. Travel and entertainment costs spurted 13 percent in 1980 and soared 18 percent in 1981 , according to American Express Company data. The card issuer expects businesses to spend $70 billion on travel-related items this year. And that sum does not include associated administrative and accounting expenses.
One way to cut administrative expenses is to have a travel agency help pay the cost of running a corporate travel department. Aetna has such an arrangement with a Hartford, Conn., travel agency. The agency has in effect set up a special branch office on Aetna's premises. But this so-called ''in plant'' branch is staffed by Aetna employees.
''At the end of every month we send the agent a bill for the cost of the service - salaries, benefits, rent, heat, and light,'' says Mr. Rathke, who in addition to his position with the Passenger Traffic Association is also senior administrator of corporate travel services at Aetna. The travel agency gets the money to pay Aetna from the commissions it earns on tickets written in the branch office.
Airlines will pay only a 3 percent commission on domestic travel to such an in-plant branch, whereas a 9.9 average commission is paid on regular business. So a corporation must generate about $1 million in commissions before a travel agency will set up an in-plant branch.
But even companies that do not generate enough commissions for such an arrangement are finding new ways to save money. Kay Nalbach at Hart Schaffner & Marx expects ''an immediate 15 percent reduction in travel costs'' by switching from an inside ticket clerk to an outside agency that specializes in business travel. The agency assigns specialists full time to companies on the basis of the commission income they generate. The clothing manufacturer will have two specialists working full time on its travel arrangements. It sees much of the expected savings coming from the agents' ability to make sure the company is paying the lowest available fare.
Companies are also asking travel agents to provide detailed reports on expenses so waste can be spotted and larger discounts negotiated from vendors.
''You have got to know what you are spending to have the leverage for discounts,'' says Jeanie M. Thompson-Smith, a Washington, D.C.-based corporate travel consultant. Generally, if a company gives an individual hotel 100 nights of business a year, it can negotiate for a price lower than the typical corporate rate.
Until now, corporate control of travel expenses has not been as tight as it might have been, a new American Express survey shows. Of 1,300 companies that responded to its questions, 43 percent had no written travel policy to guide employees. And some 15 percent were still using travel agencies that did not have access to computerized reservation equipment. Without such equipment it is difficult for an agent to offer the lowest fare, given the rapid price changes brought on by airline deregulation.
While tighter regulations will crimp corporate travelers' freedom, there has been little grumbling - at least out loud. Says Aetna manager Rathke, ''Employees recognize there is a problem. Costs are going up. We haven't gotten grief'' over a recent decision to drop first-class air travel. How companies reimburse travel costs Average mileage allowance for use of personal car: 20 cents Average per diem meal allowance (domestic travel): $22.00 Average per diem meal allowance (international travel): $30.00 Average cost of one week of travel: $730.00 Source: American Express Company