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

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

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

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

4. Why Did We Elect To Manage Travel?Answer: Untapped Area of Spend

5. Travel & Expense Assessment Findings (2008) • $28 - $30M annual spend • 25,000 expense reports filed annually • Opportunities existed to: • Provide guidance and assistance to travelers • Increase process efficiencies • Decrease environmental impact • Reduce departmental and grant-related travel costs • Travel is a complex spend category; very personal in nature (no surprise)

6. What We Did to Manage Travel

7. Comprehensive travel program: • Managed by Procurement Services • Considerations: • Travel Management Company • Booking • Expense Reports • Travel Card • Travel Vendors

8. Quantify the Opportunity * Results of a 2008 Strategic Sourcing Assessment with Huron.

9. Know Your Campus - Savings Drivers Procurement Dependent Behavior Dependent • Travel Card Rebate • Aggregate card spend (with Chase)   • Negotiate best financial terms   • Increase utilization of travel card   • Travel Supplier Contract Discounts • Establish agreements with travel suppliers   • Negotiate best financial terms   • Drive spend to contracted suppliers   • Behavior Changes/Demand Management • Reduce last-minute bookings   • Choose lower cost travel options   • Avoid 3rd party transaction fees   Driven/influenced by travelND/ATI

10. Meeting the Strategic Sourcing Goals

11. Learn the Industry • Resources • Global Business Travel Association (GBTA) • Society for Collegiate Travel and Expense Management (SCTEM) • Travel Publications and Blogs – Scott Gillespie, Travel Procurement Magazine • Partner with your Travel Management Company (TMC) • Meet with your travel reps

12. Airline Discounts

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

14. Fare Basis/Class of Service F A J D I Y B M H K L U T Highest Price Few Restrictions Deeper Discounts First Business Economy Less Discounted Many Restrictions Lowest Price

15. Fare Market Share • Neutral share – probability a traveler will use an airline in a given market • Ignores price and loyalty programs • Based on each airline’s schedule in each city pair • Airlines use a service by PRISM to get data • GDS data • Direct Connect data not included

16. What Makes an Airline Soar? • Movement and profit margin drive discounts • FMS – what can an airline reasonably expect to gain • Higher Ed. only has a chance of changing FMS significantly if they mandate specific airline • ND increased Delta’s market share by 10 points = $78K savings with contract • Don’t overpromise (must be reasonable and possible) • United has current market share of 25% and Delta has 40%; I can’t reasonably or realistically promise each of them 70%

17. Business Case: Airfare Analysis – UND Spend By Carrier

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

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

20. Get the (Bed) Bugs Out of Hotel Negotiations

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

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

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

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

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

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

27. How to Cluster L • Step one: Plot the high-stay/preferred H U H • Step two: Plot the low-stay hotels H L L U • Step three: Look for the clusters U • Step four: Bring the unused hotels into the cluster L H • Step five: Identify and eliminate the orphan hotels H

28. Hidden Benefits in Ground Transportation

29. There’s More to a Contract than Price Car Rental Contracts: • Discounted rates (web fares may be lower) Added value in negotiated contracts • Younger driver concessions • Discounted GPS • Reduced city surcharges • Status matching • Discounted one-way rates

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

31. Lessons Learned

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

33. Notre Dame’s Approach • Centrally funded ATI to drive usage to Agency (8/10) • T-card charges flow into ER • Allow choice • Assumed ER usage will drive travel usage • Availability of travel data for expense reports • Agency fee no longer applied to individual budgets • Contract pricing available • Choice and convenience in booking • Phased roll out of Expense and Travel beginning 10/2010 • Mandated Use of Expense 7/1/2011

34. Lessons Learned - Travel Really is Personal • Behavior is hard to change unless mandated • Don’t make life too easy, then ask them to change • Eliminated Agency Service fee which increased usage of Agency • Our intention was to gain data before we implemented on-line tool • Then we asked them to do their own bookings • Look what happened!

35. Travel Booking Vision

36. Reality

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