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Old corporate travel policies won't fly

Dragged down by the ailing technology sector, traditional businesses have been forced to hunt for ways to cut fat--and travel budgets are a likely place to start, analysts say.

A growing number of businesses looking to cut costs are requiring employees to go online to book business travel.

"Anytime you can take a person out of the equation and automate a process you're going to be more efficient," said Rusty Carpenter, general manager of American Expess Consulting, which advises companies on lowering overhead.

In such mean economic times, companies want to be lean. Dragged down by the ailing technology sector, the sliding economy is forcing traditional businesses to hunt for ways to cut fat. Travel budgets, which analysts say ballooned during the past decade's boom times, were a likely place to start.

Last week, Oracle announced that its new mandatory online travel policy will save the company about $16 million this year and more than $100 million over the next five years. First Union Bank, Xerox and 3Com have mandated the use of the Web to purchase travel fare and say that their new policies can help chop between 10 percent and 20 percent off travel costs.

According to Carpenter, large and medium-sized businesses spent $157 billion last year on travel.

Online travel is one of the most robust sectors of the Web, with continued growth and demand even as the stock market has dropped and hundreds of dot-com businesses have been wiped out.

Now corporate America is figuring out what the tens of thousands of consumers supporting that sector learned years ago: Online travel sites are an easy and effective way to locate low prices.

One reason companies are switching to Web-based travel agencies is that automated systems allow an agency to find fares for customers free of charge. Offline travel agencies, which must pay travel agents, charge transaction fees.

Tools of the trade
Costs are further cut by "corporate booking tools," which allow companies to better monitor their employees' travel plans. Installed in a company's intranet, the booking tools allow employees to shop online for travel fares just like they would at Web travel agencies such as Expedia or Travelocity. The difference is that the booking tools allow a company to insert its travel policy into the system, and it prevents any free-spending employees from violating the policy.

When a business traveler presses the "enter" key on a high-price ticket, the booking tool can alert the traveler that the purchase is in violation. Several of these systems, which are offered by companies such as GetThere, TRX and eTravel.com, can also snitch to the traveler's boss.

see special report: E-travel's unfriendly skies If a company chooses, it can elect to be notified by e-mail when an employee makes an unauthorized purchase.

"Corporations and their travel managers realize they've got to use these booking tools," said Kate Rice, an analyst with travel research group PhocusWright. "If they haven't used them, they are going to."

Stricter travel policies follow years of frustration by companies over workers who ignored travel policies. In addition, corporate travel has a reputation for being far more expensive than just booking travel plans independently.

A common practice by companies that spend a lot on travel is to strike preferred-pricing deals with airlines, hotels and rental car companies in exchange for a guarantee that their employees will patronize them. But for years, employees have booked fares with their preferred airline or rental car company--and there were few ways for employers to monitor whether employees were buying the lowest-cost fare or honoring travel policies.

"Travelers will make up any excuse at all to avoid traveling on a carrier so they can stick to their preferred airlines," said Josh Friedman, a senior analyst for research group IDC. "Most often, their preferred airline is the one issuing them frequent-flyer miles."

With booking tools, that kind of conflict won't fly any longer.

The appeal of the agent
But some analysts see serious flaws with the booking tools. They question whether the company is best served by having workers who travel--often high-level executives--spend valuable time surfing the Net for the cheapest deal on a rental Ford compact.

It might be prove less expensive in the long run to pay a travel agent to search, said Friedman. A former travel agent himself, Friedman said technology can never replace a human when it comes to understanding another human's travel needs.

He also questions the strategy of restricting workers to booking only fares with the carriers and hotels the company mandates. Doing so eliminates the possibility of the employee finding rock-bottom prices that sometimes surface on the Web.

"These booking systems don't have the same capacity to analyze variables that a human does," he said. "The technology isn't there yet. In the long run, I'm not convinced that they can save companies any money at all."

The long run is precisely where proponents of online booking systems say they can save companies the most money.

The booking tools will also help companies to guarantee the airline or hotel chain they've negotiated preferred prices with a certain amount of business, and that means better terms for the company, said Jeff Palmer, chief operating officer of GetThere.

Once the companies get a track record using the system, they can drive an even better bargain when negotiating preferred prices in the future, he said. And the time issue isn't that critical, he said, pointing to studies that show that employees quickly find and buy lower-priced tickets online.

"Their behavior shifts and they become much more interested in finding the best deal," Palmer said. "Instead of just telling an agent what times they want to arrive or depart, they put together many more variables when doing it themselves.

"They might be open to leaving from a different airport or open to juggling their schedules," he added. "These are questions that a travel agent many times doesn't have the time to ask."

Elaine Triggs, director of travel services at First Union Bank, says she is excited that employees have taken to ordering airfare online. The company had hoped to see about 30 percent of its employees booking over the Web; Triggs said the number has topped 40 percent. Before changing the travel policy on Jan. 1, less than 1 percent booked tickets online.

Besides trimming direct travel costs, First Union is seeing savings in indirect areas such as telephone bills and the cost of fax paper.

"We've saved $5,000 a month alone on faxes now that we get far fewer paper confirmations," Triggs said. "Most come by e-mail now."

In the end, it's the company that pays for the travel, said PhocusWright's Rice, and it "should a have a say in how (the money is) spent."