SMART WAYS TO CUT TRAVEL COSTS Companies that force employees to fly Chapter 11 Airlines and stay at Motel 0 are on the wrong track. The trick is to save money without making travel more of a hassle.
By Alan Deutschman REPORTER ASSOCIATE William E. Sheeline

(FORTUNE Magazine) – JOHN SUNUNU isn't the only manager whose expense account is coming under close scrutiny these days. Companies are pushing harder than ever to make sure that business trips are really necessary -- and trying to cut the tab when employees do travel. How bad can it get? Michael Woodward, the top travel consultant at American Express, says that some FORTUNE 500 outfits have stopped picking up the lunch check for corporatchiks on the road (company names withheld to protect the guilty). Matters aren't likely to improve. Runzheimer International, a consulting firm based in Northbrook, Illinois, predicts air fares will rise nearly 40% by 1995, propelled by government's appetite for tax increases and reduced competition as major carriers die off. And tighter controls on travel aren't likely to be lifted even after the economy picks up. ''Travel policy never moves backwards,'' says Laurie Berger, editor-in-chief of Corporate Travel magazine. ''No one ever says, 'Guess what, you can go first-class again.' '' The good news is that smart companies can save big money without making travel significantly less comfortable or convenient. In fact, that's just about the only means of achieving real savings, since employees are sure to find ways around policies that condemn them to wait endlessly in Hades Terminal B for a connecting flight on Chapter 11 Airlines. One of the newest and most popular strategies is to strike special deals with travel suppliers by proving you can steer them enough business to improve their lot significantly. Hotels, which lost an average $125 a room last year, and airlines, whose earnings continue to fall at the speed of sound, are ready to listen. ''The customer today has tremendous leverage,'' says Roger Ballou, president of Amex's travel services group. We're not talking here about the modest generic discounts available to anybody who whispers the words ''corporate rate'' in a travel agent's ear. Think bigger: Airlines are willing to make deals that can save companies 45% to 60% off regular coach fare. Major carriers won't publicly admit to the practice, and these alluring deals don't show up on travel agents' computer reservation screens. But according to Topaz Enterprises, an independent consulting and auditing firm in Portland, Oregon, more than 20% of corporate tickets in the first quarter of 1991 were bought for such ''negotiated fares'' -- more than for any other fare category (see chart, following page). Among hoteliers, room rates up to 40% cheaper than the nominal ''corporate'' tariff are merely the beginning. Gerard Smith, Northrop's corporate travel administrator and one of the nascent profession's top hagglers, has a long list of amenities he often gets his company's voyagers for free: upgrades to bigger rooms, breakfast and newspaper delivery, local phone calls, shoeshines. You can't just call an airline or hotel manager and demand this kind of discount. To flex their bargaining muscle, companies must first compile hard data on things like the number of flights their people take between cities and how many nights their employees spend in each. Don't assume your CFO knows these figures. Legions of otherwise careful and sophisticated companies are surprisingly clueless about how their travel and entertainment dollars get spent.

The easiest way to amass the facts on your company's travel patterns is to consolidate bookings through a single travel agency, which can use its computerized management information system to spit out nifty statistics on command. Corporate Travel's 1991 survey of the top 100 companies on the FORTUNE 500 found that two-thirds now purchase travel through only one or two agencies, a 15% increase from the previous year. Mega-agencies control 78% of this elite market: American Express leads with a 30% share, followed by Minneapolis's Carlson Travel Network (12%), Philadelphia's Rosenbluth Travel (8%), and IVI Travel near Chicago (7%). All right, you have armed yourself with detailed analyses of your company's travel patterns (ho boy, 2,000 room-nights a year at the Beverly Hills Hotel), dazzled the airlines and hotels with win-win negotiating tactics, and gotten some fat discounts. Now comes the hard part: proving you can actually fill those metal hulls and beige chambers with warm bodies. To get employees to use the suppliers you've contracted with, it isn't enough to circulate lists of approved hotels or airlines. Says Hal Rosenbluth, the fourth-generation head of his family's big agency: ''Companies have so many memos. The travel memo is the last one you're going to look at.'' He recommends that instead you influence the decision at the point of sale -- when an employee calls the travel department or agency to book the trip. Such a conversation might go like this: Susan Schlepper says, ''I'm going to Duluth, so please make a reservation for me at the Excelsior, where I always stay.'' Canny Agent, trained in salespersonship and prompted by a computer, responds sweetly: ''Wouldn't you rather try the charming Hotel Moderato, right across the street. We can get you a bigger room, a free breakfast and Wall Street Journal, and it costs $30 less a night, so your boss will be happy.'' If subtle persuasion doesn't work, you can always resort to force. An agency can program a client's travel policies into its computer and report on employees who try to get around the guidelines -- before these miscreants get out of town on company funds. But most employers are reluctant to make like Big Brother on this front. An exception: government contractors, which operate under strict federally imposed rules. At Northrop, only five senior executives can grant exemptions to its hotel policy, which emphasizes reasonably priced caravansaries.

WITH EITHER approach, try to clarify what are often ambiguous or unworkable travel policies. In a recent survey, American Express found that 25% of companies that require travelers to take the ''lowest logical air fare'' never bother to explain what they mean. Is it ''logical'' to fly first-class instead of coach if you're traveling with a client -- or you're 6 1/2 feet tall and weigh 300 pounds? Does it make sense to take a longer flight with acrobatic connections if you're only going to save $100? What about $200? If the company doesn't put together a clear, fair set of rules -- perhaps drawn up by an interdepartmental ''travel council'' like the ones that exist at Ford, PepsiCo, and Motorola -- then managers are free to approve all kinds of ad hoc exceptions, especially for themselves and their cronies (hence those 2,000 nights at the Beverly Hills Hotel). This is not the best way to promote careful travel management. Says Corporate Travel editor Berger: ''A lot of CEOs and top managers fly coach. Whatever the CEO does filters down. If you want people in your company to make sacrifices, you have to make them yourself.'' An alternative to bludgeoning the rank and file into obedience is to create incentives for them to share in the savings. Scott Paper is thinking about offering employees $45 a night if they stay at a friend's place instead of a hotel. At Unisys, employees who use their frequent-flier points to travel on business now get paid half what those tickets would have cost the company. A happy surprise: Running a small fleet of corporate aircraft can prove a cost-saving measure if plants and offices in far-flung cities are not served by frequent and reasonably priced commercial flights. Texaco has doubled passenger volume on its eight corporate aircraft. Adopting this option doesn't require a covey of $25 million Gulfstream IVs with showers -- just some $2 million King Air turboprops that seat six to ten. The trick is to fill them with employees of any rank who need to fly, not just top officers. At BellSouth ''you might see a telephone repairman sitting next to the chairman,'' says John Riener, president of Carlson's business travel group, which advises the Baby Bell. The most effective way to reduce travel costs is, of course, simply to travel less. The Amex survey found that between 1988 and 1990 the percentage of companies relying on long-distance phone calls in situations where employees used to travel rose from 45% to 55%. This trend may be accelerating. The Gulf crisis ushered in a stay-at-home mentality, and legions of office potatoes still haven't gotten off their swivel chairs. ''CFOs are saying, 'We ! didn't travel during the war -- and it wasn't so bad,' '' observes Brent Garback of Total Travel Management in Troy, Michigan. Hyatt President Darryl Hartley-Leonard told a gathering of hoteliers in April that the war lulled executives into believing that they could get by with just a phone and fax machine. Now if only someone would invent a fax with a minibar . . .

CHART: NOT AVAILABLE CREDIT: RENEE KLEIN FOR FORTUNE/SOURCE: RUNZHEIMER INTERNATIONAL LTD. CAPTION: HEADING FOR THE STRATOSPHERE Air fares, which account for 41% of corporate travel costs, will keep climbing as more big carriers die off. The rise in hotel and rental car charges, which outpaced air fares in the 1980s, should slow a bit.

CHART: NOT AVAILABLE CREDIT: RENEE KLEIN FOR FORTUNE/SOURCE: TOPAZ ENTERPRISES INC. CAPTION: THE KINDS OF AIR FARES BUSINESS BUYS . . . . . . AND WHAT THEY COST What business buys most these days, according to an audit of travel agencies by Topaz Enterprises, are low-cost, company-customized ''negotiated fares'' -- fares that the airlines don't like to admit exist.