First, per diems are issued in early August to be effective October of that year through September of the following year. Since we currently contract January to December, all the hotels are given the opportunity to change their rates for October through December. In most cases, one of two things happens. Either in areas where the per diem went up hotel potentially loses that revenue if they do not amend the rate, or the properties are suspended from the program if they do not amend rates that were bid at the previous years per diem in areas where the per diem went down. As we already make exceptions and concessions for this entire market, why do we not solicit rates based on the government calendar year? It could not be harder for us or the travel agencies than managing and loading for the same program year twice.

Next, we need to address the issue of soliciting all hotels worldwide versus utilizing production and market data to develop a more sensible and manageable program. Understanding that there is some amount of government business everywhere, and acknowledging that hotels base rates on their best business information and potential revenues, the government rates could be solicited much like any other large lodging consumer. Hotels should be made aware of the total government lodging credit card spend for the specified program or government agency (i.e. FedRooms, CW|Sato Government Travel; Navy Elite; Army Lodging) in their city or area based on the two previous years. They should be made aware of any base construction or closings as well as agency headquarter relocations planned within the program year. The government or its representative should commit to authorizing only a certain number of hotels per hundred or per thousand room nights, and only accept that many hotels into the specified program for the year in that location. This will create competition for the revenues between hotel companies and that is when we can examine concessions.

The first concession we could look at is commissions. I understand that the very hard working agents should be paid and paid fairly for their work. I have wonderful relationships with the agency travel managers I work with on the government accounts and do not wish to take anything away from them. However, when the rate offer requirements dictate that the rate must be at or below per diem, must be commissionable at 10%, plus there are participation fees or pay for performance models, it severely reduces the number of hotel and quality of service the lodging industry can provide. When a rate that is already, in many cases, unattractive to the hotel, is then reduced further by fees, they cannot make government business fit into their business needs. Say, for instance, the CONUS rate is $70.

We are now looking at the hotel receiving only $60.67, in effect, as they cannot use the $70 as the actual value from which to pay operating and staffing costs and see a profit. It is my understanding that the airline industry no longer pays commissions on the CPP or other government rates, so maybe we should have discussions with them industry leaders to industry leaders about how that is working for them and how it has affected their relationships with the various government program managers, and of course the bottom line revenues. Hopefully, together, we could find a system that would benefit budgeting for all parties involved; the government as a whole, the lodging industry; and the agencies.

Following commissions, last room availability is a concern. Most hotels have complicated yielding plans that optimize revenues while still being able to offer rates to lower rated business client and the government. Although during some times during the year, the property may be able to offer these more discounted rates readily, the majority of the year, in my experience, the hotels must be very careful with their thresholds. If the government agency and its travel agency want to guarantee that there are always rooms available at their contracted rates, then they should accept the limited hotels per area as discussed, and not only mandate per diem rates, but that the travelers must stay in program hotels. Although when working with the corporate market transient programs we see a high level of leakage, there are programs which are very well mandated and will not pay a traveler back for stays in properties not listed on their program directory. Hoteliers are more willing to offer last room availability when they are aware they are one of a select few getting the business and are aware of how much they can expect to receive.

Once we get these more critical items addressed, we can look at the competitive edge and value added type concessions. Some hotels already include breakfast or other meal functions in the rates for all guests and that allows the traveler more freed up funds for other meals and incidentals. Some hotels which do not have inclusive items for all guests, will include items such as continental breakfast and/or afternoon hors d’oeuvres to their executive level guests and frequency program members. These could be value add items for the government and contracted into the program rates. If you have one hotel who would offer per diem and no concessions and one hotel that would offer a meal or other amenity at the same rate in order to be guaranteed the business, then the government gets a choice as they can then counter-offer or negotiate a lower rate or amenity with the first hotel as many of our corporate customers often do. As developing technologies emerge and thinking outside of the box, unconventional items we could look into as we move forward would be expanding electronic folios to include “government ready” receipts, divided folios, or TDY travel claim voucher style itemized cost savings reports, as well as, some in-house items like laundry/pressing services for our military travelers including military service style uniform and shoe shine care.

Although there are more questions than answers at this part of the game, there is a better way out there. We as the travel industry cannot just require changes on the government’s side of the equation. There are things the hoteliers and the lodging industry need to consider as well before agreeing to this type of arrangement. Some of the other questions I have as challenges to the change but do not have answers to are:

• If a hotel cannot offer the contractual government rates, or a rate at per diem, should they offer a rate at the hotel that is labeled government? I know currently most do.
• Once this more corporatized process is in place, are government travel managers at the agencies still going to audit to see what other federal government rates are available and insist on the same rates or benefits? If rates are offered on a production driven basis, knowing each travel agency manages different departments and agencies within the government with different travel needs, they should not be allowed (at that point) to demand equalization. We don’t offer our corporate clients producing 10000 room nights a year at a property to offer the same rate packages to clients consuming 300.
• Are technologies in place that could manage a October to December program versus a January to December program on both the industry and the government travel agency sides? What would it take to create or update that use? Could they be made compatible to ETS?

We have made a lot of progress in how we work with the government. But I think with all the new technologies we have access to, it is time to look at how to make it better; both more cost effective for the government and more profitable for the hotels.

by Crystal Wright

In the old days and before the 1978 Airlines Deregulation Act, the Civil Aeronautics Board (CAB) used to decide the fares between any two cities. They decided which airline flew from/to cities and how much they should charge.

Well, the 1978Airline Deregulation Act changed the dynamics and working ways of the airline industry. It allowed airlines to decide where to fly and how much they can charge. Competition was the name of the game.

What was the government reaction to the deregulation act?

In 1980, the government using the sheer volume of business it controls was able to negotiate and establish “government fares or CITY PAIR PROGRAM”. “Fly America Act” requires the use of US flag carriers or US Code Share flights.

These fares were to become the backbone of huge savings for the government and were published under the code of YCA. (Special government Business Class fare was also established to be used under special circumstances). TMC /CTO’s can report all government travels easy now with the use of E-Ticketing. These fares are very low, based on one way and very flexible and fully refundable.

The government also looked into the accommodation of the staff on duty and their use of car rentals & established rules and regulations about their use with additional benefits to government travelers.

The government requires from hotel/car rental companies to provide usage reports to DTMO.

On top of that, the government established Per Diem expenses for TDY allowances published in the FTR. Those rates are reviewed and adjusted by 3 entities:

• GSA for CONUS
• DoD for Alaska, Hawaii, Guam and any other non-foreign location
• The Department of State for OCONUS

Electronic Travel Systems:

Both the Dept. of Defense & GSA decided to invest and establish new electronic systems utilizing the new technology breakthroughs. A new Defense Travel System (DTS) by the DoD for the use of Military personnel and the E-GOV (or ETS) by GSA were developed for use of civilian government employees.

Federal Travelers are required by law to use Travel Management Service (TMS); otherwise they will be responsible for any cost associated with not using the system.

Chapter 301 from the FTR describes the minimum capabilities of the system which basically include the availability of Travel Management Center (TMC) or Commercial Ticket Office (CTO) to perform: Bookings, lodging and car rentals. In addition to basic management reporting system  providing for example number of bookings by type of service (carrier, lodging & car rental) and compliance with policy and reasons for non compliance , statistics on origin/destinations, number of lodging nights and where & locations of car rentals used. The last thing is possibility of reconciliation of charges on CBA and refund tracking and processing.

After airlines stopped paying the TMC’s commission, the TMC’s established 2 methods of collecting fees for their work; Transaction Fees (fees on each action they take) or Administration Fees (a lump sum for all their actions say during a month).

Contracting:

The DoD issue an RFP and GSA Travel Services Solutions (TSS) Multiple Award Schedule (MAS). The awarding of services will go to the winners with the experience, professional accreditation and specific capabilities.

The other method of contracting is Full & Open competition for TMC or CTO to conduct Government travel services. Government will issue a task force order sent to 3 schedule contractors for bids. The best one with value and price is usually selected. Also the Government will always put aside some contracts for small businesses. The TSS Schedule RFP means travel agents have 90-120 days to respond to a bid.

Once TMCs/CTOs are functioning then they will be using GDS which are called front office. TMCs/CTOs reporting systems linked to GDS data like: Airline ticketing, Hotel Bookings, Car Rentals, Destinations, Fares and other data like CPP usage, CPP expense, unused tickets to provide full reporting to the government.

Payment Methods:

Beside GTR (Government Transportation Request), which is being phased out as a method of payment, a new law was introduced in 1998, to mandate the use of charge cards to pay for travel expenses; thus the GSA SmartPay was introduced.

The SmartPay cards are uniquely numbered for recognition as Government issued charge cards. Cards issued to agencies or organizations are called CBA (Centrally Billed Accounts- liability rest with the government) and those issued to individuals are called IBA (Individual Billing Accounts- liability rests with the individual).

Enhancements & benefits of using these cards include: one method of payment, minimize cash advances, Electronic Payments to vendors and Electronic reimbursement to travelers, tracking data, faster transactions, new look with anti-misuse / abuse features & increased security methods such as email supervisor once card is used. Airlines will only issue tickets with Government/military fares against these cards.

Frequent Flyer Program:

Government employees are allowed to accumulate either miles on airlines or points at hotels/cars.

Conclusion:

Whoever wants to be a travel manager or a government travel professional must have a ticketing/reservation background and master all the information mentioned above from all the sources that deal with government travel from web training to access to all the government travel rules published. He should have high ethics and communicate clearly and effectively with all government individual travelers and branch managers. Well versed in dealing with the DTS/ETS SYSTEMS for authorization and issuance of vouchers.

By:  Metri Altwal

• Information and
• Ticketing

Now they have lost these monopolies due to deregulation; information is plentiful and tickets are more and more irrelevant. By cutting agents’ commission, airlines decrease their dependence on travel agencies as a distribution channel. The process started in the United States (U.S.) in 1995 when seven airlines, (American, Delta, US, Trans World, United, Northwest and Continental Airlines) joined forces to put a cap on commissions paid to travel agencies. They set an upper limit for travel agents’ commissions fixed at 50 USD for domestic flights, and at 100 USD in 1998 for international flights. In October 1999, airline commissions were reduced to 5% and finally eliminated in the U.S. in March 2002 (on average, one commission cut every 14 months). Three key variables triggered the end of the commission model:

• The unsustainable financial losses by airlines due to the growth of low-cost carriers leading to an increase in the number of bankruptcies
• No negative consequences from previous commission cuts: airlines had progressively lowered the commission payments starting in February 1995
• No effective recourse for travel agencies (group actions prohibited by US law)

So, what’s interesting to me is: where are the fees being applied?

Most travel agents have managed the commission cuts by migrating to a “fees for services” business mode; by applying charges to each transaction. The structural changes that are taking place in the industry are such that travel agents need to be able to provide added value for which they can charge the client and a lot of them are now doing better than they were before commission was cut. However, fees have raised the total cost of travel for the traveler and customers are unwilling to pay for a service they did not have to pay for in the past.

By: Anna Quartey-Smith

Disclaimer: The comments in this paper are mine and do not reflect the opinions of my employer.

IATA by the way is the organization that established the 3 letter codes for airports that is used to identify to make bookings (PNRS) in GDS or facilitate bag connections.

The FTR are accessible through the GDS.

Those agents that wish to work with the Government must have certain capabilities to function and perform the services required like:

• Corporate/Government experience to conduct official travel services
• Past performance will allow the government to assess their quality.
• Describe the way they do Day-to-day operations and how they manage that.
• Fulfilling the Scope of Work in technology, reservations, profile keeping, ticketing, emergency services, compliance with Fly America Act and many other capabilities that are mentioned in the RFP.

 Commissions and Transactions Fees:

Once the airlines phased out paying commissions to Travel Agents, those agents in order to maintain their operations resorted to collect the lost income by imposing a system of fees whether management fees or transaction fees as it is logical that they cannot do their jobs for nothing.

Transaction fees are a complex issue. It requires a lot of calculations modules. Each travel agent has his unique way of doing these calculations that might be based on :

• Real and actual experience
• Standard accounting procedures
• Travel industry trends
• Risk assessment
• Industry statistical data from either ARC or IATA.

Management fees could be a lump sum figure for the whole travel services during a month.

Contracting:

Government contracting for travel management services began in early 80’s when a pre-world war 1 prohibition on the use of travel agent services was removed. Those accredited travel agents, once they are under contract to the Government, DoD calls them Commercial Travel Office (CTO) and GSA calls them Travel Management Center (TMC).

There are two methods of contracting for government travel services.

The DoD issue an RFP and GSA Travel Services Solutions (TSS) Multiple Award Schedule (MAS). The awarding of services will go to the winners with the experience, professional accreditation and specific capabilities.

The other method of contracting is Full & Open competition for TMC or CTO to conduct Government travel services. Government will issue a task force order sent to 3 schedule contractors for bids. The best one with value and price is usually selected. Also the Government will always put aside some contracts for small businesses. Large contractors are encouraged to subcontract to small businesses. The TSS Schedule RFP means travel agents have 90-120 days to respond to a bid.

The prices offered are firm however after one year, the governemtn can look into an EPA (Economic Price Adjustment) if needed. The terms for EPA must be negotiated before awarding the contract.

Once a bid has been awarded, implementation starts from dealing with a Project Manager to serve as a single point of reference to oversee all activities of starting the new TMC or CTO or in some cases just a renewal of contract.  If a contractor is being replaced then the new one must work along the old one to have a smooth transition with little inconvenience to travelers.

There are several implementation steps like: Project award, meeting with contractors, assurance of TMC/CTO accreditation, site visits, hiring and training of personnel, equipment, contract start date and any other step needed or come along.

There should be a test run for all activities before the start date.

Once TMCs/CTOs are functioning then they will be using GDS which are called front office. TMCs/CTOs reporting systems linked to GDS data like: Airline ticketing, Hotel Bookings, Car Rentals, Destinations, Fares and other data like CPP usage, CPP expense, unused tickets to provide full reporting to the government.

By: Metri Altwal

• the maintenance of safety as the highest priority in air commerce;
• placing maximum reliance on competition in providing air transportation services;
• the encouragement of air service at major urban areas through secondary or satellite airports;
• the avoidance of unreasonable industry concentration which would tend to allow one or more air carriers to unreasonably increase prices, reduce services, or exclude competition; and
• the encouragement of entry into air transportation markets by new air carriers, the encouragement of entry into additional markets by existing air carriers, and the continued strengthening of small air carriers.

The act intended for various restrictions on airline operations to be removed over four years, with complete elimination of restrictions on domestic routes and new services by December 31, 1981, and the end of all domestic fare regulation by January 1, 1983. Exposure to competition led to heavy losses and conflicts with labor unions for a number of carriers. Between 1978 and mid-2001, nine major carriers (including Eastern, Midway, Braniff, Pan Am, Continental, America West Airlines, and TWA) and more than 100 smaller airlines went bankrupt or were liquidated including most of the dozens of new airlines founded in deregulation’s aftermath.

Another problem stemmed with travel agencies having monopoly on two aspects of air travel: (1) information and (2) ticketing for more than 20 years. These monopolies where lost due to deregulation; information is plentiful and tickets are more and more irrelevant. By cutting agents’ commission, airlines decrease their dependence on travel agencies as a distribution channel. The process started in the United States (U.S.) in 1995 when seven airlines, (American, Delta, US, Trans World, United, Northwest and Continental Airlines) joined forces to put a cap on commissions paid to travel agencies. They set an upper limit for travel agents’ commissions fixed at $50 for domestic flights, and at $100 in 1998 for international flights. In October 1999, airline commissions were reduced to 5% and finally eliminated in the U.S. in March 2002 (on average, one commission cut every 14 months). Three key variables triggered the end of the commission model:

• The unsustainable financial losses by airlines due to the growth of low-cost carriers leading to an increase in the number of bankruptcies
• No negative consequences from previous commission cuts: airlines had progressively lowered the commission payments starting in February 1995
• No effective recourse for travel agencies (group actions prohibited by US law)

So, what’s interesting to me is: where are the fees being applied?

Most travel agents have managed the commission cuts by migrating to a “fees for services” business mode; by applying charges to each transaction. The structural changes that are taking place in the industry are such that travel agents need to be able to provide added value for which they can charge the client and a lot of them are now doing better than they were before commission was cut. However, fees have raised the total cost of travel for the traveler and customers are unwilling to pay for a service they did not have to pay for in the past.

The government has played an important role in shaping air transportation as well as shaping the roles and responsibilities of individuals who use government funds for travel. In the deregulation act, the federal government loosened its control of the airline industry. Without government controls over airlines and their route structures, the airline business became a more competitive industry. Many airlines dropped unprofitable routes which were no longer subsidized in favor of more heavily travelled, profitable routes. New airlines sprung up, some literally overnight, to take advantage of new markets.

To improve efficiency and cut costs, airlines developed a “hub and spoke system” where some airports are used as a connecting point for passengers from different origins and destinations. Large airlines have two to five hubs. Many major cities have hub airports while other municipalities continue to seek airlines willing to develop hubs at their airports. In addition to adding thousands of new jobs to an area and an improved tax base due to related economic growth, “hubs bless a community with a unique synergy created by the comings and goings of thousands of people”.

Another major benefit for hub cities is the huge numbers of flights to choose from to many different destinations. If a passenger needs to travel between two major hubs, such as Detroit and Chicago, there are many flights on airlines (i.e., American, Delta, Southwest, and United) to choose from.

With everything good, I believe there are some disadvantages… One of the biggest problems facing the airline industry today is airport congestion, a condition intensified by the hub-and-spoke method of operations that concentrates all aircraft activity into certain narrow time periods during the day. Much of the scheduling problem at major airport hubs is a direct result of airlines’ attempts to meet the demands of customers; that is, providing service at the times passengers want to fly.

Unfortunately, passengers tend to want to fly at the same times, so all the airlines schedule flights around those times. The inevitable result is delayed flights, which hurt everyone:

• passengers miss connections,
• airlines lose money as planes burn fuel on the ground, and
• the government air traffic control system gets saturated.

However, the carriers do not feel they can curb service since satisfying demands is the rule of the day….

By: Anna Quartey-Smith

Disclaimer: The comments in this paper are mine and do not reflect the opinions of my employer. 

Source:

Airline Deregulation Act: http://en.wikipedia.org/wiki/Airline_Deregulation_Act

Effects of Airline Deregulation: http://www.mackinac.org/6358

• 1989 a survey conducted by American Express shows that corporate travel management is a career opportunity.
• 1993 the Clinton administration thought it could eliminate the entire White House travel office staff and replace it with a cousin of the president and the help of a midsized travel agency in Little Rock.
• Hal Rosenbluth of Rosenbluth International proclaims time is right for the automation of travel management.
• 2001, Sato began specializing in providing travel management services to government agencies.
• 2002 “The ETravel initiative was one of President Bush’s 24 EGovernment initiatives, which aim to make the federal government ‘more efficient by using technology and putting more agency information and services online.”  A milestone was reached with selection of an on-line booking system.
• 2007, the focus for the past ten years has been ‘How do we focus on the customer as suppliers worry about things like eliminating commissions?’   The industry is looking to partner with suppliers.

General Services Administration’s (GSA) travel management policies strive to continually improve the systems used by federal agencies to ensure efficient travel for federal government employees.

Constant changes in the travel industry and customer needs have shown the “one size fits all” approach no longer applies to travel management.  With the ever-growing technological services and the complexity of choosing the right one, travel knowledge and expertise have become invaluable.

Our office offers complete travel management.  We provide planning to reservations, to arrival and accommodations and return.  Our experienced travel professionals work closely with travel agents to get the best prices, bookings and accommodations for our travelers.

By Diane Huffman

The contents of this message are mine personally and do not reflect any position of the Government or my agency.