Advantages of a CTD

CORPORATE TRAVEL DEPARTMENT (CTD)

Appeared in Travel Manager’s Executive Briefing (American Business Publishing) September 2000

Lower airline commissions and higher travel agency fees have created substantial changes in the way a company processes its corporate travel arrangements.  Business travel expense is now becoming a much higher priority for senior management.  Travel managers have had to make adjustments in their travel procurement procedures to maximize cost savings.  A fairly new alternative that appears to be gaining momentum is the appointment of the company’s travel program as an official Corporate Travel Department (CTD).  The CTD option is the ultimate in travel program self-management.

Approved in March of 1998 by the Airlines Reporting Corporation (ARC), the CTD provides corporate travel departments with direct access to ARC’s central accreditation, reporting, and settlement processing systems.  The CTD appointment is a status similar to today’s ARC appointed travel agencies.  The difference is that the travel agency appointment supports a retail relationship with outside clientele.  On the other hand, the CTD appointment establishes a purchasing relationship between industry suppliers and the company holding the CTD designation for the sole purpose of processing internal corporate travelers.  Although the program has started off slowly, there now appears to be some very steady growth.  As of the end of July (2000), there were 50 ARC appointed CTDs; another 50 CTD applications are currently pending in various stages of the ARC approval process.  There are now more than twice as many CTDs as there were last year at this same time and it looks as if this trend will continue.

Listed below are some of the advantages and constraints of becoming a self-managed CTD.  Additional CTD information is also available on ARC’s Web site:

Advantages of a CTD

• Improved Documentation – The CTD now owns and controls the ARC data and airline ticket tracking. This documentation is fairly exact and considered highly reliable by most airlines.  Each ticket is documented via ARC on a weekly basis providing an early opportunity to verify the data thereby enhancing the mid-system and backend reporting process.  No more reliance on agency data.

• Direct Accountability – Having weekly ARC responsibility, enables the CTD to have increased accountability with the airline expense detailing fare and commission data for each ticket.  Weekly reporting also promotes ticketing accuracy while expediting the debit memo and recalled commission-tracking process.

• Cash Flow – Most commissions are paid directly to the CTD (based on the ARC number).  This procedure expedites the payment process and eliminates the cumbersome practice of filtering commissions through the travel agency.  ARC settles electronically (EFT) with each CTD on a weekly basis.

• Better Control, Independence and Flexibility – CTDs can choose to handle the entire process internally or outsource most or as many of the travel procurement elements they wish to.  This type of flexibility provides independence and much more control over service levels and operational processes.  Operational control   also provides the ability to better customize various elements of the program;

• Could Reduce Program Costs – Eliminates and/or lowers agency fees and facilitates net pricing while creating a more simplified business model.

Constraints of a CTD

• Cost of Program – If the travel program is not already established as a “rent-a-plate” or an on-site, there could be a substantial initial investment in facilities, equipment, and/or technology.  Internally, there is typically a square footage cost to setting up an on-site travel operation.  On the technology side, investments could be required in such systems as a CRS/GDS, backroom accounting, QC, and management reporting;

• Commitment – Facility build out, CRS contracts, and technology purchases are typically allocated over a five-year period.  So, if the CTD is staffing internally and not outsourcing any of the procurement elements, there can be some long term liability and obligation associated with the CTD.  Also, any insourcing is apt to buck the current corporate trend of outsourcing and reducing headcount;

• Added Responsibility – Those in charge of the CTD have responsibility and accountability for ARC reporting, banking, ticketing, credit card reconciliation, MIS reporting, etc. – can you spell “debit memo”?

• Staffing – If you plan to staff internally, be aware that good agents are hard to find.  While the market has recently improved somewhat, finding and retaining qualified agents is still difficult and expensive.  Also, depending on the circumstances, you may have to add an IS person to the staff;

• Loss of Agency Support – Losing the agency lifeline could be traumatic.  If adequate alternatives have not been arranged, agency support, analysis, consulting, and industry expertise could be sorely missed;

• Loss of Commissions – There can be a loss of agency overrides and commissions.  It is also important to note that a few vendors are not paying commissions to CTDs (i.e. Southwest); this list could expand.