CWT Vision Q3 2012 EN - Carlson Wagonlit Travel

Driven by hotels, last room 

availability evolving 

| 4 

Guest interview: Floyd Widener, 

senior vice president, CWT Meetings 

& Events worldwide 

| 6 

Opportunities abound to drive 

more savings in air and ground 

| 8 

APAC – Guest interview: Kelly Kuhn, 

president, CWT Asia Pacifi c 

| 11 

EMEA – Midscale hotels growing 

in popularity throughout EMEA 

| 13 

LATAM – Rapid evolution 

characterizes LATAM airline industry 

| 14 

NORAM – Keep airline commitments 

reasonable this negotiating season 

| 16 

Insights into Eff ective Travel Management 

Q3 2012

Co-Editors in Chief 

Christophe Renard 

Nick Vournakis 

Email 

cwtvision@carlsonwagonlit.com 

Web 

www.carlsonwagonlit.com 

CWT contributors: 

Gregoire Boutin 

Andre Carvalhal 

Philippe Chonion 

Christopher Clay 

Jonathan Dunn 

Kelly Kuhn 

Artwork/Photos 

Photos: Cover © Corbis and page14 © istockphoto 

All other artwork by CWT 

Vincent Lebunetel 

Juan Lopez 

Jose Mejia 

Mike Orchard 

Chris Sabby 

Krista Shold 

CWT Vision is published quarterly by the CWT Solutions Group, the CWT Travel Management Institute, 

and CWT Corporate Marketing & Business Intelligence teams. 

31 rue du Colonel Avia 

75904 Paris Cedex 15 

France 

Please consider the environment before you print this publication in part or in full. 

All monetary references in this publication denote U.S. dollars unless otherwise noted. 

Copyright © 2012 CWT 

Jair Suarez 

Sebastian Vicuna 

Darren Waite 

Joel Wartgow 

Floyd Widener

Negotiation season in full eff ect 

Christophe Renard 

Nick Vournakis 

| Q3 2012 

Welcome to the Q3 issue of CWT Vision, which comes across your desks at what we know is an 

incredibly busy but hopefully equally exciting time of year for all of us in managed travel – negotiating 

season! At this critical time for your travel programs, we are pleased to bring you the most timely 

and relevant information CWT has to off er, to help inform the crucial supplier conversations we know 

you’re having right now. And, we continue to invite you to use our 2013 Travel Price Forecast as a 

useful benchmark for what to expect from suppliers next year as it relates to pricing as well as other 

contractual elements, such as ancillary expenses. 

More specifi cally, as many of you begin or continue hotel negotiations in the coming days and weeks, 

you’ll want to read our global perspective on the evolution of last room availability (LRA). We hope 

you’ll use that information to have an open and direct conversation with your preferred suppliers on 

whether their approach to LRA has changed since last year’s negotiations to ensure you understand 

what you’re getting in this year’s contracts. This quarter we also catch up with CWT’s new global leader 

for meetings & events (M&E) about that team’s strategy for more closely aligning with how clients 

worldwide are beginning to purchase M&E, and we also get his outlook on the M&E industry. We also 

take a look at the key fi ndings from the CWT Travel Management Institute’s recent annual research on 

opportunities to further optimize managed air and ground transportation programs. 

Regional spotlights in this issue include a conversation on trends with CWT Asia Pacifi c president 

Kelly Kuhn, following her fi rst year as CWT’s leader in that dynamic part of the world; an examination 

of the increasing popularity of mid-scale hotels in Eastern Europe and the Middle East; a recap of 

recent airline industry developments throughout Latin America as the supplier landscape in that region 

rapidly evolves; and some reminders for North America-based buyers on how to set themselves up 

for success by making manageable commitments during airline negotiations. 

We hope the content from this issue of CWT Vision will serve as a valuable asset as you source your 

2013 programs, and as you continue to manage against your 2012 objectives as the fourth quarter 

fast approaches. 

Best wishes for a successful conclusion to your negotiating season! 

Christophe Renard, Co-Editor in Chief Nick Vournakis, Co-Editor in Chief 

Vice President, Corporate Marketing Vice President, CWT Solutions Group 

& Business Intelligence 

3

4 

Driven by hotels, last room 

availability evolving 

As hotels become increasingly sophisticated in their yield management techniques – taking after airlines in their ability to 

segment certain types of inventory and close and reopen availability based on fl uctuating demand – the ways in which they 

are fulfi lling their corporate contracts, including last room availability (LRA) clauses, are changing. This is creating additional 

complexity and even confusion for some travel buyers. Below, CWT Solutions Group hotel experts from around the world help 

dissect this trend and provide advice for buyers to ensure they take this dynamic situation into account in their 2013 negotiations. 

LRA is a clause in a corporate contract that ensures hotels will honor the corporation’s negotiated rate for a particular category of 

room (e.g. standard king), even if only one more room in that category is available for the night. In these situations, the hotel is 

near full capacity and in the absence of LRA, the remaining rooms could be sold at a premium for last-minute bookings. Given 

that reality, along with the fact that high occupancy rates in many cities make this scenario a more regular occurrence at many 

properties, hoteliers are increasingly reluctant to award LRA. 

CWT has observed hotels implementing several tactics in their eff orts to withhold LRA, such as giving LRA preference to clients 

with longer average lengths of stay. Another tactic is off ering travel buyers non-LRA rates at a signifi cant discount of up to 30% 

less than LRA rates, which forces buyers to strongly reconsider purchasing LRA. In some cases, hotels are beginning 2013 

negotiations by completely withholding LRA rates and off ering much cheaper non-LRA rates, requiring buyers to ask for LRA in 

the second round of negotiations. 

Another, more complex, tactic is “fencing:” when LRA is granted, hotels have begun to break apart or restrict the inventory, and 

are now closing out the various categories based on their yield management strategies. For example, a hotel may close out 

all room categories for Tuesday arrivals, so even if a client has the LRA rate, the hotel will not honor it for travelers arriving on 

Tuesday, forcing them to pay higher rates, stay at another property, or adjust their arrival date. Hotels feel they are still honoring 

LRA because they make it available overall, just with more restrictions. However, travelers are ultimately receiving LRA less often, 

which erodes the value to the program. 

This trend is expected to continue as hotels retain pricing power and as their yield management abilities continue to advance. 

Buyers are rightly questioning whether they are receiving the LRA benefi ts they have in the past. Regardless, it appears the 

defi nition of LRA is changing, creating the need for both parties to come to a clearly defi ned, transparent, and mutually accepted 

defi nition for 2013 contracting. 

Recommendations 


GLOBAL PERSPECTIVE 

The scenarios described above are prompting suppliers and buyers alike to reconsider commonly held beliefs and 

assumptions about the value of LRA. Below are the CWT Solutions Group’s recommendations to buyers, specifi cally related 

to navigating this trend as they sit down to negotiate 2013 programs with hotels in the coming weeks and months: 

Be selective with LRA. Given hotels are only willing to grant LRA at an increasingly high premium, buyers should think 

more critically than ever about where it will provide the best return on investment, rather than trying to secure it for most


or all markets. Buyers should only pay for LRA in their most frequently traveled markets and/or in those markets where 

occupancy levels are highest (occupancy data is made available from entities like Smith Travel Research), and use non-LRA 

rates elsewhere. It may even make sense to contract both LRA and non-LRA rates at some of the same properties in top 

cities, with non-LRA rates being available for advance bookings and LRA rates providing coverage for last-minute trips. 

Get specifi c. Whereas in the past travel buyers and hoteliers had a common understanding of what LRA meant and how 

it would be applied to the program, that is changing as hotels adopt new practices. Buyers should work with their preferred 

partners to reach a clear, commonly understood defi nition and execution of LRA to avoid surprises. 

Get rewarded. Buyers should also insist on non-LRA rates that are signifi cantly cheaper than LRA, as a reward from the 

hotel for the organization assuming the risk that the property will be sold out. This is in contrast to the risk the hotel must 

assume when it off ers LRA, which is that it could sell the room at a higher price for a last-minute booking. 

Manage non-LRA. While incorporating more non-LRA rates will be fi nancially attractive to buyers, it does provide less 

protection from hotels being sold out by the time travelers attempt to book their reservation. Buyers can mitigate this risk by 

reemphasizing advance purchase requirements (ideally 14+ days in advance whenever possible) and focusing on driving 

traveler compliance to preferred properties. A clear understanding of travel behavior can help buyers evaluate whether non- 

LRA rates are a realistic option for their program. 

More properties vs. fewer. Depending on the situation, either of these situations can benefi t the program. Consolidating 

to fewer preferred hotels in a market can eff ectively make a company a larger client to their preferred hotels, resulting 

in better pricing and contract terms. Conversely, in high occupancy markets buyers may need to add several additional 

properties to their program in a city for additional coverage, particularly in the absence of LRA. 

Leverage the TMC. Beyond corporate negotiated rates alone, travel management companies like CWT can make available 

to buyers additional discounts they have negotiated on behalf of their entire client base. CWT Value Rates is an example of 

this and can assist in driving further savings for hotel programs. 

Monitor for changes. It can be diffi cult for travel buyers to understand when they are being impacted by the aforementioned 

fencing strategy, but one recommendation is to monitor for any signifi cant change in how often travelers are receiving the 

negotiated rate. CWT recommends further investigation when booked rates are more than 5% higher than the corporate 

rate. By requesting e-folio or transaction-level data from the hotel, buyers can determine whether rate increases are being 

driven by the supplier or by traveler behavior. 

Expand room types. Managed hotel programs often include just one or two room types in the negotiated rate. By including 

additional room types, buyers can mitigate some of the eff ects of fencing, since even if travelers are forced to book in a 

higher room type than desired, there will still be some level of discount applied. Here again, this is likely only feasible in the 

most-traveled and/or highest-occupancy markets, and it is important buyers understand the room type availability at a given 

property to determine the best strategy. 

Understand the inventory. Buyers need a clear understanding of how many rooms are available at a property in the room 

type they have negotiated. Depending on the size and type of hotel, there may be 100 standard rooms available, or just 

10. This obviously has an impact on the frequency with which travelers can successfully book the negotiated room type at 

a property. 

Focus on partnership. As hotels look to manage yield as eff ectively as possible, buyers must be able to articulate the 

unique characteristics of their travel program that benefi t the hotel, beyond room night volume and total spend. The days of 

week and months of year most frequently traveled, and the average length of stay, are of particular interest for hotels looking 

to fi ll gaps in demand. Similarly, buyers should try to understand what would make them a more attractive partner to a hotel, 

and compromise where possible. For example, if travelers most frequently arrive on a Wednesday but the hotel could benefi t 

from shifting some of that behavior to Tuesday arrivals, the buyer could try that approach for mutual benefi t. v 

5

6 



Guest interview: 

Floyd Widener, senior vice 

president, CWT Meetings 

& Events worldwide 

In May, CWT announced the creation of a new, global leadership role for CWT Meetings & Events (M&E), and the appointment of 

CWT veteran Floyd Widener to that role. Below, Floyd shares with CWT Vision more information on the new global M&E structure, 

as well as his outlook for the meetings industry for the coming year. 

CWT Vision: 

Your role is a newly 

created one for CWT. 

Tell us more about 

why this position 

makes sense for 

CWT and its clients 

at this point in time. 


What do you see the 

near future looking 

like for CWT M&E? 

The global leadership role for M&E was created in response to our clients’ increasing desire to 

better manage their own M&E programs at a local, regional, and global level. As an extension 

of that goal, they want to work with partners who can off er them holistic products and services, 

and we are building the organization to help them do just that. CWT has long provided M&E 

expertise to our clients, but we now see growing demand for the service model to evolve 

globally. This global alignment allows us to serve our clients even better around the world, 

and it enables us to better assist them with the advancement of their strategic meetings 

management (SMM) programs and other enterprise-wide initiatives. 

As an integral part of our Global Program Solutions (GPS) organization, it is a logical evolution 

for the team to work in close collaboration with program management and business 

development. Years ago, we created the GPS organization to more eff ectively address the 

needs of clients with increasingly complex requirements operating across geographical 

boundaries. Taking the same approach with M&E makes perfect sense, as our global M&E 

structure will create the same type of alignment with how our clients are conducting business 

today. So far we have received positive feedback, with clients and non-clients alike indicating 

they see value in establishing a single point of contact to drive progress in their M&E programs. 

One of our short-term goals is to ensure our existing portfolio of clients understands the 

updates we have made to our organization and most importantly, the value this approach 

brings to each of them. We are focused on engaging in these discussions to bring our clients 

along with us on this journey, and to ensure we are exceeding their expectations as an 

outcome of this new organization. 

Another priority for me is bringing onboard a leader for CWT M&E in the Asia Pacifi c region. 

While this role has existed for some time in the Americas and in Europe, the Middle East and 

Africa (EMEA), it will be a newly created position in Asia Pacifi c. This leader will be key in our


What will 2013 

look like for 

meeting planners? 


What challenges 

are buyers 

currently facing? 


What should 

corporate meeting 

planners do more of 

in the coming year 

to advance their 

programs? 


ability to develop our business and deliver M&E services consistently across regions, and it’s 

particularly important as Asia Pacifi c represents a larger portion of travel and M&E budgets 

for many organizations (see “Guest column: Kelly Kuhn, president, CWT Asia Pacifi c” in this 

issue). In addition to working closely with his or her M&E counterparts in other regions, this 

leader will work closely with Kelly Kuhn and her leadership team for the Asia Pacifi c region. 

We’re anticipating conservative M&E growth for next year in most markets. As we discussed 

in CWT’s 2013 Travel Price Forecast, we believe costs per attendee per day will increase to 

some degree everywhere next year as suppliers retain pricing power amid strong demand 

and limited supply. Perhaps not surprisingly, the highest price infl ation will be in Latin America 

and Asia Pacifi c. The implication of that trend in those two regions will be that group sizes 

will decrease moderately as meeting planners try to mitigate higher prices by including fewer 

meeting participants. In North America and EMEA, where per-attendee prices will be more 

modest, group sizes are actually expected to increase to varying degrees, given planners won’t 

be operating under the same cost pressures. Even so, regardless of location or the broader 

economic situation in their area, we know corporate meeting planners will continue to remain 

focused on price but are also keenly aware that they need to fi nd a balance so that the return 

on investment for the meeting is met when compared to its objectives. 

A big one I see is around technology – as organizations look to standardize their programs 

around the world, they will increasingly need tools that can serve them consistently everywhere. 

Some of this functionality exists today, but more progress is needed to ensure that everything 

from meeting registration to compliance tracking is available regardless of location. We can’t 

forget that the technology must also be fl exible enough to allow customization for local 

relevancy, so that buyers can refi ne the tools to meet local needs. 

For most organizations, the biggest opportunity lies in the foundational exercise of 

understanding your meetings volume – who is doing what, and where. Many still do not have 

a clear understanding of what they spend, where they spend it, and with whom they spend 

it. If it were a simple task it wouldn’t elude so many, but planners can start by making an 

eff ort to determine who their internal stakeholders are and connect with them to understand 

their current meeting spend and their wants and needs for the future. The key is to focus 

on how the meeting processes you’re seeking to put in place will make these stakeholders’ 

lives easier and provide the overall organization with a solid return on investment. We do this 

today for many clients and, with the increased focus of the entire GPS organization, we will 

be working with more and more planners going forward. v 

7

8 



Opportunities abound to drive more 

savings in air and ground 

Organizations spend a signifi cant portion of their annual travel budgets with airlines and ground transportation providers. The 

constantly evolving supplier landscapes create endless opportunities and challenges for buyers, which can leave many unsure 

of exactly how to stay ahead of it all. The latest research from the CWT Travel Management Institute, “Mastering the Maze: A 

Practical Guide to Air and Ground Savings,” seeks to help buyers identify practical steps to drive further program improvements 

in both air and ground. Following is a summary of the key fi ndings of that study, which is based on surveys with travel 

managers and travelers, expert interviews, and CWT data from more than 50 million transactions worldwide. 

Proven ways to optimize air sourcing 

While the air portion of a managed travel program is often the most mature and heavily managed, the following opportunities 

exist for most organizations to drive even more savings, particularly as airlines evolve and become increasingly sophisticated at 

managing both their yield and organizations’ contract performance as a result. 

Concentrating volume on preferred suppliers. Savings of up to 8% of air spend can be obtained by consolidating 

volume with fewer suppliers to obtain larger up-front discounts and back-end rebates. 

Integrating a best buy strategy without undermining negotiated fares. Given preferred airline prices are 17% 

cheaper than published fares on average (thanks to negotiated discounts and rebates), CWT recommends caution on best 

buy strategies, which allow travelers to book the cheapest available fare on any airline. This is only benefi cial and should 

only be allowed when the fare diff erence is 20-30% cheaper than a preferred airline’s fare. 

Working with airline alliances. The three global airline alliances today make up about 60% of the global market. Many 

benefi ts can be obtained by contracting with alliances, and buyers can mitigate the potential disadvantages by working with 

a primary and secondary group to maintain competition. 

Considering low-cost carriers (LCCs). LCCs off er attractive prices to organizations and should be considered by buyers; 

however, upfront savings from cheaper fares must be weighed against potential additional costs and ineffi ciencies, such 

as booking outside the global distribution systems (GDSs), service to secondary vs. primary airports, etc. 

Negotiating regularly within multi-year contracts. While corporate airline contracts are typically negotiated on a 

multi-year basis, buyers should still review them annually to ensure the pricing and service remains competitive and 

continues to meet the needs of the organization based on changes in airline service, the company’s travel patterns, 

travelers’ booking behavior, and more. 

Click here to access the full fi ndings from the CWT Travel Management Institute 

research, “Mastering the Maze: A Practical Guide to Air and Ground Savings.”


Negotiating point-oforigin 

pricing. 

Incremental savings can 

be achieved by negotiating 

access to corporate rates 

from ticketing locations 

outside the country of 

departure; however, these 

agreements must be 

explicit given cross-border 

ticketing without prior 

agreement from airlines is 

illegal and is prohibited in 

some cases by the aviation 

industry. 

Tackling ancillary fees. 

Tracking and negotiating 

ancillary fees remains a 

key untapped opportunity 

for most travel programs, 

The attractiveness of negotiated vs. lowest available fares varies with market cycles 

Average 

negotiated fare 

Market conditions 

make negotiated 

fares interesting 

Illustrative example 

Market fares (public fares, 

restricted fares, promotions…) 

Interest in best-buy strategy 

2008 2009 2010 2011 2012 ... 

Source: CWT Travel Management Institute 

Market conditions make 

negotiated fares less 

attractive, with travel 

managers using them 

as an air cap to ensure 

availability for travelers 

Average 

negotiated 

fare 

Interest in best-buy strategy 

thanks to buyers’ limited visibility into the spend and high complexity to manage. Still, this area represents 5-10% of air 

spend for most, making it worth the eff ort to drive improvements by gathering data available from expense management 

tools and corporate card reporting. Further visibility should come in the future as providers improve their off erings. 

Negotiating fuel surcharges. Airlines’ fuel surcharges now appear to be disconnected from the actual price of fuel, reaching 

7-12% of air spend. Buyers should continue to raise this extra cost in negotiations in an eff ort to achieve better overall pricing 

or additional back-end rebates. 

Monitoring booking class availability. The availability of discounted corporate airfares is often under managed but 

can drastically impact costs. Buyers should audit booking class availability and use the information in airline negotiations 

to improve availability, and/or to justify under-performance if needed. 

Auditing airfare loading. While most managed travel programs audit GDSs to ensure negotiated hotel rates are available, 

only 25% audit for negotiated airfares. Substantial savings are available from auditing and taking corrective action with 

airline partners to ensure the availability of discounted fares. 

Key policy items and tools for improving air booking behavior 

Even the most well-designed travel programs are ineff ective if travelers do not comply with the travel policy. The following key 

actions can have a substantial impact on the air program: 

Mandating and communicating key policy items. Two foundational ideas still drive maximum results in this area: 

recommending or preferably mandating the use of approved booking channels (namely through the travel management 

company, whether online or offl ine), and clearly communicating and reinforcing the travel policy. 

Promoting advance booking. Advance booking still drives substantial cost savings, with best-in-class organizations 

mandating booking 14+ days in advance. Given travelers wait an average of eight days between identifying the need to 

travel and booking their air reservations, most organizations can drive improvements in this area. 

Using restricted fares. Airfares that carry restrictions, such as early booking or length-of-stay requirements, are 29% 

cheaper than unrestricted fares, and still off er signifi cant savings even when factoring in exchange fees or other additional 

costs caused by the restrictions. More can be done to encourage travelers to book these fares. 

Introducing stricter traveler comfort rules. Organizations can save signifi cantly by shifting from business class to 

premium economy class, requiring connections rather than non-stop fl ights, and more. As always, the potential cost 

savings should be weighed against the traveler impact in terms of productivity, stress, and more. 

9

10 | Q3 2012 

Enforcing air caps. Placing a dollar-value limit on the airfares that can be booked can direct travelers toward cheaper 

airfares, though these air caps must be considered by route and require constant monitoring by the buyer to ensure they 

don’t erode the air program overall. 

Using point-of-sale selling matrices. These matrices help travel counselors direct travelers toward various carriers 

in order of preference based on the organization’s airline agreements and their fl uctuating performance against those 

contracts. Implementation of this tool is best for organizations with signifi cant offl ine bookings, as online booking tools are 

challenged to support this from an automation standpoint. 

Motivating travelers through gaming techniques. Points-based systems and other gaming techniques have helped 

some organizations increase traveler compliance by rewarding travelers for making the right decisions. 

Advice for improving the 

ground transportation 

program 

With ground transportation 

costs averaging 10% or more 

of most travel budgets, it is an 

area worth closer management 

by most travel buyers. Further, 

buyers must go beyond car 

rental costs to fully maximize 

the opportunities available, 

including: 

Managing the trade-offs 

between air and highspeed 

rail. While rail is 

20 

a viable alternative to 

air on only some routes 

globally, buyers with 

travel in those markets 

0 

1 2 

Trip duration (hours) 

3 4 

could do more to 

Based on 1.8 million transactions on 16 European routes in France, Germany and Spain in 2011 

encourage rail use, which 

can cost 2-4 times less 

Source: CWT Travel Management Institute 

than air. The key is high-speed service to keep the trip duration comparable with fl ying. 

Optimizing car rental. Various eff orts can drive additional savings from most car rental programs, including requesting 

full spend data from suppliers to help manage ancillary expenses, negotiating beyond daily rates to include weekly and 

monthly rentals, and more. 

Considering taxis, chauffeured cars and other road transportation solutions. It can be valuable to negotiate 

preferred rates with a limited number of suppliers outside rail and rental car, given they are frequently used by travelers. 

While taxis are most frequently used, agreements are most often created with chauff eured car services. v 


High-speed rail is preferred for business trips under 3 hours and especially 

under 2 hours 

Rail market share (%) 

100 

80 

60 

40 

Gregoire Boutin 

Senior Manager, CWT Travel Management Institute 

Gregoire leads the CWT Travel Management Institute (TMI), the research arm of Carlson Wagonlit Travel. He 

spearheads the TMI’s annual research study, which takes an in-depth look at one of CWT’s Eight Key Levers for 

Eff ective Travel Management each year, in addition to a number of other eff orts.

REGIONAL SPOTLIGHT: Asia Pacifi c 

Guest interview: 

Kelly Kuhn, president, 

CWT Asia Pacifi c 

As Kelly Kuhn, president of CWT Asia Pacifi c, celebrates her 1-year anniversary as the leader of this dynamic region, CWT 

Vision caught up with her at her offi ce in Singapore, where she shared her observations from the past 12 months in her role, 

as well as her expectations for what 2013 has in store for managed travel in this part of the world. 

CWT Vision: When you refl ect on your fi rst year as the leader of CWT in Asia Pacifi c, what stands out most? 

So much! My fi rst year has been largely dedicated to meeting with as many employees and clients as 

possible to get their thoughts on what has been going well and what CWT can do even better. Clients’ 

expectations are higher than ever for CWT’s ability to deliver in Asia Pacifi c, as it now represents a much 

larger percentage of many of their travel programs than it did even a few years ago. Based on this 

increased focus, in the past year we have made some key leadership changes throughout the region to 

better serve our clients, with a focus on local talent who know each country and its unique characteristics 

fi rsthand. 

Clients also tell me they are focused on bringing innovation into their travel programs and enhancing the 

traveler experience. That is one thing that has really stood out to me since coming here – everyone is 

interested in the traveler experience these days, but in Asia Pacifi c they are particularly committed to it 

and tend to defi ne it using a higher standard. It is absolutely critical for success here. 

CWT Vision: What do you foresee being most important in the coming year? 

I think the next year will bring important progress across the region. The travel infrastructure will continue 

to improve overall, as suppliers invest in new planes and new hotel construction, which will help continue 

to meet the increasing needs of organizations to send employees here to conduct business. Technology 

will continue to forge ahead, with more and more travel content made available via mobile channels. 

Similarly, online booking will continue to progress in this region; in fact, CWT recently responded to strong 

demand in China by launching the industry’s fi rst online booking tool (OBT) for international travel, to 

complement the domestic OBT we have off ered our clients in China for many years. 

Speaking of China, it will continue to be important to watch this year – not only is the entire world carefully 

monitoring its gross domestic product (GDP) growth and the impacts that has worldwide, but China’s 

domestic companies are increasingly focused on the importance of managing their travel spend. As this 

proliferates across organizations, China will become an even bigger player from a travel perspective. 

Finally, as Asia Pacifi c becomes more important within more travel programs, it is crucial that buyers invest 

the time and energy required to understand this market and its many countries, which vary greatly from 

one another. The travel programs that we have seen be successful in this part of the world are those that 

11

12REGIONAL REGIONAL SPOTLIGHT: SPOTLIGHT: Asia Pacifi Asia cPacifi 

c 

have made the extra eff ort to truly understand these locations and how the business of travel diff ers in 

each. In contrast, programs we have seen struggle are those where travel is being purchased on behalf of 

Asia Pacifi c from another part of the world without the use of local resources and/or proper consideration 

of the nuances here. In those cases, confl ict arises because local decision makers branch away from the 

global program when their needs are not getting met. 

CWT Vision: When you look at the corporate travel industry across the region, what are the biggest trends 

you see, and how do they play out differently in the very disparate markets? 

I think the biggest trend in our region is a unique dichotomy of growth and expansion coupled with 

uncertainty and at times, volatility. Take India, where companies are expanding and travel is booming, yet 

where government regulation and infl ationary challenges tend to hold down growth. Similar situations 

exist in many of the other markets as well. Based on CWT’s 2013 Travel Price Forecast, another obvious 

trend we foresee is rising prices in most places throughout the region and for most categories of spend, 

but here again the ways in which that plays out vary signifi cantly by country. What unifi es the countries 

is how buyers tend to respond to these trends, which is by seeking opportunities to get more value for 

every travel dollar, whether by improving traveler compliance or working diff erently with suppliers, such as 

contracting with low-cost carriers (LCCs), which have become much more prevalent in Asia Pacifi c than 

in many parts of the world. 

CWT Vision: What is the biggest challenge for APAC-based travel buyers at the moment? 

One of the biggest challenges in this part of the world is also unique here, which is the huge amount of 

airline and hotel content not available via the global distribution systems (GDSs). There are many diff erent 

systems in place across locations, combined with the high number of LCCs and independent hotels, most 

of which do not participate in the GDS. Aggregating all of that content and making it available in one 

place, not to mention via mobile, is very challenging for buyers. It requires CWT and other travel industry 

participants to continually innovate to help buyers solve this problem, which we do through solutions like 

Your Place by CWT (formerly CRS by CWT), which pulls non-GDS hotel content into the GDS, and the 

aforementioned international online booking tool we make available in China. 

CWT Vision: What do you see as the most signifi cant current opportunities for buyers managing travel in 

Asia Pacifi c? 

A few things stand out for me. The fi rst is the opportunity to work with providers to aggregate all of the 

disparate content and make it available to travelers. The second is to consider working with LCCs, which 

are truly changing the airline landscape in this region and can be benefi cial for many travel programs. 


As in most other places in the world, meetings and events is a huge opportunity here. This spend is 

still highly fragmented for most organizations, so CWT Asia Pacifi c is making major investments in our 

people, technology, and more to help our clients tackle this. In fact, as Floyd also mentioned (see “Guest 

interview: Floyd Widener, senior vice president, CWT Meetings & Events worldwide” in this issue), we 

expect to have a leader dedicated to meetings and events in Asia Pacifi c onboard by the end of this year. 

That individual will work closely with Floyd and me to best meet the needs of our Asia Pacifi c client base. 

Finally, many opportunities exist for organizations in the energy and resources sector, of which there are 

many in the Asia Pacifi c region. Due to the often unique nature of their travel, they are some of the most 

frequent users of the non-GDS content I’ve been referencing. They have many specifi c requirements that 

require sophisticated management to ensure the safety and security of their employees and the productivity 

of their trips taken. CWT heavily invests in our capabilities to support these organizations, from which these 

buyers can benefi t in a number of ways depending on the current level of program maturity. v

REGIONAL SPOTLIGHT: Europe, the Middle East, and Africa 

Midscale hotels growing in 

popularity throughout EMEA 

While luxury properties have historically dominated the hotel landscape in Eastern Europe and the Middle East, mid-scale brands 

have been proliferating in the market in countries like Qatar, the United Arab Emirates, and Russia, with continued expansion 

expected in 2013 to meet the needs of cost-conscious travel programs sending international travelers to this part of the world. 

For example, brands like Intercontinental’s Holiday Inn Express and Staybridge Suites, and Marriott’s Courtyard by Marriott, have been 

opening brand new mid-scale properties in locations like Bahrain, Lebanon, and Qatar. These properties have been performing well to 

date, as foreign travelers gravitate toward recognized Western brands, and as these properties off er an attractive price point compared 

with traditional luxury properties. Further, these “limited service” brands actually off er more amenities as part of the corporate rate 

than many hotels at an equal or higher classifi cation level in other parts of the world, providing additional value for travel programs. 

While the increase in properties in the 1-3 Crown categories is not yet suffi cient to take market share away from 4-5 Crown hotels, it 

is limiting their ability to increase prices to the extent otherwise possible, and it is slowing construction of additional properties as well. 

As mentioned in CWT’s 2013 Travel Price Forecast, mid-scale brands are also increasing in popularity in France. However, this trend 

looks diff erent in Western Europe than in Eastern Europe and the Middle East: rather than initiating new hotel construction, global hotel 

chains are typically rebranding properties from their upscale off erings to a mid-scale brand within their portfolios. These properties then 

off er fewer included amenities to keep rates down. At the same time, in Paris specifi cally, three of the fi ve existing ultra-luxury “palace” 

level hotels, which are marketed as being higher than 5-Crown properties, are temporarily closed down right now for renovations. 

While it is not anticipated that these properties will downgrade their off erings as part of the broader trend discussed here, they are 

reportedly looking to reposition their off erings to ensure they remain relevant for the future. 


Try midscale properties. The CWT Solutions Group recommends that travel buyers who don’t already incorporate midscale 

(typically 3-Crown) properties into their hotel programs give it a try, particularly in the Middle East and Eastern Europe, 

where these hotels are brand new and off er complimentary amenities. At a minimum, begin including them in the annual 

request for proposals (RFP) process to understand the rates they off er in exchange for the value received, and conduct a 

trial by accepting several into the program. 

Ensure safety and security. Buyers must give careful consideration to the location and the specifi c property before 

determining whether to allow it in the program. In most cases mid-scale properties are as safe as those in higher categories 

(in fact, crimes are sometimes specifi cally targeted at higher profi le, upscale properties for increased visibility), but the specifi c 

location of a given hotel will typically be the deciding factor. Similarly, buyers should avoid sending travelers to properties that 

are too far down in the Crown rating system, as these can present security concerns, particularly in other parts of the world 

where the classifi cation systems can vary widely. This potential challenge can be addressed by asking more security-related 

questions in hotel RFPs, and by involving the organization’s security department in the decision-making process. 

Use two-way traveler communication. Depending on the travel program, the use of mid-scale properties may require 

change management communication to travelers, particularly if upscale properties have primarily been used in the past. Be 

sure to articulate the value to travelers personally in addition to the organization overall – this can be an easier sell if they 

see that they get more for the rate than they would at other properties. Then, solicit their feedback on the hotel, via a tool 

that collects reviews or some other method, especially for properties that are new to the program and/or from travelers not 

previously accustomed to staying in mid-scale properties. Use traveler input to determine whether to expand the program 

in the future, whether additional education is needed to obtain traveler buy-in, etc. v 

13

14 

Rapid evolution characterizes 

LATAM airline industry 

The airline industry throughout Latin America is currently experiencing 

a period of rapid evolution, as carriers undergo various forms of 

consolidation and re-alignment with global alliances. Below is a 

recap of recent developments to assist travel buyers in keeping it all 

straight and understanding the potential impact of these changes 

on their managed airline programs. 

LATAM Airlines Group, AviancaTaca battling for share 

LATAM is now the world’s second largest airline by market value, 

though its two legacy carriers, LAN and TAM, are maintaining 

independent operations for now. LATAM by the end of 2012 must 

decide in which airline alliance it will participate, as LAN has been a 

member of Oneworld and TAM a member of Star Alliance. However, 

there is speculation that LATAM will not have the option to remain 

in Star Alliance, as its biggest competitors, AviancaTaca and Copa 

Airlines, joined Star several months ago, and anti-trust regulations 

prevent the three competitors from belonging to the same alliance. 

Given LAN’s and TAM’s route structures had little overlap, some travelers will not see major diff erences now that the carriers are under 

shared ownership. This is particularly true in LAN’s home base of Chile. However, the merger is likely to generate increased domestic 

competition in some countries; for example, LAN’s presence in Colombia is now making it a stronger competitor to AviancaTaca in 

its home country, where it is off ering attractive corporate rates along with additional fl ight frequencies on business routes. 

Increasing options in Brazil 

While TAM enjoys about 42% market share in Brazil, Gol Airlines is an active competitor with almost 40% market share, boosted 

by the support Delta Air Lines is providing as an investor in the carrier’s operations (Delta is also investing in Aeromexico and 

Aerolineas Argentinas as part of a broader plan to expand its Latin American presence). Competition should also increase as a 

result of Azul Airlines’ merger with Trip Airlines, which creates the third largest airline in Brazil with more than 10% market share. 

Given Azul’s and Trip’s roots as low-cost carriers, they are expected to maintain an aggressive focus on price, potentially driving 

down overall fares for travelers in Latin America’s most heavily traveled country. 

Landscape uncertain in Argentina 

Thanks to government investment, Aerolineas Argentinas is no longer teetering on the verge of bankruptcy, giving travel buyers, 

travelers, and the industry alike confi dence that the carrier will be around for the long term. That confi dence will likely be 

reinforced by the carrier’s recent announcement that it has joined SkyTeam as the alliance’s fi rst South American member. 

Further, the struggles of competitor airlines, such as Uruguay’s Pluna, which has ceased operations, have given the carrier a 

boost. In terms of competition throughout Argentina, it remains to be seen whether the merger of LAN and TAM will move 

forward there, as the combined carrier has not yet received the necessary regulatory approvals. 


REGIONAL SPOTLIGHT: Americas – Latin America

REGIONAL SPOTLIGHT: Americas – Latin America 

Current presence of LATAM-based carriers in global airline alliances 


With all of the recent changes, CWT’s team of travel management professionals throughout Latin America recommends the 

following to travel buyers: 

Determine primary and secondary carriers. In countries such as Brazil where several airlines are competing for 

market share, buyers must determine with whom to align. CWT advises buyers to select one of the dominant carriers in a 

market as its primary airline after determining which of the major carriers is able to off er the best pricing and service. Then, 

select another competitor, such as a low-cost carrier or smaller airline, as the secondary provider. This ensures healthy 

competition within the program while preventing buyers from having to over-commit on market share (see “Keep airline 

commitments reasonable this negotiating season” in this issue), which can happen when attempting to contract with the 

two most dominant carriers in a given market. 

Understand the impacts. Increased competition among airlines can have mixed implications for travel buyers. Benefi ts 

include more routes and frequencies and sometimes aggressive discounting as carriers battle to win market share away 

from one another. On the other hand, monopoly situations can create reduced competition, which can translate into 

higher prices and less fl exibility in contracting. The specifi c implications vary signifi cantly by location, airline, and company, 

so buyers should monitor ongoing developments closely to understand the evolving impacts to their organizations. 

Work at the alliance level. For global programs, it can be most benefi cial to negotiate with contacts from the global 

alliance rather than with individual carriers. This allows buyers to leverage their combined volume to obtain the best 

possible pricing. It should also streamline the process by providing a single point of contact with whom to work. 

Keep up with developments. While the airline landscape in Latin America is fast evolving, buyers will benefi t by keeping 

their fi nger on the pulse of ongoing developments so they can anticipate the implications and proactively communicate 

questions or concerns with their preferred airline partners. v 

15

16 REGIONAL SPOTLIGHT: Americas – North America 

Keep airline commitments 

reasonable this negotiating season 

Corporate travel negotiating season is offi cially underway, and while many airline programs are not sourced annually and do not 

run on a calendar year schedule, the fact is plenty of travel buyers will indeed be sitting down with their airline partners in the 

coming weeks and months to negotiate their air programs. As carriers remain laser-focused on holding buyers accountable for 

meeting contractual commitments, the following reminders are provided to help buyers establish reasonable airline contract goals 

and manage to them year round. 


38-45% 

30% 

Share premium 

commitment 

required for 

optimal pricing 

Fair market 

share for 

Airline A 

Resist the urge to over-commit 

The more volume a buyer commits to an airline, the 

more attractive the pricing and other contract terms they 

receive in turn. While it is ideal to work with more than one 

preferred airline – perhaps a primary and secondary carrier 

– to maintain an element of competition in the program, 

buyers must be careful not to make commitments they 

can’t successfully execute with each carrier. Some fi nd 

themselves making volume commitments that total more 

than 100% of their total volume across carriers on a given 

route, which is obviously impossible to sustain. 

The challenge typically comes from carriers that require 

very specifi c volume thresholds from buyers based on a 

premium over the airline’s fair market share. Fair market 

Source: CWT Solutions Group 

share is the amount of volume the airline knows it would 

receive without providing any corporate discount at all, 

simply based on the percentage of seats fl own in the market that they own. Beginning with fair market share, carriers then 

require an additional commitment (often referred to as a “share premium”) by the organization in order to receive optimal 

pricing, and in hub markets where the carrier has a dominant presence, the additional requirement is typically much higher 

than in non-hub markets. For example, if Airline A has 30% of the market share in a city, it could require a buyer to commit 

anywhere from 38-45% of the organization’s volume in the market to that airline in order to receive the best pricing. By the 

time that commitment is made and similar details are worked out with other airlines, it is easy to see how buyers can fi nd 

themselves unintentionally overcommitted. 

Keep the scope manageable 

The aforementioned market share agreements should be focused on the organization’s top 10-20 most frequently traveled 

routes, or applied to markets that encompass the majority of total air spend, whichever is more manageable for the organization. 

This ensures buyers can focus the necessary resources on meeting or exceeding those commitments that drive the greatest 

cost savings to the organization. This is particularly important given airlines increasingly look at an organization’s success rate 

in this area, as well as proven ability to infl uence traveler behavior, as they determine the pricing and terms to off er a buyer.

REGIONAL SPOTLIGHT: Americas – North America 

For all other markets, buyers can often obtain a small, single-digit percentage discount off of published fares with a given carrier 

by making similarly smaller market share agreements, also in the single digits. While they deliver less overall value to the travel 

program, these arrangements help ensure the organization isn’t paying the full published rate in all the other markets to which 

its employees travel. 

Use OBTs to drive progress 

In North America, where online booking achieved critical mass years ago, it can be easy to overlook some of the less obvious 

functionalities that online booking tools (OBTs) off er to drive traveler compliance to preferred carriers, and thus help the organization 

meet its airline commitments. Because of the maturity of the online booking market in North America, OBT providers based there 

– namely, Rearden Commerce, GetThere, and Concur – are particularly advanced in the capabilities they off er. 

Typical functionality includes the ability to: preference preferred suppliers by having them appear at the top of search results; 

weight search results to more heavily showcase the organization’s strongest preferred partners; require a reason to be specifi ed 

if a non-preferred carrier is selected; and in some cases, enable a custom messaging capability that attempts to redirect noncompliant 

traveler behavior before the booking is processed, such as encouraging use of the lowest logical airfare if it has not 

been selected. 

Depending on the culture of the organization, OBTs can also be used to apply stricter limitations to booking behavior, including 

completely excluding non-preferred airlines in search results, prohibiting bookings that include any non-compliant elements, or 

requiring pre-trip approval for certain types of trips, such as those that are non-compliant or that cost a certain amount of money. 

However, these measures must be carefully considered as they can delay ticketing for necessary trips, ultimately costing the 

company more money in the end. Finally, many OBTs allow the organization to specify the reason codes travelers must select 

to justify non-compliance. Thoughtful consideration of these codes can help buyers glean useful insight into the reasons behind 

non-compliant behavior, enabling the organization to educate travelers diff erently, redirect behavior if needed, or perhaps adjust 

their preferred programs to better meet travelers’ needs. 

To ensure the OBT remains an eff ective enforcer of the corporate travel policy, buyers must ensure that ongoing adjustments 

made to the policy itself are also applied to the confi guration of the OBT. Finally, integration with mobile technology will help 

enforce the policy while travelers are on the road, often faced with making quick decisions that may or may not comply. 

Help travelers understand their impact 

Travelers need to understand how their purchasing decisions aff ect the organization, including its ability to meet market share 

commitments. Most travelers likely are completely unaware that such agreements even exist between their employer and 

airlines. Buyers must continually increase awareness and provide education via available channels such as intranet sites and 

travel-specifi c sites and tools they use. Organizations like CWT assist with this eff ort by off ering additional communication 

methods, such as messaging tools that enable specifi c follow up based on unique situations, and other reporting mechanisms 

that help travelers see the aggregate cost impacts of the many decisions they make while on the road, helping them move away 

from considering each choice in isolation. 

Importantly, buyers should provide positive reinforcement to travelers for compliant behaviors that help the organization save 

money or that advance other travel program goals, such as safety and security, rather than solely communicating when corrective 

action is needed. This acknowledgement, especially if the employee’s leadership is included, can go a long way toward driving 

further positive behaviors in the future. v 

17

18 INDICATORS 

As the price of fuel has fluctuated, sometimes drastically, over the past 18 months or so, many airlines have expanded 

the practice of assessing fuel surcharges in addition to the base fare for certain airline tickets. This Indicator chart is 

intended to provide travel buyers clarity around the current state of average fuel prices and airline fuel surcharges, 

and illustrate the ongoing evolution in the relationship between the two. 

150 

140 

130 

120 

110 

100 

90 

80 

70 0 

RELATIONSHIP BETWEEN OIL PRICES AND AIRLINE FUEL SURCHARGES 

112 108 

104 108 113 103 113 11 

2011 Q2 

2011 Q3 

NOTE: The monetary reference in this chart denotes Euros. 

2011 Q4 

Source – fuel surcharges: Amadeus global distribution system 

Source – fuel price information: U.S. Energy Information Administration 

Starting with Q1 2012 data, this chart encompasses all classes of service for 19 legacy carriers with headquarters in every region of the world. 

Previous quarters represent data for 12 international carriers. 

Domestic = travel within any given country 

Continental = travel originating in any given region to international destinations within that same region 

Intercontinental = travel originating in any given region to destinations outside of that region 

Values have been recalculated using fl at exchange rates to eliminate artifi cial price variations 


2012 Q1 


Fuel Index 

Domestic 

Intercontinental 

Continental 

Total All Airlines

INDICATORS 

Europe, Middle East & Africa - Percentages indicate the variation of Q2 ’12 vs. Q2 ‘11 

US$ 

1600 

1400 

1200 

1000 

800 

600 

400 

200 

US$ 

1600 

0 

1400 

1200 

1000 

800 

600 

400 

0 

2011 Q2 

2011 Q2 

AVERAGE TICKET PRICE 


ECONOMY 

2011 Q4 



BUSINESS 

Domestic Continental Intercontinental Continental Intercontinental 

ECONOMY 

-3% 

-3% 

+5% 

Source: CWT client data, worldwide on top 20 round-trip routes 




Top 20 round-trip routes: 20 most frequently purchased round-trip routes per category (domestic, continental, intercontinental) & per region, based on 2010 and 2011 CWT ticket sales 

Values have been recalculated using fl at exchange rates, versus previous editions of this publication, to eliminate artifi cial price variations. 


US$ 

5500 

5000 

4500 

4000 

3500 

3000 

2500 

2000 

1500 

1000 

500 

2011 Q2 

North America - Percentages indicate the variation of Q2 ’12 vs. Q2 ‘11 


2011 Q4 



+11% 

+1% 

+2% 


2011 Q4 

BUSINESS 



US$ 

5000 

4500 

4000 

3500 

3000 

2500 

2000 

1500 

1000 

500 

0 

2011 Q2 


2011 Q4 




19 

+2% 

+2% 

+5% 

+4%

20 INDICATORS 

Asia Pacifi c - Percentages indicate the variation of Q2 ’12 vs. Q2 ‘11 

US$ 

1200 

1000 

800 

600 

400 

200 

0 

US$ 

1600 

1400 

1200 

1000 

800 

600 

400 

200 

0 

2011 Q2 

2011 Q2 

AVERAGE TICKET PRICE 


ECONOMY 

2011 Q4 



BUSINESS 


ECONOMY 

+7% 

-1% 

+2% 

Source: CWT client data, worldwide on top 20 round-trip routes 




Top 20 round-trip routes: 20 most frequently purchased round-trip routes per category (domestic, continental, intercontinental) & per region, based on 2010 and 2011 CWT ticket sales 

Values have been recalculated using fl at exchange rates, versus previous editions of this publication, to eliminate artifi cial price variations. 


US$ 

5000 

4500 

4000 

3500 

3000 

2500 

2000 

1500 

1000 

500 

0 

2011 Q2 

Latin America - Percentages indicate the variation of Q2 ’12 vs. Q2 ‘11 


2011 Q4 



+9% 

+10% 

+7% 


2011 Q4 

BUSINESS 



US$ 

5000 

4500 

4000 

3500 

3000 

2500 

2000 

1500 

1000 

500 

0 

2011 Q2 


2011 Q4 




-3% 

+4% 

+9% 

+11%

INDICATORS 


BUSINESS & FIRST CLASS USAGE 

Europe, Middle East & Africa 

% 

50 

45 

40 

35 

30 

25 

20 

15 

10 

5 

0 

% 

50 

45 

40 

35 

30 

25 

20 

15 

10 

5 

0 

2011 Q2 

2011 Q2 


Continental Intercontinental 


2011 Q4 

2011 Q4 






% 

50 

45 

40 

35 

30 

25 

20 

15 

10 

5 

0 

% 

50 

Source: CWT client data, worldwide 



North America 

45 

40 

35 

30 

25 

20 

15 

10 

5 

0 

2011 Q2 

Asia Pacifi c Latin America 

2011 Q2 


2011 Q4 




2011 Q4 





21

22 INDICATORS 

% 

80 

70 

60 

50 

40 

30 

20 

10 

0 

% 

80 

70 

60 

50 

40 

30 

20 

10 

0 

2011 Q2 

2011 Q2 

AIR BOOKINGS MADE 14+ DAYS IN ADVANCE 

Europe, Middle East & Africa North America 


2011 Q4 



Domestic Continental Intercontinental 


% 

80 

Source: CWT client data, worldwide 




70 

60 

50 

40 

30 

20 

10 

0 

% 

80 

70 

60 

50 

40 

30 

20 

10 

0 

2011 Q2 

Asia Pacifi c Latin America 


2011 Q4 



2011 Q2 


2011 Q4 





2011 Q4 



Domestic Continental Intercontinental

CWT Vision Q3 2012 EN - Carlson Wagonlit Travel

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