Why Companies are Moving Toward a Corporate Travel Department

June 22, 2021

Over the last few years, we’ve seen increased interest from travel managers around how to create and support a Corporate Travel Department (CTD). This interest has only increased post-pandemic as companies are seeking to take more control over their travel programs, technology solutions, revenue flow, and most importantly, employee wellbeing and duty of care.

We are often asked to consult on the merits of the CTD model, especially as it relates to Deem’s unique fit in supporting this type of travel program.

What is a CTD?

A corporate travel department allows a company to act as its own travel agency for the purpose of purchasing and distributing travel services directly to its employees. This can be a more cost-effective approach in managing a travel program, particularly for large enterprises, as compared to a traditional travel management company (TMC)-managed travel program. A CTD offers a unique way for a company to take control of its travel program and exercise more leverage over revenue flow.  

Why companies adopt a CTD model

Companies that adopt a CTD model want to achieve at least one of these advantages:

  1. Increased access to revenue streams
  1. Increased flexibility with suppliers, partners, and technology providers
  1. Increased oversight and ownership of the offline and online traveler experience

In the early days of the CTD model, the key driver was increased access to revenue streams. Companies sought transparency and direct access to commissions rather than relying on a third-party partner for reporting and revenue sharing. With a CTD model, there is a clear audit trail on commissions through Airline Reporting Corporation (ARC). Any rebates, incentives, or other soft-dollar revenues offered by suppliers and GDSs are delivered directly to the company, rather than through the TMC.

Corporate travel departments have the flexibility to choose their own suppliers, partners, and technology providers rather than fit into a solution that is optimized for a TMC managing several customers at scale. Companies can negotiate supplier contracts that are best suited for their unique needs, travel volumes and spend.  

They are the primary decision-maker when it comes to evaluating new tools, or considering the timing of feature enablement or upgrades from legacy systems. They can set up custom processes and workflows that streamline fulfillment, surface up spending insights, and guide traveler behavior. In other words, rather than a one-size fits all approach, companies can pick and choose the travel ecosystem that best suits their needs.

Last but certainly not least, a CTD model provides a higher degree of ownership when it comes to the relationship with business travelers. The company itself becomes the face and voice of the travel program as the first point of contact for travelers when they need something. This relationship can uncover extremely valuable insights into traveler behaviors, safety, and satisfaction.  

And as the pandemic has shown us, companies are focused now, more than ever, on duty of care and ensuring traveler wellbeing. A CTD model offers direct access to traveler feedback, uncovering valuable insights that can help drive better business decisions about the travel program.  

Moreover, it is typically the online booking experience where CTDs provide the greatest impact for their business travelers. Travel management companies typically lead with their service offering; when a traveler needs help with booking a complex trip, an agent is ready and willing to assist. A CTD, on the other hand, typically puts the traveler tool stack first, choosing a digital suite of tools based on its own unique business objectives and traveler needs.  

Offline servicing is still critical to the traveler experience. However, CTDs are afforded more opportunity to prioritize the online traveler experience. They have the flexibility to focus on the digital experience for their travelers, reducing traveler friction in the process.

Travel management strategy

Before considering a CTD model, it is necessary to understand which of the above advantages are most important to your travel program goals and objectives. In other words, different CTD models can achieve different desired outcomes. Step one is identifying the best fit for your travel program.  

The most basic model includes obtaining ARC accreditation to track and recoup commissions from hotel and rental car suppliers. This grants companies visibility and control over commissions, particularly how suppliers remit commission payments; commissions are paid directly to the CTD, while maintaining a traditional TMC partner for fulfillment and traveler support.

Compare that to a full corporate travel department model where the corporation manages all aspects of its travel program, from fulfillment to traveler support, including duty of care. This model maximizes flexibility to directly manage overall travel expenditures and revenue, including auditing and reconciliation. This gives the CTD improved visibility and influence over suppliers (commissions/discounts,) the GDS agreements (incentives/overrides,) and other partners (e.g., Deem) in support of its travel program.  

This also sets up a more streamlined decision-making process where the corporation makes key business and travel program decisions without the need for consensus from a traditional TMC-managed travel program. This accelerates travel program optimization, scalability, and control over future opportunities to improve overall program value.

Costs and benefits of CTDs

While companies that adopt a CTD model can often reap cost savings and new revenue streams to offset program management costs, there are additional implicit and explicit costs associated with taking on this responsibility. It is important to weigh your options and identify tradeoffs in adopting one of these models.  

For example, will a commission-only model generate enough revenue to offset the increase in TMC fulfillment fees? Considering TMCs typically offset their fees through supplier revenues, this model will certainly result in the TMC charging higher fees, especially if agent assistance is required. To adopt this model, your hotel program needs to be robust enough to cover the gap in commissions versus fees and still generate revenue.

There are, of course, additional costs and resource dependencies associated with managing your own travel program. Negotiating, contracting, and managing suppliers can be a challenging and time-consuming exercise best handled by experts. This type of service can be bundled into a traditional TMC service agreement or contracted out to other third parties.  

There are real costs in navigating and managing the ARC accreditation process. There are also staffing resources needed to run a CTD, from managing the overall program to providing traveler support. And let’s not forget the cost of evaluating and acquiring the necessary technology platforms required to optimize the CTD opportunity.

These are just examples of what needs to be considered when deciding if the benefits outweigh the cost of creating a CTD. This is a critical exercise that needs to be approached with a clear understanding of your goals and objectives. More importantly, you’ll need to understand which benefits map to each of your objectives and identify the intangible benefits that cannot be captured by a simple cost model.  

In other words, the CTD model is not without risks, hidden costs, and other challenges, but hiring a qualified consultant to help navigate the process can ensure you optimize your program and avoid the pitfalls. Achieving economy of scale by becoming a CTD is heavily dependent on the model selected and rooted in a long-term strategy.

Why drive corporate travel management now?

The post-pandemic travel ecosystem will certainly see an increased demand by companies choosing to become CTDs, particularly considering the challenges faced in the early part of the global pandemic and the suspension of most, if not all, corporate travel. The return to some semblance of order within corporate travel and travelers getting back on the road will necessitate companies, particularly large enterprises, take a greater stake in their travel program.  

The traveler journey is also shifting to a more touchless experience. Travelers are savvier and more tech-friendly, minimizing the need for expert, agent assistance for their travel needs. This has led to travelers embracing self-service tools with a marked growth in online adoption, starting with mobile, across most companies and industries. 

The need for influence over the traveler journey will certainly help drive the interest in corporate travel departments. And designing an active and engaged CTD model will create the opportunity for companies to rethink their travel program and shift the narrative to being more traveler-centric, tech-forward, and scalable as corporate travel regains momentum.

How we can help

Our customer-first approach makes us uniquely fit for companies considering becoming a CTD. Deem is a travel technology platform designed around travel program scalability, traveler-centric user experience, and future-looking solutions. This allows Deem to more broadly model each CTD experience based on the program objectives and requirements of each customer, with the ability to scale quickly as programs grow. This aligns well with Deem’s general philosophy to be agnostic toward the travel ecosystem and desired fulfillment model.

In addition, Deem’s focus on a unified traveler journey across mobile and web on a modern travel platform aligns with CTD program goals. Deem offers best-in-class technology and mobile-first solutions the CTD customer demands, with the ability to granularly control each aspect of the company’s travel program. This opens the door for companies to have control over all their content requirements (NDC, direct to supplier, etc.) and invest in the future of their travel programs through increased access to travelers, suppliers, and Deem.

Request more information from a Deem specialist.

Emilie Kopp, partner development director at Deem, contributed to this article.

Author

Garner Swann
Solutions Architect

Garner Swann is Deem’s Solutions Architect and has spent many years at Deem in various roles including director product manager, director of business development and QA manager. Before Deem, Garner held technical support roles at Asian American Recovery Services and American Express, and support roles at United Airlines. He completed a BA at the University of California and now resides in San Francisco.

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