There’s no secret to making money selling business travel. The formula is this: boost revenues, cut expenses, and watch the bottom line grow.
That’s what Lisa Buckner did at Corporate Travel Services (CTS), an established corporate agency in Minnetonka, Minn., that was shrinking.
As part of a new management team that took over in 2009, Buckner, CTS president and COO, boosted 2010 revenues by 30% over a flat 2009. By next year, Buckner expects to double sales.
Out to bid
“The first thing I looked at was the revenue model, where our revenue was coming from or not coming from,” Buckner told Travel Market Report. “We had management fees and transaction fees, but we did not have any preferred suppliers.
“I put the entire book of business out to bid with the top air carriers, all the car rental companies, and developed a supplier relations board and a customer advisory board.
“We named three preferred carriers, a car rental preferred and an alternate, and that’s when we started making money.”
That was also when Buckner, CTS president and COO, started attracting outside attention.
Earlier this month, CTS was acquired by Directravel, where a $1.5 billion consolidation of mid-sized agencies being headed up by industry veteran Ed Adams. (See “Q&A: Directravel's Adams Cites Market 'Void' in Acquisitions Drive,” Oct. 24, 2011.)
Buckner is staying on as president and COO.
Shrinking for years
CTS was founded in 1974. When Buckner came on the scene in early 2009, it was an established American Express agency with corporate clients scattered from California to Massachusetts.
But what had once been one of the largest agencies in the Midwest had been shrinking for years.
No game plan in sight
The agency had no preferred suppliers, no agent productivity goals or incentives, no phone reports, no customer incident reports.
Agents took calls, searched for the lowest fares, wrote tickets, booked whatever cars and hotels looked good on their screen, and went home at the end of the day.
“The lowest fare might be the right thing to write, but fares being equal, you should book with the carrier that pays you,” Buckner said.
“Our agents were booking whatever came up without giving any thought to what was best for the customer or for the company. It wasn’t anybody’s fault, they just didn’t know what they didn’t know.”
Many agencies in same boat
CTS wasn’t unique in its business practices or falling revenues, Buckner said. There are hundreds of small and mid-sized agencies that have never moved beyond the business model created by the founder a generation ago.
Business practices that produced steady profits in the 1970s and 1980s are less successful in today’s leaner and meaner business climate.
Air contracts help
Buckner’s job was to bring CTS into the 21st century. Part of the change is tapping new revenue streams. She started with preferred suppliers at both the agency level and the customer level.
Air contracts have made a tremendous financial difference, she said. Focusing air purchases with three carriers, Delta, American, and US Air, gives CTS the market share it needs to negotiate better contracts.
“It makes a big difference just to book with a supplier who is going to pay you,” she said.
On the client side, she has helped customers create their own air programs, a cost saver that most did not have. Creating customer preferred supplier programs using the same three carriers helps align incentives for the agency, its agents, corporate customers, and their travelers.
Aligning agency and customer incentives also encourages carriers to help CTS move market share with strategic pricing deals. The winners are Delta, American, and US Air, depending on the client and city pairs. The loser is typically Southwest.
“We have some customers in some markets who want to book Southwest,” Bucker said. “The perception is that Southwest is always the lowest fare, but at the end of the day, it doesn’t have to be. We’ve done a pretty good job of getting our preferreds to match Southwest pricing to help us move market share.
“When you align your customer incentives with the same preferred carriers, you avoid possible conflicts of interest. What’s good for your customer is good for the agency, too.”
Knows the terrain
Buckner is not a newcomer to the corporate travel world. She helped build a small agency, Northwestern Travel Management, that became part of Navigant, which was folded into Carlson Wagonlit Travel.
She retired as vice president of operations and account management for CWT and came back to run CTS.
“I knew that moving back into a small agency where the customer was the focus was the right place to be,” she said. “Our industry is losing sight of that customer focus.”