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SPECIAL REPORTS  September 2006
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Dream Data
Globalization of business travel has increased corporations’ need for accurate data, and complicated it at the same time. Travel suppliers are responding pretty.
by Phoenix Arrien & Judy Ferring
But those who are clamouring the most for its delivery are North Americans, and they’ve set the standard, perhaps at a level and in an area that is not compatible with the rest of the business travel world’s needs.
“The good news,” says Prism International’s vice president, Les Baker, “is that the travel data coming out of Asia has surpassed that of Europe for quality. The bad news is that it still isn’t on a par with the data coming from North American TMCs and suppliers.” Prism, whose business is the collection of travel data, grades North American data quality at 918; Europe’s at 738 and Asia Pacific’s at 749.
When it comes to Europe, familiarity may be helping to bridge the gap with North American data quality. But most corporate travel managers are on a steeper learning curve — on a variety of subjects — when they work on their programs in Asia. And data from Asia is especially important. Forecasts hold that the region will host nearly a third of the world’s global travel volume before 2020.
A Lot That’s Different
The basic problem, points out Susan Hopley, executive vice president of emerging markets at TRX, is that faring and distribution models in Asia are often very different from what is practiced in Europe and North America. That means the data will also be very different — or that the data that you’re looking for may simply not exist because the process it describes does not exist.
Even if it does exist, it may not be as important to Asian buyers. So the mechanisms to collect the corresponding data may not be widely in place.
This point was recently made by Kenneth Phua in ACTE’s Global Business Review magazine. “IT-related solutions that offer ... superior information value, which may work well in North America, enjoy only modest adoption in many Asia-Pacific markets,” he writes. “Global teams fret about this lack of receptivity while local teams frown upon the imposition of tools that introduce unnecessary complexities in places where current processes, often regarded as redundant, actually score high on meeting cost-management objectives.”
“I really just saw firsthand the very things we’re talking about — a lot of very exciting things,” says Hopley, who has just returned from a tour through China, Singapore and India. One of the key differences, she continues, is the greater reliance on spot buying, often with a corresponding requirement that the lowest logical fare always be chosen. Coupled with a greater faith than often occurs in the Western world that the agency can and will adhere to that dictate, Asian travel buyers don’t feel the same need for verifying data.
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Freshman Class
State and local governments issue travel cards to just 13 percent of their employees even though 34 percent travel more than twice a year.
by Paul Shanahan
The reasons why that’s about to change are a textbook case of common sense. If you’re a finance professional with a state or local government or a public university, you’re certainly aware of the negative press government charge card programs have received in years past. Reports of government employees using cards to pay for such things as lingerie, tattoos, admission to exotic dance clubs and Ozzy Osbourne concert tickets are admittedly hard to ignore.
But if old news about card abuse makes you think a charge card program is not a good way to manage your T&E expenses, you haven’t been getting the full story. The truth is that government travel card programs work very well. Public sector agencies are now using them to control T&E expenses, slash administrative costs and increase employee accountability -— while maintaining and improving control and accountability.
Today, highly effective travel card programs are common throughout the federal sector, but the same is not true at the state and local government levels, according to the 2004 Corporate Travel Card Benchmark Survey Results by RPMG Research Corporation (RPMG). A leading commercial card and e-commerce consulting firm, RPMG finds that state and local government travel card programs issue cards to just 13 percent of their employees versus 60 percent for federal programs. This disparity cannot be entirely explained by differences in the numbers of employees traveling. State and local governments in the survey reported that 34 percent of their employees travel more than twice a year versus 45 percent for federal agencies. (For a summary of RPMG statistics on public sector travel card use. (See table on page 15.)
Although travel cards may now be under-utilized by state and local governments, that won’t be the case for long. RPMG reports that 83 percent of state and local agencies and 91 percent of public universities that already use a travel card expect their programs to grow in the next five years. Organizations with travel card programs clearly recognize the benefits, and they intend to expand their programs to capture more of their T&E spend on travel cards.
Still undecided? Read on. In this article, we’ll examine the reasons why a travel card makes sense for state and local governments. In particular, we’ll take an in-depth look at starting a new program and implementing best practices to take maximum advantage of the efficiencies and cost savings of travel cards.
Despite the publicity, fraud is simply not happening very often in government travel card programs. According to the RPMG survey, incidents of fraud on average account for less than 1/100 of 1 percent of all public and private sector travel card spending. That’s one basis point or just $100 for every $1 million of spend. On average, there is less than one incident of fraud per every 100,000 card transactions.
RPMG also finds that the public sector is more effective at preventing fraud than the private sector. Fraudulent expense as percent of annual public sector travel card spend is a mere 0.001 percent, with just 0.02 fraudulent incidents per every 10,000 transactions annually.
Governmental agencies are clearly doing an excellent job of maintaining control and accountability in their card programs, thus avoiding negative publicity. Why? The short answer is better policies and procedures for card use, and stronger internal controls. RPMG finds that 64 percent of fraudulent travel card incidents are discovered by organizational controls and issuing banks’ fraud detection systems.
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Inflation Fighters
Studies show that in some airport locations, there can be upwards of a 60 percent increase in the daily rental car rate once all the fees and special excise taxes are added on to support local projects.
by Nina Lemke
Considerable effort is being expended to change the situation. In the meantime, travel managers still have to cope with the budgetary balloon that’s been created.
So what, exactly, are your travelers paying for? In Wisconsin, a new commuter rail; in Kansas City, a downtown sports arena; in Massachusetts, added police and fire stations ... To date, car renters have been asked to cover the costs of 18 stadiums and sports venue projects; and at least 17 more are under consideration. Since 1976, more than 80 car rental excise taxes have been enacted in 38 states and the District of Columbia. In the past decade alone, the number of car rental excise taxes has almost doubled. Consumers and businesses that use rental cars have paid over $3 billion in special taxes in the past 12 years and, no matter what project the money is used for, the final product is most likely not on your traveler’s itinerary.
Excise taxes are typically used for one of two purposes; to raise revenue or to discourage a particular behavior. These types of taxes are unpopular with both economists and taxpayer advocates. Economic experts agree that car rental excise taxes are bad policy for many reasons. Considered predatory, they target a group that reaps no direct benefit from the tax dollars raised. Nor does that group have any representation in the decision — the same as in 1773, when the Boston Tea Party laid the groundwork for the American Revolution.
Lawmakers are attracted to rental car excise taxes because they are less politically painful than other, more traditional types of taxes like sales, property or income taxes. Traditional taxes are highly visible to taxpayers and attempts to raise them are often met with strong opposition, becoming a political hot potato for politicians who need voter support. Since rental car and other travel related excise taxes are viewed as being paid by non-residents, voters are less likely to object. This translates into easy money to pay for popular projects and cash-strapped cities, counties and states submit new proposals on almost a weekly basis.
“Funding programs by taxing outsiders from other states or cities is what economists call ‘tax exporting.’ This type of taxation makes lawmakers less accountable to their constituencies and encourages overspending on projects that may or may not make economic sense,” states Andrew Chamberlain, staff economist for the Tax Foundation, a non-partisan educational organization in Washington, DC. “If a specific project is really needed, economists believe it should be funded through broad-based taxes spread fairly and evenly among those who will benefit from the project.” He says that economists believe that overall, car rental excise taxes are unreliable, regressive and retaliatory.
Tax law is always complicated and part of the difficulty in working with the car rental excise taxes is the variable nature of the taxes. The rules that govern taxation are different depending upon where the proposal originates. Some new taxes need public approval; some are approved through city councils or regional boards; some are only imposed in a specific city or county and some are imposed statewide. A small number of these excise taxes have expiration dates written in but those dates, in reality, are often missed. According to the car rental companies, it is often the local car rental representative who hears about a proposed tax first.
“Car rental companies must address the serious trend of the government collecting easy money to fund local projects — and even private enterprise in some situations — at the expense of travelers,” states Neil Abrams, a leading expert of the auto rental business and founder of Abrams Consulting Group. “But car rental companies really aren’t enough. Travelers aren’t enough. It will take a grassroots, multi-industry coalition all speaking with the same voice and sending the same message to stop this trend.”
“The good news is that the government relations people in our industry really play well together and we recognize that this is an all-for-one and one-for-all effort,” says Jim East, vice president of government relations for Vanguard Car Rental USA, Inc. “We have a well-developed network and a very effective early warning system in place. We share information almost weekly on any rumblings we may hear of new tax proposals and mobilize our efforts very efficiently.”
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