Lodge Cards - A Way to Easy Savings on Travel Purchases?

Dedicated to the management of corporate travel expenses, the lodge card or travel account¹ is a payment tool that provides companies with process optimization, comprehensive data analysis capabilities and travel insurance. Travel agents are also in favour of them because they offer better cash-flow management and higher payment security. Lodge cards can contribute to the optimization of the travel management value chain.

As a consequence, the lodge card is increasingly becoming a must for any company willing to improve its corporate travel expenses as well as its business relationship with its travel agent. This article aims to understand the reasons why an increasing number of companies opt for a lodge card.

Optimized Processes

The lodge card is a company centralized payment means dedicated to air and rail ticket purchases. Only one lodge card is issued for a whole company or to each subsidiary, or on a per cost or profit centre basis. All the flights and rail trips booked by the entity’s employees are thus charged to this one single card.

Technically, the card is recorded into the information system of the company’s travel agent together with the travellers’ profiles. Each time a travel order is being passed, the travel agent selects the lodge card as means of payment. So doing, he automatically requires a payment authorization from the issuer, in order to benefit from the payment guarantee. The company receives a weekly or monthly statement of its purchases and pays the card issuer by direct debit or by wire transfer with payment terms varying from seven to 30 days. Under this scheme the travel agent is paid directly by the card issuer.

For companies this process brings the benefits of an easy payment process and more simplified control over spending via the detailed statements of transactions, and negotiated payment terms with the card issuer.

For travellers, the central payment solution offers many advantages:

• non frequent, travellers who do not have a corporate card, benefit from easy payment of their tickets and comprehensive travel insurance benefits; and
• frequent travellers benefit by freeing up their corporate card payment limit by transferring flight and rail ticket purchases to the lodge card.

For travel agents, the benefits are security of payment (thus sharply reducing risk management costs) and cash-flow optimization through shorter payment terms and full predictability of inbound flows.

The following flow chart gives a global understanding of the flows of data and money with a lodge card.

A lodge card: How Does it Work?

The first flow of data (marked in red) is concerned with travel request and booking. It is the common travel planning flow of data, whatever the payment means involved. The company makes a travel order with its travel agent. The travel order may be sent by fax, phone, email or via electronic data transmission. The travel agent uses his connection to a CRS (Central Reservation System) such as Amadeus, Galileo, Sabre or Worldspan in order to identify the available flights that best suit his client’s needs and then generates a booking. This is recorded into the BSP (Billing Settlement Plan) in order to set up the billing.

The second flow of data (marked in blue) characterizes the lodge card data collection scheme – data collected from the travel agent, the CRSs and the BSP. This is where there is a clear differentiation between lodge card issuers – some of them are able to collect data solely from the travel agent, through either the acquiring side of the payment system or with a combination of acquirer data and an additional travel dedicated flow of data. The most powerful issuers are able to cross-check and complete their data collection process using the information available from the CRSs and/or BSP. A card issuer that collects data from BSP can report Flown Data (see below) to the customer. At the end, data ais made available at theclient’s level through invoices and powerful MISs (Management Information Systems).

The flows of money are marked in grey. They clearly illustrate the fact that the card issuer intermediates between the company and the travel agent, thus allowing these two parties to benefit from the negotiated financial terms that best correspond to each one’s needs. In particular, the travel agent benefits from a fully predictable frequency of money collection in addition to a guaranty covering client risk.

Travel Managers Empowerment

Data is the key asset of a travel manager. In order to optimize travel expenses, he needs to establish and monitor the compliance with a corporate travel policy. He also needs to negotiate with suppliers, with a full and detailed knowledge of its company’s travel activity.

Using a lodge card as a means of payment, he or she will benefit from detailed, accurate and independent data featuring both travel-specific data and company-specific data.

Travel-specific data ais related to the purchases made by the company with airlines:

• Traveller’s name
• Airline name and code
• Routing, segment details
• Travel agent invoice number
• Ticket number
• Date
• Amount paid
• Travel agent fee

Company-specific data ais used for accounting and management accounting purposes. Card issuers offer a large number of possibilities such as:

• Traveller number
• Cost Centre
• Project Number
• Order Number
• Accounting Unit reference
• Internal account

The travel manager will also be provided with access to fairly inexpensive and ‘state of the art’ Internet-based reporting tools in order to conduct the analysis of the information. The lodge card thus empowers the travel manager for every area of his activity and reveals itself as an essential tool for the accomplishment of his mission towards enhanced cost reduction and higher traveller satisfaction.

Commenting on the benefits of using lodge cards to pay for ticketing,Sylvie Saint-Genez, Travel Manager of Aéroport de Paris², says: “In 2002, within the framework of a business travel costs reduction policy, we implementated a self booking tool and a centralized means of payment, i.e., a lodge card.Today, we use five lodge cards which allows us to save 25 per cent of time in the seizure of the accounting data.”

The Corporate Card and the Lodge Car

In order to differentiate lodge cards and corporate cards, the latter are usually designated under the name of ‘walking plastic’. This terminology carries its own meaning – the walking plastic serves corporate travellers while they ‘walk’ outside the office. Corporate cards are used to pay for taxis, restaurants, hotels, rental cars, fuel and any other such business travel related purchases.

For a corporation, the travel management chain is divided into three chronological steps:

• the pre-travel step tackles issues such as mission authorization, booking, payment of train and airline tickets. That is where the lodge card intervenes, together with powerful software for travel planning and booking, in relationship with the company’s travel agent. The lodge card is fully integrated into software and makes payment and data collection transparent processes.
• the travel itself is where corporate cards are being used: easy payment all around the world, assistance and insurance services make travellers’ lives easier and safer.
• the post-travel step is concerned with expense reports, employee reimbursement, and travel policy survey. Corporate cards electronic statements are easily integrated into expense management software and detailed lodge card data is made visible via the reporting tool provided by the card issuer. However, most travel expense software on the market are provided with a capacity to integrate lodge cards data. As a consequence, travel managers benefit from a consolidated view of expenses. Some of the card issuers are able to consolidate corporate and lodge cards data into one single reporting tool.

Using French market data, it is enlightening to observe the distribution of travel related expenses of companies by categories of spending, in order to measure the markets for corporate and lodge cards. For the year 2004, on a slow growing market totalling €24bn of corporate travel expenses, the distribution of expenses stands as follows:

This pie chart shows that 68 per cent of the total annual amount of corporate travel expenses is made on air or rail tickets, which represents the potential market for lodge card payments.

Future Innovations

Travel Agents Fees: Travel agents have introduced transactions fees as a consequence of the cancellation of airline’s commissioning on tickets sales. Lodge cards are now usually able to provide the amount of fees associated to each individual transaction. A useful piece of information for a travel manager willing to cross-check his travel agents billings.

Flown data: Some card issuers are now able to collect what is called Flown Data. This highlights paid but unused and un-cancelled airline tickets. Serious savings are available for companies that do not yet enforce a strong cancellation policy. Flown Data are the essential data to support the enforcement of such a policy.

Benchmarking: Future features of reporting tools could integrate benchmarking capabilities. Most card issuers own a large database of prices on a detailed per route basis. Travel managers will surely find it interesting to be able to compare the prices they paid with those negotiated by their fellow travel managers.

¹ Various names exist for this category of product. Some issuers also name it Travel account or Lodged account. In this article, the name lodge card will be used as a generic term. It is important to note that even where the product is named lodge card, there is no plastic issued: the lodge card is purely an account.

² Company Profile: Aéroport de Paris (ADP) Aéroport de Paris is a company which manages the airports located 50km around Paris.Groupe ADP: ADP and its four subsidiaries ADP Ingénierie, ADP Télécom, ADP Management, Alysia (subcontractors) consists of nearly 9000 employees (8500 for ADP itself). Its annual travel budget is €3.2m. Company staff require 4200 tickets (train + flight) each year, with 3000 missions per year, 200 “VIP travelers” with an average of four missions per year. Flights: 50 per cent international, 50 per cent domestic .