The Benefits of Lodge Card Solutions Uncovered
The idea of using a lodge card or central settlement account to pay for an organisation’s business travel has been around since 1936, when American Airlines first introduced the scheme to encourage air travel by offering a line of credit with an associated incentive structure. The scheme took off in the airline community and the outcome was the first ever credit card: the Air Travel Card, now called the Universal Air Travel Plan (UATP).
In the following 70 years, the credit card industry and lodge cards have rapidly matured to keep up with the business travel industry’s needs. Although a few years ago, some voices were quick to announce the death of the lodge card, central settlement has come back from the brink of death, so to speak, to become the payment method of choice for an ever increasing number of corporates who value the additional value, information and control it offers.
Data is the key behind lodge card solutions. With a central settlement account, travel managers are consolidating high level data in one invoice, giving them a more complete view of their company’s travel spend. The lodge card transaction data captured is generally much more detailed than ordinary credit card data. For example, any flight purchase made with a lodge card based on the UATP platform will deliver the same amount of information as a flight coupon, i.e. passenger name, route, origin, destination and class of travel. This data can then be enriched by additional details entered by the travel agent at time of booking, such as cost centre, project number, department or employee ID.
Should the company decide to give corporate cards to their employees to cover their on-the-road expenses, ideally the data from those cards should feed into the same management information system (MIS) as the transaction data from the lodge card. Whether the corporate cards are issued by the same provider as the central settlement account or by a bank partner, the important thing is to have an interface in place to ensure the data flow between corporate cards and the company’s MIS is possible. Some lodge card providers even have the ability to integrate corporate data from another provider. It is important to choose a solution that has the ability to consolidate data from the organisation’s lodge and corporate ‘walking’ cards to deliver a complete view of the company’s travel spend.
Detailed and complete data delivers a number of benefits; it paves the path to speeding up reconciliation procedures. The majority of central settlement solutions can easily feed consolidated data into expense reporting systems. Card solutions provide their high level settlement data in a variety of formats that will easily feed into in-house reconciliation systems, thus greatly reducing reconciliation time.
Having a complete view of a company’s travel programme means increased control for the travel manager. Having a lodge card solution can improve control of a company’s travel policy, as it provides better tracking of usage of preferred carriers, class of service rules and advance ticketing rules. According to the 2007 AirPlus International travel management study, which surveyed over 1,000 travel managers in 10 different countries, 94% of travel managers worldwide stated that they carried out compliance checks and 49% of UK respondents predicted that their policies will get tougher, slightly above the international average of 43%.
Implementing a central settlement solution reduces the burden on employees for carrying credit on individual cards. They are much more likely to stick to policy guidelines and comply with use of the designated travel agency or online booking tool if they do not have to make payments on their own private credit cards. A lodge card solution will also lessen the influence of incentive programmes on employees’ purchasing behaviour. Travellers are much more likely to book within policy guidelines and disregard air miles if they do not have to use their own private credit card to pay. Sixty-six per cent of respondents to a US commissioned study by Partnership Travel Marketing and Edgar, Dunn & Company said that traveller compliance was a key objective with implementing a lodge card programme. By using the designated agency, travellers are working within the parameters of the company’s travel policy, which according to those surveyed “is saving on travel spend, gathering appropriate travel data, and setting up the possibility of more cost-advantageous negotiations with travel suppliers”. Achieving compliance with policy is generally considered by experienced professionals to be the key to containing travel costs.
Since central settlement solution offers a complete picture of an organisation’s travel purchases it is also a reliable source of information for security and for tracking travellers. With security an increasing priority, it is vital to have this information readily available. Travellers’ well-being is ranked second in importance by seven out of 10 countries’ travel managers in the 2007 AirPlus International travel management study, only second to reducing costs.
One of the greatest advantages of having a lodge card solution is the ability to use one’s organisation’s consolidated data for more successful supplier negotiations. One of the reasons that companies have travel policies is to have a mechanism to deliver spending commitments to preferred suppliers. A central settlement solution will deliver the data needed for successful negotiations. Some lodge card providers will even offer ‘flown data’ from the airlines for a totally accurate picture of tickets purchased and tickets actually used. And the more the central settlement account is used, the more opportunity for negotiations. Which is why it is advisable to choose a card provider whose solution can be used to pay not only for air spend but can also cover other travel services such as hotel accommodation, car rental and rail travel. Although air travel accounts for an average of 51% of travel budgets in the UK, hotel spend is rising at a rate of 20%, car rental accounts for 9%, while rail travel comes in at 8% (2007 AirPlus International travel management study). And even small spenders have the opportunity to negotiate a few deals, so long as they have a travel policy to direct their limited volumes.
Travel managers are always looking for ways of cutting cost without compromising their travellers’ security and comfort. Seventy years ago, the airlines suggested the idea of central settlement, which soon became mainstream for a good reason. The new generation of lodge cards are offering high-level data for all travel services and consolidated invoices that ultimately save companies time and money by optimising their processes and giving them the information and control they need.