Flight Path To Survival:
Business process outsourcing helps airlines,
hotels, car rental industry survive the economic cri...
Significantly declining demand. Yo-yo-ing fuel             the overall region’s occupancy dropped
costs. Labor relations i...
Flight Path To Survival: Business process outsourcing helps airlines,
2. Approach outsourcing with an open mind                 unique processes can be seamlessly transitioned
   Merely thinki...
Flight Path To Survival: Business process outsourcing helps airlines,
Commercialized approach to operations
                                                      Most travel companies cannot p...
Flight Path To Survival: Business process outsourcing helps airlines,
Copyright © 2009 WNS Global Services

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Flight Path To Survival: Business process outsourcing helps airlines, hotels, car rental industry survive the economic crisis


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Business process outsourcing (BPO) represents a strategic and efficient option for companies looking to thrive in these tumultuous times. If implemented properly, BPO can be a fast and simple solution to rapidly reduce costs, help organizations survive the economic downturn and set the stage for future growth. In this article, through various examples, the author demonstrates how business process outsourcing (BPO) can help the airline; hotels and car rental industry survive this economic downturn. It also offers eight simple rules to ensure success of your business process outsourcing program. Finally the author also suggests the various travel processes that companies can outsource.

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Flight Path To Survival: Business process outsourcing helps airlines, hotels, car rental industry survive the economic crisis

  1. 1. Flight Path To Survival: Business process outsourcing helps airlines, hotels, car rental industry survive the economic crisis
  2. 2. Significantly declining demand. Yo-yo-ing fuel the overall region’s occupancy dropped costs. Labor relations issues. Capacity 18.3 percent, average daily rate declined management challenges. Commoditization and 12.1 percent, and revenue per available room lack of pricing transparency. Possible government- fell 28.3 percent. regulated passenger 'bill of rights.' Plummeting Car rental n companies revenue per available room night. Intense scrutiny Annual reports and quarterly filings reprise a and potential regulation for group and incentive litany of challenges. These include: businesses. Sky-rocketing fleet costs. 1) a disruption in the ability to obtain financing Rate deflation. Failing health of the automobile and an increase in the cost of financing; industry. Is it any surprise the airline, hospitality 2) substantial debt; 3) the financial condition of and car rental industries feel like they’re up the automobile manufacturers; 4) intense proverbial creek without a paddle as a result of competition that could lead to downward today’s abysmal economic conditions? pricing; 5) decreased acquisition or disposition of cars through repurchase and guaranteed depreciation programs; 6) environmental laws The current state of these travel and hospitality and regulations and the costs of compliance; industry segments is worryingly bleak. Recently and 7) too much reliance on asset-backed third-party statistics tell the story financing. And the industry’s symbiotic Airlines n relationship with air travel exacerbates the The International Air Transportation situation. For example, one major car rental Association’s (IATA) March 2009 Financial company estimated approximately 69 percent of Forecast declared that the airline industry is in its worldwide car rental revenues during 2008 debt by $170 billion, net losses in 2009 are were generated at its airport rental locations. expected to be higher than previously forecasted Significantly reduced air travel traffic demand at $4.7 billion, revenue will decline by thus has a major impact on the car rental 12 percent ($63 billion), overall traffic demand industry. And the National Business Travel is expected to shrink by 7.8 percent, and Association’s (NBTA) prediction – in its 2009 passenger traffic will drop by 5.7 percent. Business Travel Overview & Cost Forecast – of And in a March 24, 2009 press release, IATA’s nominal car rental rate increases of 1 to 3 Director General and CEO, Giovanni Bisignani, percent provides very little consolation to this said, "…the relief of lower fuel prices is ailing industry. overshadowed by falling demand and plummeting revenues. The industry is in intensive care." Bisignani continued, "…It will BPO to the rescue for the travel and be a grim 2009. And while prospects may hospitality industry improve towards the end of the year, expecting a Business process outsourcing (BPO) represents significant recovery in 2010 would require more a strategic and efficient life raft for companies optimism than realism." striving to stay afloat in these tumultuous times. Hotels n If implemented properly, BPO can be a fast and Smith Travel Research, a leading hotel industry simple solution to rapidly reduce costs, help analyst firm, stated that in the week of March 22, 2009, in year-over-year measurements, the U.S. hotel industry’s occupancy rate dropped 12.3 percent, average daily rate fell 8.8 percent, and revenue per available room decreased 20 percent. European hotels fared a bit better with mixed year-over-year results in February 2009, with figures for occupancy, average daily rate and revenue per available room night ranging from double-digit losses to single-digit gains. And while several Asia-Pacific markets posted gains or smaller decreases, 1
  3. 3. Flight Path To Survival: Business process outsourcing helps airlines, hotels, car rental industry survive the economic crisis companies survive the economic downturn and set time when economists are forecasting world GDP the stage for future growth and expansion after the to shrink by 1.9 percent in the deepest recession economic tidal wave subsides. since the 1930s. The fact is, with many travelers viewing air, hotel and especially rental cars as While rapid cost reduction is mandatory for commodities and looking only for the lowest companies trying to survive in the most possible cost, suppliers must focus on delivering a challenging economic climate in over 60 years, superior customer service experience across each BPO delivers benefits which extend far beyond contact point. Partnering with a BPO provider to cost savings. These benefits include rapid deliver back - and middle-office processes can decrease in cost structures, moving costs from rapidly reduce costs, increase accountability, and fixed to variable, maintaining focus on the transform legacy processes for streamlined and customer, retaining customers in the face of increased efficiency and effectiveness. operating cost reductions, placing focus on knowledge rather than intuition to plan capacity Travel and hospitality suppliers must take a very and manage inventory, making the cost structure hard look at what functions are core to their brand transparent, engineering for rapid speed to value, and truly generate revenue, as compared to those, consolidating delivery operations to standardize like finance and accounting, which clearly are not business processes, getting even more out of and do not. And while there are certainly shared services costs and delivering continuous accounting complexities inherent in the travel improvements. industry, such as commission and revenue accounting, interline and alliance revenue Leveraging BPO is particularly valuable for accounting, property management and lease organizations in the airline, hospitality and car administrations, these are non-differentiating rental industries, as spending in these domains is back-office functions and thus viable outsourcing considered by many to be highly discretionary at a candidates. Clearing the decks for success - Revenue accounting and recovery for a leading U.S.-based airline Six simple rules for airline, hospitality and car rental companies when As part of its ongoing continuous adopting BPO improvement initiatives to control costs and improve process efficiencies, a leading 1. Ensure BPO is a CEO priority U.S.-based airline partnered with WNS to In uncertain times, sponsorship for critical obtain a cost-effective and high-quality initiatives such as BPO must come from the solution for its passenger revenue very top of the house. Only the CEO can deliver accounting and recovery processes. the message that there are no other options for Leveraging WNS’ deep BPO knowledge – survival. Otherwise, management sees particularly in passenger revenue implementation as optional, easily finding ways accounting – enabled by automation, to opt out, with arguments ranging from improved by business process "outsourcing never works, we've tried it," to reengineering and delivered by highly "the process is too critical to outsource" to trained staff to drive process "I have to implement new systems first." improvements, the carrier was able to soar This CEO-level sponsorship is even more from the bottom to the top of Department critical in the travel space than in some other of Transportation’s complaint statistics for industries given the global, trickle-down, refunds, while reducing refunds-related massive at-stake implications of failing to take customer complaints by 55 percent. this vital step. wns.com | 2
  4. 4. 2. Approach outsourcing with an open mind unique processes can be seamlessly transitioned Merely thinking reservations work or rules- and successfully outsourced to a provider with a based transactions limits the extent to which proven track record and substantial travel space BPO can be deployed as a survival tool for domain expertise. travel companies. Smart travel industry organizations have been outsourcing these 3. Move fast types of simple processes for years with As the third-party industry statistics above all positive results. But the BPO industry has too clearly indicate, travel volumes and moved well beyond volume-based voice and data resulting revenue in all sectors will decline work into highly complex industry and insight through at least end of 2009 and more likely processes - think lost baggage tracing and well into 2010. While the airlines have largely customer support, fraud prevention and control, controlled their costs through capacity cuts passenger/cargo revenue accounting and and the drop in oil prices, there is still a vital auditing and marketing analytics. Smart travel and immediate need for cost discipline. For companies collaborate with providers to example, as a fixed asset, hotels cannot reduce determine "the art of the possible." They begin capacity, and with RevPAR dropping to pre by determining what is core and non-core to their 9/11 levels, there has never been a more business. In the travel industry, core processes critical time to focus on the core business, include efficient operations management, reducing costs wherever possible. And while differentiation through product innovation and the financial and credit market challenges are enhancing brand awareness. But beyond these, beyond the control of the car rental industry, most SG&A and other highly complex and the impacts are material and quick action is required to reign in expenses. Contact center and baggage services for 4. Develop a realistic deployment plan a top 10 North American airline Even when outsourcing is being implemented for cost savings, many companies push for or A leading North American airline had a buy into an unrealistic transition roadmap in significant customer dissatisfaction their haste to cut out more cost. And when the challenge with its baggage claim, tracing first failure occurs because processes cannot and communication processes. The airline be thoroughly documented, the network is not determined its best option was to enter ready or work shadowing is insufficient, the into an outsourcing relationship with a naysayers come out in force. A deployment third-party provider which could deliver an strategy that builds up steam over time after innovative, proactive, customer the success of initial phases is far more likely satisfaction-focused solution for these to meet objectives. For example, by analyzing processes. Within the first year of its current baggage claim processes and outsourcing engagement with WNS, the associated customer dissatisfaction challenges, airline achieved a 92 percent reduction in then implementing a staged process which customer complaints, an overall efficiency focused first on inbound servicing and increase of 140 percent by the outbound subsequently leveraged that experience to calling team and an increase in sales of implement a proactive outbound desk, WNS approximately 40 percent. On the baggage achieved a 60 percent reduction in complaints tracing/delivery/customer relations front, after just eight months for one of its travel WNS reduced passenger complaints by industry clients. more than 60 percent in three years and increased the efficiency of the team by 40 percent. 3
  5. 5. Flight Path To Survival: Business process outsourcing helps airlines, hotels, car rental industry survive the economic crisis 5. Insist on alignment tracing, loyalty program management, Outsourcing can mean a massive dislocation of maintenance and supply procurement and culture, resulting in a tug of war between client yield/revenue management, and should all be and provider. When new people and processes considered as opportunities for rapid, material are introduced into the equation, dissonance cost savings. naturally occurs. But partnering with an outsourcing provider whose operating credo is to serve as an extension of the client’s brand, Contact center services for a leading understands what values are most important to U.K.-based airline the client and intimately knows the intricacies of the travel industry – including inventory Building on its 13 year partnership, this distribution trends, attribute pricing, carrier and WNS recognized the potential maximizing yield and RevPAR, customer to increase revenue and reduce the cost service as a differentiator and navigating an of performing the work in-house if WNS ever changing regulatory environment assumed responsibility for and domestically and internationally – can quickly transformed reservations servicing. change discord to a strong partnership. By taking processes to the next level, WNS has collected £8 million from Consider the travel industry’s response to the passengers who make amendments in Swine Flu epidemic which began in April their passenger name record, improved 2009. As suppliers reacted by waiving change turnaround time for all post-travel and cancellation penalties, and as the traveling customer complaints from 21 days to public’s apprehension increased, imagine the 14 days, transferred administrative implications of lack of alignment between responsibilities from the client by airlines, hoteliers, agencies and their handling 100 percent of reissues and outsourcing service provider. Without constant amendments with the scale to manage communication and alignment across all levels 2.1 million customer contacts via of supplier and provider, the massive increase inbound calls and 0.21 million contacts in call volumes and customer queries could not via postal mail or email. have been processed efficiently. Also, while the situation was not the fault of the supplier, providing a quality customer experience in Advantages travel and hospitality resolving customer queries was paramount to companies gain by moving to a BPO earning repeat business. model today Standardized business processes 6. Debit budgets in advance Consolidating business processes offshore in order This little trick obtains commitment where it to reduce costs has a positive by-product – levels counts – in the budget process. Building BPO of standardization that are difficult to achieve savings into the current year's budget in through incremental efforts such as process advance ensures managers have no excuse but reengineering during easier economic times. to be committed to the implementation of the With standardization, which inherently equates to BPO program or find some other way to get the consistency, organizations are well-positioned to cost out fast. Truth be told, short of cutting take the next step to transform processes through staff to the bone, there is rarely another way. technology and quality to achieve the next level of A further benefit to this tactic is forcing efficiency. Here is a good example: with so many managers to look again at processes previously potential points of traveler contact pre-trip, on-trip thought of as too complex for outsourcing. and post-trip, consistency is key to customer Industry providers have proven track records in retention and earning repeat business. But all too functions such as customer relations, baggage wns.com | 4
  6. 6. Commercialized approach to operations Most travel companies cannot put a price on the cost of paying a bill, collecting revenue from an interline ticket or tracing a passenger's baggage. Imposing the discipline of a BPO contract replete with unit cost, turnaround times and customer satisfaction levels makes organizations think differently as the actual cost to sell a product or service becomes transparent. This is particularly vital in the travel and hospitality industry, where market conditions make understanding the cost/satisfaction equation critical. often, travelers hear one message from For example, when the airline industry cut and reservations and another at the check-in counter, then removed travel management company (TMC) e.g., a traveler may not be informed, at the time commissions, the carriers focused material of purchase, of the baggage fee rules associated amounts of energy and resources solely on with the booked fare. And when he or she arrives reducing distribution costs. TMCs using global at the airport and must pay an unexpected fee to distribution systems were viewed as an effective check baggage, customer satisfaction instantly channel by the airlines and their customers, but drops. But outsourcing to obtain standardized, the cost was deemed as too high. The carriers consolidated and consistent business processes believed a direct sales model heavily focused on helps travel organizations ensure their brand their own websites would reduce their costs messaging, service commitment and policy without impacting total ticket sales or customer enforcement do not differ at any point in the satisfaction. customer interaction. As a result of the commission cuts, the TMCs were forced to implement customer interaction Rationalized delivery model service fees to stay solvent. The airlines then went The greatest challenge in moving to a shared one step further in pushing direct sales by services, or consolidated, structure is overcoming implementing their own service fees for speaking misconceptions and fears about diminution of with reservations agents. As a result, service fees service levels, risk and performance, especially evolved into a major competitive differentiator for when the company’s operations are regionalized. TMCs and airlines in the drive to attract and retain But service providers possessing deep domain customers. Online travel agencies have waived expertise in travel and hospitality understand the nearly all booking fees and now are waiving importance of travel brands and the criticality of change fees as well. Traditional TMCs must react any impact revenue, and can rapidly waylay accordingly in order to maintain their share and concerns by successfully transitioning then the airlines continue to revise their fee structure delivering steady state operations. An outsourcing with attribute pricing. provider capable of proving demonstrated process expertise and deep travel industry knowledge – such as the complexities of ticketing, commission BPO providers deliver a lower cost model and cost processing, distribution channel management, per contact certainty enabling effective regulatory reporting, predicted economic competition in a complex service fee environment. environment impacts on forecasted volumes, Further, that cost certainty does not come at the travel-specific technology and other factors – can expense of delivering a superior customer quickly help organizations not only accept but also experience. embrace delivery model changes. 5
  7. 7. Flight Path To Survival: Business process outsourcing helps airlines, hotels, car rental industry survive the economic crisis Which travel and hospitality industry processes are ripe for business process outsourcing? Sales and customer care Operations Research and analytics Customer n service Finance n and accounting RevPAR n versus capacity Sales n and reservations Fare n filing and loading analysis Loyalty n program management Rate n filing and loading Fleet n management and Revenue management tracking Customer n relations n Property management system Yield n management Lost n baggage tracing and n customer support help desk Promotion n optimization Website n navigation support Rates, n fares and ticketing Campaign n management - Reservations servicing - voids, design and evaluation Specialty n travel help desk n support refunds, schedule changes, Market n mix modeling Roadside n assistance exchanges and cancellations Location/build-up n studies Replacement n desk Fraud n prevention and control Market n sizing and planning Excursion n desk Passenger/cargo n revenue Network n cash flow and accounting and auditing profitability assessments services Customer n segmentation Cargo n operations support and targeting Customer n up sell/cross sell Churn n prediction/retention/recovery Customer n loyalty/switching pattern WNS Global Services North America United Kingdom India 420 Lexington Avenue The Lodge Gate No. 4, Plant 10 Suite 2515 Harmondsworth Lane Godrej & Boyce Complex New York, NY 10170 West Drayton, Middlesex Pirojshanagar UB7 0AB Vikhroli (West) Mumbai 400 079 wns.com | 6
  8. 8. Copyright © 2009 WNS Global Services About WNS WNS is a leading global business process outsourcing company. Deep industry and business process knowledge, a partnership approach, comprehensive service offering and a proven track record enables WNS to deliver business value to some of the leading companies in the world. WNS is passionate about building a market-leading company valued by our clients, employees, business partners, investors and communities. To learn more, please write to us at info@wnsgs.com or visit wns.com