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. Read more such articles at http://www.wns.com/Insights/Articles/tabid/81/Default.aspx

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

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,
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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.
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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.
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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
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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.
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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
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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