BA Supplement - Travel - Going, going, gone.

(From Financial Director)

Byline: Amon Cohen.

Reverse e-auctions, where vendors bid live online to undercut one another for a specified contract, are all the rage in procurement and are even spreading to buying services such as corporate travel. When one looks at the claimed success stories, it is easy to understand why.

Two companies that have used the process to put their travel management contract out to tender are Novo Nordisk of Denmark and the UK do-it-yourself retail chain Focus Wickes. The pair say they cut their travel agency fees by between 60% and 62% respectively, and sped up the tendering process significantly. Novo Nordisk has also used reverse e-auctions to contract rates with hotels and meeting venues.

But the adoption of the process for travel has its critics, principally among suppliers. Tony McGetrick, sales director for BTI UK, the UK's largest travel management company, believes the complexity of specifying what one wants from a travel management company makes an e-auction too inflexible as a tool for negotiation. "It is not in the clients' interests," he says. There are too many variables in the service."

Mark Flower, sales and marketing director for the Sheraton Skyline hotel near Heathrow Airport, is another sceptic. He says e-auctions are too fixated on price, and that buying hotel rooms is not the same as buying pencils. The latter is a done deal for a guaranteed quantity. When companies contract for 1,000 room nights in a hotel, they don't necessarily deliver the volume of business to which they have committed. But he has other gripes as well. Flower has also found himself bidding his five-star property in e-auctions against hotels that are only three star. "The buyers have not done their homework," he says.

He also thinks it could prove a passing fad. "When they started a few years ago, there was a mild panic and they did drive down rates," Flower says. "Since then, hoteliers have become more astute and, after handling quite a lot of these two years ago, I have only seen one in the past 12 months. Some big hotel groups won't participate in e-auctions at all."