Eye On The Override
By BTN
Monday, April 12 1999
Monday, April 12 1999
Published on AllBusiness.com
<B> Eye On The Override</B>
<H3>Buyers Analyze The Triple Net Equation</H3>
<i>BTN editors recently discussed the state of overrides with travel buyers Val Cordell of Oracle, Michael Cox of Thomson Publishing, Bob Grant of Charles Schwab and Andy Menkes of Republic National Bank, as well as consultant Harold Seligman of Management Alternatives and agency executive Danny Hood of WorldTravel Partners-BTI Americas.</i>
<B>BTN:</B> Harold, is the override basically 2 to 3 percent as we've said in the past?
<B>Seligman:</B> Well, it varies a little bit more than that.
<B>BTN:</B> How high can it get?
<B>Seligman:</B> Certain foreign flag carriers can get into double digits on international travel. It depends on the marketplace. Eighteen months ago across the Pacific you could not get a deal on business class fares or first class fares--there just wasn't enough space--so overrides were more traditional. But I will bet if you went to any of the carriers flying the Pacific today and said, "we are going to give you all of our business and it is a significant amount of business," that override number could increase dramatically.
<B>Andy Menkes:</B> Sometimes back-end incentives are presented as overrides that are intended for the corporation but passed through to the agency so that also is a challenge with definition.
<B>BTN:</B> So have you buyers been trying to leverage those international overrides?
<B>Menkes:</B> It is a number that is out there but it's been my preference since last summer to go net with preferreds. This way your preferred looks like a preferred to the end user because cost center management is really paying the freight and we are really operating cost centers whether we admit it or not. As commissions continue to decline it becomes more disciplined, but one of the advantages of net, as Harold has been saying, is that for the first time the employees who are spending your money can see the value of your program.
<B>BTN:</B> So it is not an enticement for you to negotiate?
<B>Menkes:</B> No, I think overrides belong with the agency community, not with the corporate community. I think it is up to the corporation to get the best deal it can with its travel management partner and then if the airlines want to continue to pay overrides to the larger agencies, that is a business model that they are entitled to maintain.
<B>Val Cordell:</B> With that said, I also think the agency
<H3>Buyers Analyze The Triple Net Equation</H3>
<i>BTN editors recently discussed the state of overrides with travel buyers Val Cordell of Oracle, Michael Cox of Thomson Publishing, Bob Grant of Charles Schwab and Andy Menkes of Republic National Bank, as well as consultant Harold Seligman of Management Alternatives and agency executive Danny Hood of WorldTravel Partners-BTI Americas.</i>
<B>BTN:</B> Harold, is the override basically 2 to 3 percent as we've said in the past?
<B>Seligman:</B> Well, it varies a little bit more than that.
<B>BTN:</B> How high can it get?
<B>Seligman:</B> Certain foreign flag carriers can get into double digits on international travel. It depends on the marketplace. Eighteen months ago across the Pacific you could not get a deal on business class fares or first class fares--there just wasn't enough space--so overrides were more traditional. But I will bet if you went to any of the carriers flying the Pacific today and said, "we are going to give you all of our business and it is a significant amount of business," that override number could increase dramatically.
<B>Andy Menkes:</B> Sometimes back-end incentives are presented as overrides that are intended for the corporation but passed through to the agency so that also is a challenge with definition.
<B>BTN:</B> So have you buyers been trying to leverage those international overrides?
<B>Menkes:</B> It is a number that is out there but it's been my preference since last summer to go net with preferreds. This way your preferred looks like a preferred to the end user because cost center management is really paying the freight and we are really operating cost centers whether we admit it or not. As commissions continue to decline it becomes more disciplined, but one of the advantages of net, as Harold has been saying, is that for the first time the employees who are spending your money can see the value of your program.
<B>BTN:</B> So it is not an enticement for you to negotiate?
<B>Menkes:</B> No, I think overrides belong with the agency community, not with the corporate community. I think it is up to the corporation to get the best deal it can with its travel management partner and then if the airlines want to continue to pay overrides to the larger agencies, that is a business model that they are entitled to maintain.
<B>Val Cordell:</B> With that said, I also think the agency
