With tough economic times taking a toll on
all of us, your first instinct to rising business
travel costs might be to eliminate the
expense across the board.
Don’t do it.
Travel leads to growth and cutting it is
counterproductive. If you’re looking to
adhere to a more realistic plan, consider reevaluating your travel policy and consulting
with a travel management company to save
20 to 30 percent on travel while keeping worthy trips in the budget.
Travel is the second-largest controllable
cost for the average U.S. business, seated
between data collection and salaries, yet
most companies have little or no management of it.
While your company may have an unofficial policy instructing employees to ‘get the
cheapest rate,’ a policy that isn’t managed
and enforced is equivalent to not having one
at all.
A Smart Business poll showed that 61 percent of respondents’ employees are responsible for making their own travel arrangements. The problem is, if your employees are
utilizing online booking agencies or different
vendors, your company is likely losing out in
the long run. If you lump your travel needs
together with selected vendors, and submit
requests for proposals, your annual negotiated rate will outweigh nickel-and-dime savings earned on a case-by-case basis.
Why travel management
is important
If you take steps to retain a travel budget
and manage it efficiently, you will most
likely see a significant return on your
investment.
“We really can’t cut back on travel,” says
Pete Costanzo, executive vice president,
Marsh Inc. “Ninety percent of our clients
are outside of Cincinnati, spread from the
West Coast to the East [Coast]. There’s
nothing like working with professionals to
make sure your travel costs are the best
value for the dollar — and we have looked
elsewhere.”
Sixty-nine percent of companies polled in
an October Association of Corporate Travel
Executives survey say they will be spending
less or the same on travel in 2009.
“The cost of travel is crazy,” Costanzo says.
“And for the $1,100 fare you might get some
juice and a cookie in transit. Our 2008 travel
budget increased by 15 percent this year, but
we want to get it back down to our 2007 level
for 2009. We need to go through our schedule
to see what we can alter.”
You’d like to think your employees have the
company’s best interest in mind, but statistics
show companies that place a travel manager
or an outside agency in charge of travel
finances stay within the confines of their
budgets while employee-handled travel has a
less successful return on investment.
You need to take a proactive approach to managing your travel costs if you expect to get bottom-line results for a minimum of expense.
But being smart about your budget entails
more than waiting for the computerized ping
alert of a reduced airline fee like one of
Pavlov’s dogs. While airfare is the most costly aspect of travel, you don’t want to arbitrarily eliminate it.
“The first step is to differentiate between
strategic and nonstrategic travel,” says
Susan Gurley, executive director,
Association of Corporate Travel Executives.
“Strategic travel generates revenue while
nonstrategic travel is anything that results in
cost but has no substantial gain in revenue.”
In most cases, meetings with customers are
justifiable, as there is a direct correlation to
revenue gains. On the other hand, meeting
with the head of the Omaha office may not
have much of an effect on your bottom line
this year, so consider cutting that — and other
trips like it — out of the budget. Use video-conferencing or teleconferencing equipment
for these internal meetings whenever possible.
Why?
Because internal travel can account for
about 40 percent of a business’s travel.
Don’t worry, technology has come a long
way since the early days of choppy robotic
movements and out-of-sync voices. Look
into Skype and WebEx as a couple of
travel alternatives that could save you
money while still keeping you in touch
with your people in a more personal
manner.
What you need to know
Getting your travel budget under control
starts with the assembly of an in-house team
of policymakers who vow to prevent travel
anarchy while clearly defining your terms
and expectations. A good policy will answer
why travel management is necessary, detail
the value of expectations, cite the requirements and give examples of useful practices.
“The policy should state that every traveler
takes the lowest fares within the defined
parameters,” says Terry Brennan, president,
Williamsburg — American Express Travel.
“Travelers should stay at midsized hotel properties and rent midsized cars. Everyone
should deal with an in-house policy administrator, which will keep organization.”
The team involved in policy planning should
include you, a scheduler, travelers and the
finance team. After the policy is made, one
person should oversee its enforcement and
keep up to date on travel industry policy. This
could be a part-time or full-time position based
on need.
A realistic travel budget must be based on
destination costs versus a flat-rate figure that
is impossible to meet in all travel locations. A
rate for things like car rental, hotel and food
must be figured depending on the median
rates in that city.
A policy needs to be revised annually to
adjust to economic and company needs, and
some flexibility is required in any plan. For
example, an employee’s time may be more
valuable than the cost savings from putting
the person on a later flight, especially if arriving later could jeopardize a meeting with a
client.
Also, you want to make sure the employee’s time is used efficiently on any business
trip. A policy should entail what is expected
of employees during travel and ways they
should make the best use of time outside of
the office. Meeting with multiple clients during a conference or calling on one located en
route are a couple of ideas to maximize the
value of a trip.
Some businesses use online booking agencies, believing their rates will be lowest and
eliminate travel management company fees,
which can account for 3 percent of all travel
costs. But the majority of costs — 97 percent
— goes to airfare, hotel and car rental, which
is the same arena in which a travel manager will save money.
“A major point often overlooked is the
added safety a travel manager or an agency
provides a traveler,” says Ron Pio, sales
executive, AAA corporate travel. “In emergent situations, a traveler can rely on someone who knows how to get a flight out fast
and act as your advocate in any situation.”
While travel costs are unlikely to decrease
anytime soon, getting through the initial pain
may be the biggest challenge facing business.
“The cost increase is felt the hardest initially,” Gurley says. “However, increases and
a poor economy have resulted in a reduction
in routes traveled — about 12 percent fewer
flights are available today than even a year
ago. This figure will increase, and companies
that considered reducing travel to be cost-effective will find flying increasingly less
attractive into 2009. Optimistically speaking,
the economy will eventually level out, but
being prepared will mean better opportunities.”
