The recession has led to cost increases everywhere, including the travel industry. The National BusinessTravel Association forecasts business travel costs will increase between 5 to 8 percent this year, while there could be anywhere from a 20 to 30 percent decrease in the number of trips being taken.
Companies across the board are lookingto cut costs from every operating unit, and while cutting travel expenses can have a short-term impact on your bottom line,there are ways to reduce your travel budget without sacrificing sales and revenue.
“A common mistake companies make isnot having truly structured and managed travel programs,” says John L. Sturm, executive director of sales and marketing at Professional Travel Inc. “Many corporations have general guidelines they implement when traveling, but few specific policies — with little or no checks and balances. They’ll place those recommendations into the travelers’ hands to manage on their own.”
Smart Business spoke with Sturm about how to use cost containment to make reductions in your travel budget and how a managed travel program can save you between 12 to 17 percent annually on travel.
What are some costs issues that companies are running into with travel?
Notwithstanding the basic costs of air, car and hotel, travelers need to be aware of the impact of hidden fees, surcharges, cancelation fees and penalties. Certain hotelsare resorting to 48-hour-minimum cancellation policies, along with totally nonrefundable room rates. Now more than ever, it’s important to read the fine print on each and every agreement you sign.
At the end of the day, these fees and penalties need to be understood and managed with your overall travel policy. These penalties can quickly add up and, if left unchecked (as with your overall travel strategy), can lead to 20 to 30 percent in excess spending.
The efforts made on the front end totighten up your policy and communicate possible pitfalls associated with small upfront gains will ultimately lead to the type of comprehensive savings that canonly be achieved with a global corporate travel program.
How can cost containment help you save on expenses?
The strategic implementation of a budget and identifying benchmarks are crucial to maximizing your overall savings. Negotiated savings with each of the key vendors dealing with air, car and hotel willdrastically reduce your T&E. Additionally, many of these vendors are more than willing to add amenities into their contracts that further reduce your costs. Driving consistent behavior across all entities and to your vendor partners truly impacts the overall cost containment.
Consider the impact of loyalty programs on individual shopping preferences. When you contractually work with preferred suppliers and structure loyalty and reward programs throughout the entire organization, you realize exponential savings not obtained by individual efforts.
How long will it take to realize the greatest savings potential?
Many are immediate, but others depend on the design of your current travel policy, the level of sponsorship of your program and the operational effectiveness of your travel management company. The level of controls over your process and single source aggregation of data are crucial to your savings. Your travel management company should conduct an internal SWOT analysis to identify gaps and the low-hanging fruit to immediately impact savings. The collection and aggregating of data into meaningful leverage with vendors or internal processes become invaluable within two to three months.
What types of reductions can you make toyour travel budget?
Again, if your policy is structured effectively and your travelers are utilizing your preferred vendors (air, car and hotel), you will maximize the savings on each transaction and your overall savings potential. As with virtually all other decisions you make, the answers are in the data and the collective aggregation will identify where your opportunities are.
Have your current travel management company negotiate preferred rates for frequently visited hotels and utilize one car rental company. Negotiated savings on these two items alone can result in a 20 percent-plus savings over standard corporate rates.
How can a managed travel program help you cut costs?
Most times companies don’t have a lot of relevant travel data to negotiate savings, let alone to allow you to evaluate internalpolicy against industry best practices. The data is your biggest opportunity and becomes an integral part of negotiating better rates, fares and amenities. Your travel management company not only represents your travel, but the entire portfolio of the clients they serve. They are your advocate and should be leveraging their relationships along with their buying power to secure you the best rates possible.
JOHN L. STURM is the executive director of sales and marketing at Professional Travel Inc. Reach him at (440) 734-8800 x4089 or[email protected].
