There’s much more to business travel
than simply buying an airline ticket,
renting a car and staying in a hotel.
Especially now, with travel costs expected to
increase 10 to 12 percent over the next 12
months, says Rob Turk, the executive vice
president of Professional Travel.
“Travel typically represents the third largest
controllable expense that a company has
behind payroll and IT,” Turk says. “However,
many companies don’t properly manage it.
They need to create strategies to overcome
and adapt to its escalating costs.”
Smart Business spoke to Turk about what
companies should pay attention to in order to
rein in their travel expenses and positively
affect their bottom lines.
How can companies manage rising travel
costs in today’s economy?
Companies have to develop a consistently
communicated travel policy. This will provide the framework and foundation of
expected travel behavior as far as utilizing
certain providers and certain suppliers. Many
companies also provide per diems for guidance as to the types of hotels employees
should book or cars they should rent.
A key issue today is the managed utilization
of unused nonrefundable tickets. Failure to
do so creates thousands of dollars of loss, as
organizations have a significant investment
in these types of purchases. On average,
there are three changes made to each booking, so when travelers make changes, many
times the original purchased ticket has to be
reused. So you have a credit of an unused
nonrefundable ticket; how do companies
manage those credits? To address this, establish a database of unused tickets, which
should be managed by your travel management partner. The process of utilization can
be quite complex because different carriers
have different policies with several variables,
for example, how long after purchase you
can utilize those credits.
How does a business know when its travel
needs to be formally managed?
There isn’t really a benchmark of expense,
like you need a policy if you spend more than
$50,000 a year. Simply, companies with traveling employees should have a managed
process. You can’t manage what you can’t
measure, so it’s key to measure travel
expenses and both monitor and manage travel activity. One way to do this is with a pretrip
approval process. It’s trip justification; the
employee says, ‘I need to travel here for this
benefit for the company. Here’s my estimated
costs, is it approved?’
What risks do companies face if they don’t
closely manage travel?
After the events of Sept. 11, businesses recognized that they needed to know where
their people are at all times from a risk management perspective. If they allow their traveling employees to buy from various sources,
there’s no centralized database of where people are. There are also risks associated with
personal buying decisions. The challenge is
that air, hotel and car suppliers all market loyalty programs to the traveler. So what has to
be managed is whether travelers are buying
in their own best interests or those of the
organization. A third party can ensure that
the traveler is comfortable and being provided the right supplier at the right cost, while
the organization has supporting data that the
decisions complied with policy.
Can an outside party be expensive?
Travel purchasing should be managed at
the micro level just like any other high cost
purchase a company makes. Yet some companies think, ‘We’ll just do it ourselves; using
a travel management company will cost
more.’ However, statistics show managed
travel processes can generate annual savings
to an organization of 15 to 18 percent, while
travel management fees generally only represent 2 to 3 percent of total travel spending. As
a result, 96 percent of Fortune 1,000 companies utilize the services of an outsourced travel management company. It makes sense:
You’re aggregating purchasing, you’re driving
purchasing to select preferred suppliers, your
people are following the guidelines of an
established travel policy, and the firm you
selected provides travel advocacy and
updates you of changes within the industry
and how to best take advantage of them.
There’s probably not a more volatile industry
that exists from a standpoint of day-to-day
changes, so you should have a travel expert
monitoring it who will provide that daily
information to you and your staff as to what
to expect while traveling.
Many organizations try to maximize employee productivity, yet they expect employees to also become travel agents. How that
fits or doesn’t fit into their other responsibilities and the cost of that productivity also
needs to be factored into a decision of retaining a travel management company. Travel is
recognized to be the most personal business
service that employees use, it affects the
framework of people’s lives because it takes
them away from home and families, and so
decisions associated with it are very important. The cost risks of nonmanagement far
outweigh the minimal costs associated with
hiring a travel management company.
Most companies are focused on return on
investment. In this case, it includes the education of the traveler and the necessary communication between senior management
and travelers. Only then can organizations
reach the next level and begin examining
areas like meetings management, international travel complexities, preferred vendor
contracts and best practice benchmarks.
ROB TURK is the executive vice president of Professional Travel. Reach him at (440) 734-8800, x4029 or [email protected].