Evaluating business travel Featured

7:00pm EDT November 25, 2008

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.”