Dan Martin asks experts how firms can effectively manage their business travel activities and keep costs down.
The world is a much smaller place than it used to be. Low cost travel and internet booking means it is much easier and cheaper for business people to jet around the world to meet clients and customers. However, while the price of business travel may be generally on the decrease, firms must still ensure they keep costs under control.
Even though for some, 21st century technology such as video conferencing has negated the need for face-for-face meetings, it appears travel is still very much a part of businesses’ strategy. Barclaycard’s latest annual study on the subject showed almost half of firms travelled more for business in 2005/06 than they did during 2004/05. Business expansion, both in the UK and overseas, was cited as the main driver for the increase.
However, while trips are still very much a part of doing business, many bosses, particularly those running SMEs, are oblivious to how much they are spending on travel. A study by Booking Services International showed 28% of firms employing less than 200 people and 16% of those with more than 200 employees had no idea of their hotel expenditure. More than one in six confessed to never reviewing how much they spend on travel accommodation and three quarters said they had never sought expert advice.
DIY or outsource?
The internet has opened up a world of possibilities for the business travel booker. A plethora of websites offering cheap flights, discount hotel accommodation, reduced train tickets and cut price car hire gives the modern business traveller a variety of options when planning a trip.
Booking via the telephone or at a travel agent is generally now more expensive than the online option. Most travel firms offer internet only prices that are not available elsewhere and bookings can be made instantly, often without the need for a actual ticket – a reference number is the only requirement and can be profduced when the trip takes place.
For firms with a low annual travel budget, carrying out their own business travel booking is probably the best option. However, for larger firms which spend thousands of pounds every year, one option to consider is a taking on the services of a travel management company (TMC).
TMCs offer a range of services from simple ticket fulfilment to full scale management of a firm’s travel programme. The size and nature of TMCs mean most have secured deals with airlines and hotels which allow clients to book trips at special discounted rates. The companies are also able to benchmark prices and provide advice on best practice.
However, the main benefit which TMCs claim businesses will gain through taking on their services is time saving. Philip Carlisle, chief executive of the Guild of Travel Management Companies, says: “I have nothing against businesses doing it themselves but do firms really want a PA spending an hour searching a travel solution only to start again when they can’t find that deal anymore?”
Carlisle points out that while website booking services such as lastminute.com, Expedia and Travelocity have made it easier for firms to book their own travel: “It must be remembered that every site will have some sort of bias dependent on particular travel deals they have done.” TMCs have access to around 700,000 fares including low costs airlines which may not be included on travel websites.
Many TMCs are also able to provide online booking tools which employees can use for their travel arrangements. Carlisle says using such tools creates what is known in the industry as ‘visual guilt’. “If travellers use the tool set up for the business and are faced with a variety of prices they are more likely to chose the cheaper options because they feel guilty if they don’t.”
Carrying out a business travel audit can also help firms ensure travel costs are kept to a reasonable level.
Evaluating which trips are necessary and which trips do not need to take place should be the first stage in the audit process. Paul Tilstone, executive director at the Institute of Travel Management (ITM), says too many businesses fail to take such steps, and leave themselves open to needless expense. “Firms should try and understand which trips are for internal business reasons and which are for external business reasons,” he claims. “When having to deal with new clients, it is likely businesses will need to make a trip. However, if a regular trip is identified it may be possible it can be replaced by videoconferencing.”
Gathering together as much data as possible is also important. Most TMCs will be able to provide details of how and where employees are travelling, but internal accounts data will also often suffice. Travel experts recommend that firms insist employees use business credit cards while travelling so information on all activities related to the trip can be gathered. Todd Lockhard, head of sales at American Express, says: “Using corporate cards ensures all data is kept in the one place. It is also a massive aid towards managing costs. Making expenses visible is a direct way to prevent costs from creeping up.”
Once data is gathered, it is advisable for businesses to create a internal travel user group to discuss whether costs can be cut. “All employees connected to travel – bookers, travellers, HR departments, etc – should be invited and used to debate whether change is required,” Tilstone says. Inviting as many interested parties as possible, he adds, will ensure that if and when changes are made, all requirements and opinions were taken into consideration.
“The user group should map the booking process and look at what actions are taken when a meeting comes up,” Tilstone says. “Firms will then have the opportunity to take unnecessary chunks out of the process.”
Other key questions to consider are how strategic to the organisation a travel programme is. Tilstone recommends businesses ask themselves: “Is the travel programme absolutely the lifeblood of the organisation or is it something simply brought in to facilitate business?”
Firms should also consider the way travel is booked. It may be appropriate to introduce a central travel unit so, for example, instead of several PAs booking trips for different members of staff, there are dedicated bookers taking responsibility.
Allowing staff to jet around the world with no guidelines as to the form, class or cost of transport and accommodation can be commercial suicide. To prevent such eventualities it is advisable for firms to introduce a business travel policy.
The length of policy will depend on the size and nature of a particular organisation. Tilstone says he has seen policies which range from one-page statements to 40-page documents. The policy of one multi-national clothing retailer, he claims, simply states “do the best for the company”.
The content of a policy will also vary. Tilstone says employees should be encouraged to “be frugal but spend lots of money when necessary”. “Companies with low margins are likely to want to mandate certain behaviour,” he adds. “However, a company generating a significant amount of money is less likely to dictate specifically what employees should be doing. Such firms will generally allow people bringing in lots of money to use their own creativity to decide whether an expensive trip is necessary. If they’re wrong, they’ll be sacked!”
Businesses should ensure that as well as getting the best value for money from travelling, they also guarantee they get the best out of their travelling employees. “Firms may for instance include in a policy that if an employee is flying long haul they can go business class so he or she arrives fit for the purpose,” says Peter Kite, managing director of travel management company HRG. “When flying for under two hours, employees may be instructed to take the cheapest fare possible.”
As well as costs, other issues such as health and safety and security should be covered. Kite adds that some of his clients opt for instructing employees that when they fly overnight on a longhaul flight and arrive at their destination they should not drive themselves home or to a hotel.
It is also important for polices to cover a firms’ legal duty of care responsibilities for travelling employees. Tilstone says many businesses have begun placing a greater focus on this issue in their travel policies ahead of the introduction of tighter corporate manslaughter rules.
Modern technology may well have negated the need for many business trips but it is clear there will be a need for business travel for many years to come. Face-to-face meetings are still the driver behind most commercial relationships meaning airlines, trains and car hire firms will continue enjoy the patronage of business travellers. However, in these days of increased business cost pressures what does need to change is the way companies handle their travel management. Letting employees run riot around the world on business class flights and expensive hotels can be prevented through a simple audit process and the introduction of a formal policy.