Corporate travel was one area that felt the full brunt of the economic crisis. Unlike essential expenses such as rent and mandatory overheads, it was one cost that could be reduced, or even eliminated, simply by taking employees off the road.
Now that the economy is bouncing back and the impact of looming recession is lessening, businesses are keen to once again spread their wings, yet this time their approach is more cautious. Fuelling this cautiousness is the fact that many costs associated with travel, such as flights, are also increasing as the economy improves and demand increases.
The most significant shift in attitude is that companies now want evidence that any travel they do will benefit their bottom line, grow their business and strengthen relationships. It is only when businesses receive proof of a return on investment that they will have the confidence to reinvest in travel.
In this ‘New Normal’, companies will enforce strict travel mandates and closely monitor traveller behaviour to ensure they are followed. Research conducted by American Express Business Travel reveals that more than a third of companies now won’t cover the cost if the employee doesn’t follow protocol and regularly books travel outside of policy. And on a traveller’s first compliance failure, 90 percent of companies will issue a warning or notice.
Companies have also used the GFC to look at alternatives to travel, such as virtual meeting solutions. This cautious approach to travel has been felt right across the business community, from multinational companies through to small-and-medium enterprises (SMEs).
DIY not cheapest
Currently, many SMEs manage their own travel programs, using retail travel agencies or online travel websites. While this do it yourself approach to managing travel may appear more cost effective, evidence is emerging that this may not be the case. And as greater emphasis is placed on the bottom line, finding the most cost-effective option has become paramount.
A study conducted by Harrell Associates last year, showed that while online travel agencies can offer attractive deals for leisure travellers, when it comes to corporate travel, a travel management company (TMC) offers greater overall savings and value for businesses.
One factor contributing to this research finding is that when travel isn’t properly managed, employees often make their own arrangements according to their personal preferences. This can mean they may book seats at the front of the plane, or book unauthorised four or five star accommodation. Often this is because there are no specific guidelines indicating what should and shouldn’t be done.
Managed travel programs not just for corporates
The GFC has made it perfectly clear that you don’t have to be a major corporation to reap the benefits of having a managed travel program. When it comes to travel, no matter the size of business, all companies share similar concerns and needs. TMCs like American Express Business Travel can manage an entire travel program and are responsible for everything from booking flights and accommodation, selecting preferred travel suppliers, developing policies and providing tools to drive compliance.
Yet up until now generally only larger corporations have turned to TMCs for advice and tools to help them manage their travel programs. Many smaller sized businesses don’t actually realise the amount of money they spend each year on travel and entertainment expenses. These costs can certainly add up quickly. Consider a return trip to London flying business class. You wouldn’t get much change from $20,000 when you factor in a week’s accommodation, meals and daily transport.
In addition, global borders are blurring and the world is shrinking. SMEs are increasingly looking overseas to grow and promote their businesses, find new suppliers, develop new channels of distribution and study best practice. With this in mind, American Express has launched aXcentis, specifically designed to help SMEs get back on the road through a sophisticated managed travel program, all at a reasonable cost.
aXcentis addresses concerns crucial to businesses when it comes to travel such as:
- Getting the strongest return for their investment
- Ensuring employees understand guidelines regarding travel
- Visibility and tracking of employee behaviour and compliance.
Benefits of Having a TMC
If travel, entertainment and meetings are an essential part of your business and you spend more than $250,000 on these expenses, than a TMC could benefit your business.
The first thing that a TMC will do is closely examine your current travel program. For instance:
- How much your business spends on travel and entertainment
- Whether you are using suppliers that best match your budget and employees’ expectations and requirements
- Whether you have policies to ensure your employees are aware of what is permissible and what’s not
- How effectively employee behaviour is being tracked to ensure that it is in line with your expectations.
An obvious advantage of a TMC is that they have access to exclusive negotiated deals with suppliers, which often enables them to acquire larger discounts for clients than suppliers might offer a company negotiating on its own. These negotiations can also often lead to additional benefits for a TMC’s clients such as upgrades, complementary breakfasts and free internet.
A TMC will also have teams of travel consultants to take the burden off business owners from finding available hotel rooms and seats on flights. Often a TMC will offer online booking tools for your business that allow employees to easily view accommodation and modes of transport, guide appropriate behaviour, allow you to authorise the trip before it is booked and provide data and analysis to feedback into your business.
Encouraging staff to book their travel through an online booking tool managed by a TMC has also a ‘visual guilt’ benefit that can drive savings. It has been shown that if staff book travel themselves through a TMC’s online travel booking tool, they will look for lower-cost options because they have no-one else to blame when the finance department or their boss questions the expenditure.
A final additional benefit of a TMC is that it will work with your business to form a policy specific to the requirements of your business. A travel policy will clearly set out the guidelines for all work-related trips such as when employees can travel, the type of accommodation they can stay in and what travel expenses are covered by the company. Once the policy has been finalised, a TMC, with its team of skilled and consultative client managers, will work with a business to ensure that it is followed.
Choosing a TMC
Selecting a TMC can be a difficult decision for a business, especially if they have never worked with one before. There are five key considerations that should be made:
- Will the TMC guarantee savings? If a TMC says they can save you money, they should be willing to commit to it.
- Will you be getting personalised service or will you just be one of many? A travel management company should have a dedicated local team that understands the needs of small and medium sized businesses.
- Does the TMC have a proven track record of service? Can you request to speak to their current clients or see testimonials?
- Does the TMC have a commitment to invest in new tools and technology that will benefit your business? Find out what new tools and services are in the pipeline that your business could potentially benefit from.
- Does the TMC address the needs of your business? If the TMC is only wanting to offer you a one-size-fits-all solution, than they are most likely not for you.
While the business travel landscape has fundamentally changed as a result of the GFC, travel remains essential to doing business. Australian SMEs now have the opportunity to capitalise on the same benefits of service, savings and control that major corporations have enjoyed through their travel programs for years. Every business has the opportunity to save critical funds and now these savings are within easy reach for all.
About the author
Craig McCarroll is Head of aXcentis, American Express Business Travel