Should I use a travel management company for business travel?

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.

Virgin Blue competitor Tiger AirwaysNow 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.

[Next: Managed travel programs, aren’t they just for corporates?]