The long suffering road warrior, reading a list of ways to save money on trips suggested by American Express Business Travel, might be forgiven the urge to rebel.
“Employees that stay together save together,” says the international travel management company in a 10-point plan to offset the impact of the financial crisis, issued from its New York headquarters. Some companies, it claims, are already asking employees to share hotel rooms.
But while waiting for a colleague to finish shaving before using the bathroom may seem an economy too far, evidence is mounting that companies around the world are seeking to reduce the cost of business travel. How are they going about it?
When KDS, the online travel and expense management provider, asked its clients how the downturn was hitting them, 54 per cent said they expected to have pruned travel costs by next March and 36 per cent said they had cancelled trips already booked.
A survey by the Brussels-based Business Travel Coalition of corporate travel managers in 17 countries found that just over a quarter had implemented emergency cutbacks in recent weeks, over and above those made earlier this year. Of those, about one third had banned all trips temporarily. Roughly one in five had ordered cuts in travel spend, 45 per cent of those demanding reductions of 10 to 20 per cent. The findings indicated that there had also been a significant swing towards the use of low-cost airlines, while 30 per cent of managers said their companies were planning “above normal” investment in technology that might obviate the need to fly, such as video conferencing equipment.
Besides more predictable measures such as demanding employees should forego business class flights, steps being taken to reduce travel include compulsory seven-day advance purchase of air tickets, avoiding overnight stays or, perhaps extending trips, visiting more customers in one go, requiring staff to stay in cheaper hotels and use compact or economy rental cars rather than more expensive models.
A separate survey of corporate travel managers by the National Business Travel Association in the US found that the reintroduction of minimum stay requirements by airlines on domestic routes was having a marked impact, with “a significant percentage” encouraging staff to consider staying over on a Saturday night if the saving outweighed the additional hotel and meal costs. Many were urging travellers to compare the cost of airport parking with using taxis, and to use public transport if possible. They were also requesting employees to share hire cars and fill up the tank before returning them, to avoid higher refuelling charges imposed by rental companies.
Companies with large enough demand to negotiate discounts with airlines, hotel groups and other suppliers in return for providing set levels of business should start by ensuring employees do not jeopardise those deals by booking with, for example, non-preferred carriers.
Small or medium-sized businesses with insufficient clout to secure such deals may not have that option. As Norman Gage, business travel director of the UK’s Advantage travel agents’ consortium, observes, if only one or two personnel represent the company on the road, it is clearly much harder to make economies by cutting the number of staff travelling. “SME guys are more hand-to-mouth. The often have no choice but to fly.”
One company, whose business travel clients include a large number of individuals and small outfits is UK-based Trailfinders. Typically, they are not big enough to employ in-house travel managers or to secure deals with airlines or hotel groups. In the current climate it is “very, very clear” that such customers are seeking ways to cut costs, says Steve Gadd, its business travel director. “The crisis has acted as a wake-up call. Maybe the company secretary has demanded savings on travel. As a result we are getting inexperienced employees asking for our help to reduce spending,” he says.
“Increasingly, customers who might have been happy to fly direct when times were better are prepared to book indirect flights – to India via the Gulf for example. That can add two to three hours to their journey times but it can save companies 20 to 30 per cent on fares. Others are switching from flag carriers to emerging airlines such as Jet Airways and Kingfisher.
“It’s also clear that people are moving away from the very high price luxury hotels, the uber-brands if you like, to less expensive five-star properties. At the same time a lot of travellers are dropping from five to four-star hotels.”
Although it may seem contradictory, at least one travel management company, Yorkshire-based Redfern Travel, has decided to help clients avoid travelling – by offering them the option of online audio or video conferencing. Commercial manager Mark Bowers says: “The credit crunch wasn’t the driver, but there’s no doubt that it will focus people’s attention on the first question they should always have asked, which is: do we really need to travel? They are now more likely to ask it and if they don’t, their senior executives are going to insist that they do.”
Even the way businesses pay travel management companies can make a difference to costs. Norman Gage says: “After the downturn in the early 1990s we saw a shift from airlines and other suppliers paying agents commission, to our clients paying members overall management fees. After 9/11 clients found they were travelling less but paying agents the same fees, so there has now been a big shift to transaction fees [fees paid for each booking or other service provided].”
The switch away from commission has meant agents are under no pressure to push business class fares, he notes.
“Previously they earned more from selling premium class but now they don’t care which class they book.”
Automation also helps cut costs, says Mark Bowers: “A figure we have often heard from government travel sources is that by the time a train ticket has been sent out and an individual invoice issued – and maybe sent to the wrong department – the administration cost for one trip is on average £41 ($64). We have automated transactions, providing clients with ticket printers and invoicing all their trips together at the end of the month, which they say cuts the cost to £3.50. I take both the higher and lower figures with a pinch of salt but even if they save £10 on each transaction it is considerable.”
Meanwhile other recommendations in the Amex list include reconfirming appointments rather than risk incurring flight cancellation fees; before embarking on longer trips, comparing the cost of recently-imposed fees for checked bags on some US airlines with that of the hotel laundry, which, if you really have to share a room might have other added advantages.
Boston Scientific: Staff comfort still a priority
Travel budget in Europe, the Middle East and Africa is about €30m, but the company is looking for a 5 to 10 per cent reduction. It has frozen all but essential, customer-facing travel (such as sales trips) and is encouraging others to use alternatives such as web conferencing.
Employees are recommended to make “hybrid” flight bookings: travelling to North America in economy, for example, but returning overnight in business class.
It has also been discussing whether to ask staff to stay in lower-rated hotels. But, says, Volker Spichal, finance director for EMEA, “the idea is that people who already have fairly long days should still have some degree of comfort”.
“We are trying to set ceilings on the amounts staff spend …We want them to consider how much they would spend eating out on their own account.”
The company hopes to use information garnered via the staff online booking and expense reporting tool, supplied by KDS, to drive down negotiated air fares and keep tabs on staff spending – naming and shaming the most profligate.
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