The Economic Recession Diet for Business Travel
Cutting travel program fat without compromising strategic objectives
The global economic downturn is hitting business travel where it hurts: According to a new survey by the Association of Corporate Travel Executives (ACTE), more than 70 percent of U.S. travel managers plan to spend less on corporate travel in 2009. The results represent a sharp shift from an earlier ACTE poll (Sept. 2008), which found that only 33 percent of U.S. travel managers were planning on cutting travel spend in the year to come.
While the ACTE survey may have focused on the U.S., the challenges faced by travel buyers and travel managers cut across all sectors of the globe. From reducing travel to tightening travel policy, and from renegotiating with suppliers to adjusting travel behavior, travel program stakeholders are intent on cutting trips and curbing expenses.
The silver lining to the financial storm clouds, says Kathy Jackson, executive vice president.
Story highlights:
* Travel buyers and managers now able to make changes that were impossible in the past
* New role for account managers in understanding and supporting client business drivers
* Changes to travel policy, approval process, traveler behavior are leading savings mechanisms for cost-conscious companies
* Demand management and online technologies are key supports
For Global Client Management at BCD Travel, is that the economy is enabling travel buyers and their respective teams to make changes that, quite frankly, have never been achievable in the past.
The challenge, adds Jackson, is to save on travel spend without compromising on business objectives: “As hard as it may be to foresee, the recession will not last forever. Companies will need to emerge from the downturn with plans for growth and solid business relationships in place- and travel is a crucial element in supporting growth and retention initiatives.”
Teri Miller, senior vice president for Global Client Management in the Americas for BCD Travel, sees a major opportunity for travel management company account managers in the current situation: “Account managers need a deep understanding of the customer’s business drivers to enable them to anticipate and add value, rather than react. As an example, if a client is closing manufacturing plants in three countries, our account manager will explain how travel patterns will shift as a result, illustrate what effect that may have on supplier contracts and provide a plan for optimizing potential impact.”
What steps are BCD Corporate Travel clients taking to combat the recession?
Companies need to look beyond the big-ticket items, says Jackson, and filter adjustments through every component of a trip. “It may be tempting to focus exclusively on air ticket costs, but for some programs, air may make up only as much as 20 percent of total T&E expenditure. Our account managers, often with the support of a consultative engagement from Advito [the independent consulting branch of BCD Travel], help clients focus on the total cost of trip, including hotel, ground transportation and even restaurant costs.”
A list of some of the decisions in which BCD Travel is supporting its clients’ recession-management travel strategies is below.
The choices and decisions being made represent a major opportunity for companies to make lasting beneficial changes to their travel programs, says Jackson: “As with any diet, success is incumbent on making change a way of life, not a 30-day wonder regime.”
Changes in travel policy
Growing corporate cost-consciousness is manifesting itself most prominently in the refinement and enactment of more stringent travel policies. Among the common cost-cutting elements BCD Travel is seeing: shifting from business class to coach class (variations include mandating coach class for all travelers regardless of hierarchical level and increasing the business-class flight-time threshold); down-tiering hotels (i.e., three-star instead of four-star); mandating the use of public transport rather than taxis; and retaining frequent flyer miles for business travel rather than personal travel.
BCD Travel is also seeing an increase in the use of rail and low-cost carriers within EMEA, says Felix Vezjak, senior vice president for Global Client Management in EMEA: “Companies are much more likely to accept what were formerly seen as inconveniences (i.e., secondary airports) in exchange for savings. However, particularly in the case of low-cost carriers, companies need to ensure that their travelers always use the preferred booking channels (online booking tool and agency) of choice to ensure adequate reporting and security tracking.”
For further suggestions on refining and enforcing travel policy, see our Feb. 2009 article “Reliance on compliance.” Changes to travel approval process
Whether it’s instituting an official approval process where one might not have existed or – as is more common – making existing processes more restrictive, this cost-cutting method is winning wide-spread support among BCD Corporate Travel clients as an easy “quick win.”
As part of a concerted travel-cost reduction effort, one of BCD Travel’s global clients, which has over US0 million in annual travel spend and more than 325,000 employees worldwide, changed its travel approval process radically to incorporate the following:
# No travel unless approved by a vice president on a single trip basis (<150 VPs in the company)
# No last-minute travel (under seven days’ advance purchase) unless approved by an executive vice president (<15 EVPs in the company)
Demand management (travel reduction or travel freeze)
More and more companies today view demand management as one of the biggest opportunities they have to control or reduce costs without compromising their overall business goals and requirements.
Among the possible steps companies can take to reduce travel demand:
# Eliminate all non-client-related travel
# Freeze attendance at industry conventions and conferences
One BCD Travel client refers to internal meetings as the “mother of all travel,” and has implemented the following methods to reduce the travel they generate:
# Prioritize video/web-conferencing for internal meetings
# Reduce number of meeting participants (all participants must be on agenda)
# Require meetings to be planned around travel, rather than vice versa
# Eliminate hotel nights before and after the meetings
# Choose meeting venues based on total cost, including travel and employee time spend
Travel management company as educational and staffing resource
BCD Travel has played an important role for several major clients in helping educate travelers and travel arrangers on a range of subjects in order to improve their ability to support the companies’ savings initiatives. For some clients, BCD Travel account management has provided workshop sessions for travel bookers; for others, the company has created “Tips and Tricks” documents for cost-savvy travel that clients have made available to all travelers.
Some clients have also had to face internal downsizing, resulting in the loss of key travel personnel. In one recent case, following the departure of the travel manager, BCD Travel has been able to dedicate a resource to that role. The account manager has also supported the client by conducting analyses to forecast further headcount reduction ahead of online adoption drive. This headcount reduction has been written into the budget for 2009.
Increased use of online booking tools
In order to save on transaction costs and streamline processes, companies are increasingly mandating that all domestic or point-to-point travel be booked online. Online tools can also play an important role in supporting changes to the travel policy and to traveler behavior, says Miller: “Companies can modify booking tools to ask travelers about the necessity of a trip or offer alternatives to the journey before proceeding to booking.”
Program consolidation
Finally, says Jackson, the economic downturn may present a significant “carrot” for companies that had been looking into consolidating their travel services regionally or globally: “Consolidation of multiple country services into a multinational service center, for example, can represent considerable savings in resource and process costs. However, companies must be sure that their organization is prepared to fully support consolidation in order to fully achieve the benefits. That means asking questions like, ‘Do we have a consistent travel policy in place that spans the markets involved? Are there language constraints that would be met by the service center?’”