Business travel is part of many businesses and part of the life of many of the employees. While a company needs it employees and executives to travel, it also needs to ensure the money being spent on travel is getting the very best value.

Many business travellers build loyalties to various suppliers like travel agents, airlines and hotels. Often a business will allow their travel program to grow organically with existing suppliers which have been sourced for convenience not value.  The result: multiple travel agents, multiple airlines, multiple hotels and rental car companies used. A further complication is that the charges for these multiple suppliers are paid on personal credit cards, invoices or a variety of corporate cards. This scenario is describing the worst possible situation, but many organizations are somewhere in between this and a fully consolidated and strategically managed travel program.

Any review of a travel program must start with understanding the suppliers being used and the level of consolidation achieved. Airlines, hotels etc all work on volume and the more consolidation that can be achieved the greater opportunity to get best value and rates. In aiming to consolidate suppliers there may be a few travellers with their ‘noses out of joint’ where their favorite supplier is not in the end mix.

In the end the company is responsible to the owners (shareholders) to ensure absolute best value for the money being spent and sometimes personal preferences of travellers cannot always be accommodated.

Consolidation

In the travel commodity consolidation will have a duel meaning:

• Consolidate the internal management of the travel portfolio spend so that one area or person is responsible for supplier selection, program management and drives compliance to company policy. This does not mean only one person doing bookings or having all interaction with suppliers, but the essential task of appointing suppliers for best value delivery must be consolidated.
• The other consolidation message is ‘how many suppliers are being used’:

• Travel agent or Travel Management Company (TMC). There is a myth that if a company uses 2 or 3 TMC’s and gets competitive quotes for each itinerary it keeps them all honest. This is outdated thinking and only one TMC should be used to consolidate all a companies’ travel. The TMC cost should represent less than 4-5% of the total travel spend, so managing service delivery and managing the relationship will deliver better value than ‘shopping around’.
• Airlines. Both Australian major domestic airlines will offer reasonable discounts where a company can deliver volume and a percentage of the total spend. The majority of international carriers will also provide good point of sale discounts for a guarantee of volume – so selecting the airline/s than can best service the destinations to which your company travels is the first step.
• Hotels. Where a company has more than 50 room nights per year in a particular location they should look at consolidation and the opportunity to strike a preferred rate with a suitable hotel. Most companies with hotel programs will have a choice of several hotels in their most common destinations, and while they give travellers some choice in selection those companies will mandate the use of only the preferred hotels.
• Car Rental. Hertz, Budget/Avis, Thrifty, Europe car – take your pick, they will all provide very attractive discounts for the company that is willing to consolidate and mandate the use of one supplier.
• Payment. Avoid at all cost the use of invoices for payment of travel services. Also avoid use of ‘travel accounts’ provided by some charge and credit card suppliers. The most cost effective way to manage business travel expenses is to appoint one card provider (e.g. bank VISA or MC, AMEX, Diners), open a corporate card account and mandate that all those that travel must use the company issued card. Discounts on card fees and rebates on spend can be negotiated with all providers.

Adopting the above consolidation strategy will deliver greater discounts through the ability to leverage rates with all suppliers. The flow on benefit is that the area/person now managing travel can extract data reporting setting a clear picture of the ‘who, how, why and what’ of travel and through analysis can identify further opportunities for savings. All TMC’s, airlines, hotels, car rental and card companies can provide comprehensive reporting, but unless those supply areas are consolidated the reporting can be difficult to manage and become meaningless. The ability to provide reporting to requirements can be part of the supplier selection criteria.

Support for Consolidation

Many organizations struggle with the implementation of a consolidation strategy, especially for business travel. As mentioned earlier, often long term supplier relationships have been established and many travellers will fear loss of privileges they currently receive if they cannot access their existing supplier. Further many of those who travel most are the senior executives in the company who are charged with making decisions around the program.

Many stories exist of travellers believing they get put ‘down the back of the plane’ because the company has negotiated a discount deal and forcing travellers to book more restricted or discounted fares. Or they get the hotel room next to the lift or a low floor because discount rates are being paid. It is fair to accept that most executives work long hours and spend many days away from home and family due to business travel, so ensuring they travel and can stay in some level of comfort is necessary to guarantee compliance to the use of preferred suppliers. The selected TMC, airlines, hotels etc must all be made aware of and understand the culture of the company, how employees are, and expect to be, treated. A high level of sensitivity to these issues will help introduction of a consolidation program and acceptance by travellers. The fears and concerns of travellers must be addressed in a fact based method with removal of emotion.

The consolidation program may not be at the top of the company agenda, despite the obvious savings that can be delivered. What is needed is the full support of the CPO, CFO and any other top level executives. The CFO controls the funding, and the CPO is often the one in charge of travel procurement. These two need to work together in order for the program to be implemented and adopted.

When investors look at a company, they look at the places that the company focuses on to save money. To those investors that are not used to business travel, it can be seen as a privilege and sometimes a perk, so the ability to prove the company has taken every effort to reduce the cost of travel can be attractive. If you look like you truly care about saving money and keeping your company functioning properly, then they will be more likely to spend their money on you. In addition the person/area initiating the consolidation will earn the trust of management, and will be more likely be allowed to push forward with other ideas or projects that require funding.