It’s a seemingly impossible math problem: How do you keep the same number of employees on the road when your travel budget is flat and the costs of air tickets, hotel stays and car rentals keep going up?
Smart travel managers seem to be finding solutions that keep their warriors on the road anyway. Business travel in Canada is up by 2.2 per cent this year compared with 2011, according to Tony Pollard, president of the Hotel Association of Canada. North American employers are projecting at least a 4-per-cent increase in travel next year, according to polls by the Global Business Travel Association.
“We had a conference of eastern travel managers last month in Toronto. Most of them said their travel budgets for next year are going to be flat and they’re looking to do more with less. Then the next day we had a gathering of western managers in Calgary – many of them in resource companies – and most of them said their travel budgets are going up from 5 to 10 per cent,” says Tanya Racz in Calgary, who is president of the Canadian wing of the Global Business Travel Association.
But even those who have more to spend are concerned about holding the line on costs, particularly in hotels, where room rates are rising because of demand, energy and labour costs, she says.
According to another poll by GBTA of 1,500 U.S. and Canadian travel professionals this summer, 60 per cent of companies have placed more controls on who travels and where in the past two years. They’re adjusting policies to set more strict limits on allowable costs and monitoring compliance.
Here are evolving strategies smart travel managers are using to keep a lid on rising costs:
“Most companies realize that there is still great value in having face-to-face meetings and are looking for strategies that keep their people on the road while capping costs,” says Sherry Saunders, senior vice-president and general manager of Carlson Wagonlit Travel Canada.
Most companies have adopted guidelines for business travel, but until recently there were no stringent penalties for those who didn’t adhere to them, Ms. Saunders says. She’s seeing more firms becoming more strict about travel spending and making it an issue in performance reviews.
However, while the rules may require booking the least expensive options, companies are also aware that frequent business travellers will be more productive if they have comfortable flights and a hotel that’s convenient to their meetings. Managers will cut more slack for people who have to be on the road a lot than for people who travel only occasionally. Meanwhile, employees going to a one-time conference could find themselves relegated to a less expensive hotel that’s farther away from the site, she says.
Companies would be wise to sit down with frequent fliers and work out strategies to get the maximum amount of work done in their time away from the office, advises Tristan Lockie, managing director of MeritBiz, the corporate travel division of Merit Travel Group in Toronto.
If a sales person needs meetings in Calgary and Vancouver, arranging to do them both on the same trip can minimize time away from the office.
“But it may not be wise to require the cheapest air tickets because they may involve layovers. People can end up wasting time by getting stuck for six hours in Minneapolis doing a less-expensive connection rather than booking a direct flight.”
Strict preferred suppliers
Until a few years ago, all airlines and hotel chains would offer significant discounts to corporate clients no matter how many of their employees gave them their business. Now they’re requiring companies to sign contracts guaranteeing a minimum amount of business.
To get the best savings requires enforcing a policy that employees book only with a few contracted suppliers whenever possible.
“You don’t need more than $100,000 of air spend to get a preferred rate agreement, but you have to put your money where your mouth is. If travellers don’t end up buying what you say they will, you can get cut off,” Ms. Saunders says.
Preferred rates can be as much as 15- to 25-per-cent savings on the base price, but other expenses such as baggage fees, breakfasts and Internet should also be negotiated.
“Many chains are now offering free Internet as an attraction to business travellers, but it can cost $20 a day in some other hotels; breakfasts add $10 or more.
“Those can add up to a sizable cost in the course of a year,” she says.
The airlines have flight pass systems that allow companies to buy a book of credits for flights and these can save as much as 40 per cent over the cost of individual tickets, Mr. Lockie says. “These can make a lot of sense as long as they are carefully managed. There can be a lot of rules and restrictions on what cities they can be used to fly to and who can book on them.” This can create problems if priorities change or people leave the company, he cautions.
Between 30 to 40 per cent of business tickets issued in Canada are done through online booking tools, but many companies are slow to adopt do-it-yourself booking, says Dirk Baerts, managing director of Egencia Canada Corp., the business travel portfolio of Expedia.com.
“Many aren’t encouraging travellers to make their own bookings online because it takes time and the options they select could cost more than the preferred rates a group contract can provide,” he explains.
Companies that contract with Egencia are set up with a booking app on their corporate intranet that’s customized with negotiated rates and access to Expedia’s best rates.
It’s programmed with the company’s travel policy and approvals system and will flag bookings that are outside the company guidelines.
For expense management, the company may require authorization before the tickets are issued.
And it looks for specials that are available from airlines on websites and promotions that can beat the company’s negotiated rates.
He says a fear factor actually helps keep costs down on online bookings.
“We’ve have done research that shows people will invariably choose the low-priced option because they feel guilty about taking a higher-priced ticket and fear a confrontation with their manager” about why they didn’t comply with their company’s policy, Mr. Baerts says.