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'How to Guides'
Introduction – the need to manage travel
Anyone with an Internet connection can book a business trip. But that doesn’t make them a travel expert any more than owning a calculator makes someone an accountant. If your organisation’s travellers ever require any of the following:
- Flights outside Europe
- Indirect flights
- Trips involving more than one destination
- Flights booked less than a week before departure
- Business-class flights
- Hotel rooms in in-demand locations like London, New York, Paris and Moscow
Or if you as a buyer want to know:
- How much you are spending on travel
- Where your travellers are in an emergency
- Then you need to build a travel programme that saves money for your organisation and time and hassle for your travellers.
Basic building blocks
Management information
Travel buyers need good data about which employees in their organisation are travelling, where they are travelling, which suppliers they are using and how much they are spending. This is for three important reasons:
1. Policy adherence – making sure travellers use preferred suppliers and spend within prescribed guidelines.
2. Tracking – being able to locate travellers in an emergency.
3. Supplier negotiations – airlines, hotels and other suppliers will only negotiate deals with corporate clients which can prove how much they are spending and that, once a deal is done, the client is spending the volumes to which it has committed.
You can obtain management information from the following sources:
1. Travel management company (TMC) – your TMC will provide summaries of the travel it has booked on your behalf.
2. Corporate payment cards – select a single card provider for all your travellers, then make sure they channel as much travel expenditure, both before and during a trip, through the card. In addition to paying you an incentive for using the card, the issuer will provide you with management information about all spend made through it.
3. Direct information from suppliers – be careful. It almost certainly won’t match your own records!
Your own accounts payable department – also likely to be patchy and inconsistent.
Policy
A travel policy is the cornerstone of any travel programme. It sets out spending limits for travellers as well as which suppliers they can use and how they should book their trips (such as whether they must use a specified TMC or can book directly with the supplier).
Apart from the obvious benefit of telling travellers not to spend too much, the other crucial reason for having a policy is that suppliers will not give good deals unless they see clear evidence of the corporate client directing travellers to select them.
It is also vital to remember that simply writing a policy is never enough. The policy must be actively communicated to travellers and bookers (not always one and the same) so that they are made aware of it. Enforcement is also necessary – compliance must be monitored and action taken if travellers breach policy.
(For more details, see the 'How To' Guide on Creating a Successful Travel Policy)
Travel management companies
In recent years, TMCs (formerly known as business travel agents) have started charging fees. Nearly all travel buyers consider it nevertheless remains worth using an intermediary. Among their most important services are:
- Finding good air fares and hotel rates. TMCs are especially good at long-haul fares and complex itineraries involving more than one destination. They also have special deals with suppliers.
- Managing the totality of travel spend. This not only provides more comprehensive management information but allows you and your TMC to analyse the whole of your expenditure and make adjustments where necessary. E.g. if you see from your TMC data that you are using a particular airline regularly, you can negotiate a deal with the carrier, then adjust policy accordingly. The TMC will then make sure it books the preferred airline wherever possible.
Saving money on air travel
Most organisations will use a portfolio of different fare types and airlines:
Spot fares
This is simply buying the lowest publicly available fare on the day of purchase. Spot buying has become very common on short-haul routes, where traditional airlines have responded to pressure from low-cost carriers by slashing prices. To take one example, the cheapest flight midweek for London Heathrow-Madrid on British Airways in 2002 was £542 return. Now it is £99. However, like low-cost carriers, the cheapest spot fares are available to early bookers. As a plane fills, the fare rises. Book Heathrow-Madrid with BA for the following day and the fare can be £678 return.
Negotiated air fares
This is where negotiated fares come in, giving the buyer a price ceiling on key routes even when they book late. Negotiated corporate fares are usually dearer than the cheapest spot fares but much lower than the maximum public fares. They are also more flexible - e.g. they can be changed and cancelled without penalty. Most useful on long-haul routes, where there are fewer spot fares.
Low-cost carriers
Budget airlines often offer the cheapest fares on short-haul routes but the total cost of the trip must be taken into account. For instance, if the flight is not using the most convenient airport, then higher ground transportation costs and longer travelling time have to be factored in too. Another problem can be low frequency on a route – sometimes as little as one flight per day.
Consolidated fares
These are fares bought net by agencies and sold on to the client. Savings are especially good in long-haul business class but they often require indirect travel and advance purchase.
Creative fares
If a traveller is making several stops on one trip or visits the same destination frequently, always refer their travel plans to your TMC. The TMC will use creative but entirely legitimate techniques to construct a much lower fare. To take one example, if someone is making repeated visits to Mumbai, it can be cheaper to fly London-Mumbai single and then start buying return Mumbai-London tickets.
Saving money on hotels
In periods of low demand, such as after 9/11 or during the Iraq war, travellers could find very cheap hotel rates online. However, since 2004 the tables have well and truly turned: many key business cities are currently full throughout the working week.
In certain locations, such as Moscow or Bangalore, buyers are glad to find a room at any price. In most other cities, discounts can still be achieved by negotiating deals. As with corporate air agreements, you will need good management information and a robust travel policy. Then you will have to choose a limited number of hotels in the city on which to concentrate your spending power. Hoteliers are prepared to negotiate discounts with corporate clients if they can be convinced that you the client will deliver a regular volume of business which will continue when times get tougher.
Other hotel negotiating tips include:
- Insist travellers use a corporate card to pay their hotel bills to ensure you can track the data. This is vital because travellers use TMCs to book hotels far less than air.
- Make sure the hotel can handle your demand – if it is frequently full, your bills will start mounting as travellers spill over into non-negotiated properties.
- Check tax and service are included in the rates you negotiate.
- Negotiate on extras like breakfast or Internet access.
Self-booking tools
An increasing number of organisations in Europe have decided they can make substantial savings by introducing a corporate self-booking tool (SBT). Like the Internet, it means travellers can book travel on their PCs. Unlike the Internet, however, policy controls that restrict travellers’ choices can be added to the tools. In addition, the booking information can be collected and merged with data from reservations made directly through the TMC.
The main advantages of using an SBT are:
- The amount the TMC charges to fulfil a ticket (ie check the booking for quality control and then issue it) is about half that for a telephone reservation.
bookers become more responsible when making travel choices themselves instead of leaving it to an agent. Average ticket prices typically fall 12-20 per cent as a result.
- It saves time for travellers making simple bookings
- Travellers are increasingly demanding the ability to book online. It is important to give them a controlled booking tool instead of surrendering to them the freedom of the Internet.
- It is generally accepted that SBTs should only be used for simple there-and-back trips. Booking anything more complex saves time and money if handled by a TMC consultant.
More information
We hope you find this guide useful but inevitably it can only be a starting point. Where should you go next?
Associations
Institute of Travel Management (http://www.itm.org.uk/) – for travel buyers and suppliers based in the UK and Ireland.
Association of Corporate Travel Executives (http://www.acte.org/) – for senior travel buyers and suppliers worldwide.
Chartered Institute of Purchasing & Supply (http://www.cips.org/) – for procurement professionals in the UK.
Trade shows:
Business Travel Show (http://www.businesstravelshow.com/), Earls Court, London, every February.
Travel management companies:
Guild of Travel Management Companies (http://www.gtmc.org/) – its members handle 80 per cent of all business air bookings in the UK.
