With the recession receding, corporate travel is on the rise. Managing its potentially hefty costs and the complex logistics is the province of the travel management company
This article was first published in the July/August 2015 UK edition of Accounting and Business magazine
We live in an age of immediate communication, and there are plenty of software packages and apps to enable videoconferencing. Yet the overwhelming majority of people would rather have face-time with their clients and colleagues – actually sitting in front of them, shaking hands, looking them in the eye. No device can match the interpersonal and non-verbal communication that happens in a real meeting. Given large international networks and the global nature of business, that often means travelling.
However, with so many variables involved – airports, flights, transfers, hotels, taxis, car hire – the arrangements can be highly complex. This is where a travel management company can offer cost savings and efficiencies. A travel management company does more than make bookings: it helps a business manage its travel spending through its access to the best deals and its ability to heighten the visibility of costs and develop a travel policy.
Size doesn’t matter
The size of a company is not an issue, according to Nigel Turner, director of programme management at travel management company Carlson Wagonlit Travel (CWT). He says: ‘Our smallest clients spend £50,000 a year, our biggest over £100m, but what any organisation needs to understand is what is being purchased, how that is being done, how it is being paid for and how it is being managed.’ Indeed, smaller businesses may feel the burden of travel spending and arrangements all the more, and so need the best value possible.
PAs and executives may book hotels and flights, but without overall management there is little or no consistency. An employee in one department may fly first class, another business, and a third economy. This fosters resentment. An individual may have found a good hotel deal but not shared that information with colleagues, so another opportunity to reduce costs is lost. What all businesses need is an effective travel policy.
‘As part of our initial setup we look closely at travel policy,’ says Mervyn Williamson, managing director of Statesman Travel. ‘You must get it correct from the very beginning, so there is no ambiguity and the rules are clear-cut.’ Without proper controls, employees are less likely to adhere to rules; they might not even be sure what the policy is. A travel management company can offer a uniform approach to business travel and remove internal differences.
Paul Wait, CEO of the Guild of Travel Management Companies, warns of the wider effects of businesses trying to manage travel matters themselves. ‘Managers don’t work out how much time their employees spend researching and booking travel, yet that is taking them away from what they’re paid to do. That’s a false economy because it damages productivity. Using a travel management company would cost far less on a per-hour basis.’
By outsourcing travel, a business can see exactly where spending is going. For professional services firms with high travel demands, this is especially useful, as former accountant Williamson explains. ‘With rechargeable expenses you need transparency. If a client wants to know why £10,000 was spent sending three people to the US, all the information is there ready to be uploaded. Compare that to waiting for everyone to submit expenses and then waiting for credit card statements.’
Tracking employees is just as vital as tracking money. ‘All organisations want to control costs,’ says Turner, ‘but there is also a duty of care. So much happens across the world, not just in high-risk areas. You must know where your people are.’
Travel management companies are increasingly using mobile apps for this. ‘The technology is a new dynamic reflecting the needs of the traveller,’ explains Turner. ‘You used to get a piece of paper with an itinerary written on it, just static data. The app is a whole new world – any changes to your trip, just a delay of a few minutes, and you’ll be told.’
Business trips can run into trouble. Usually it’ll be a prosaic reason such as a hotel closed due to burst pipes, or an airport shut due to an electrical failure or strike action, rather than an extreme natural event. This is when the weary traveller needs help. Trying to contact the PA who made the arrangements might work if you’re in the same time zone, but if it’s 3am back at the office, then the employee has to resolve the problem and reducing costs will not be their priority.
Some larger travel management companies are global, while smaller outfits often band together in global networks, so a partner in, say, Australia, Indonesia or Brazil will be in a position to help travellers, whatever the problem might be, on a 24-hour basis.
A survey of travel managers by CWT found that the main concern of business travellers in Europe is corporate social responsibility, so it works with many companies to incorporate green issues into their travel policies. Some of CWT’s clients want the lowest carbon option to be included in their travel plans. Statesman Travel enables clients to act on green targets through buying carbon offsets for the trips they make.
At what cost?
Ever more people are flying, and there is a new generation of superjumbo aircraft. Very long-range models such as the Boeing 787 and the Airbus A350 have been developed to operate outside of giant hub airports, widening the range of destinations the business traveller can reach efficiently, especially in emerging markets. Of course, it would be greener to hold a videoconference, but, as Williamson puts it: ‘In business, the traditional value of getting in front of a client is essential. People still believe it’s the right thing to do, regardless of environmental cost.’
Travel management companies also cost, but their fee, they argue, is justified by the savings they can bring. ‘How do you know you’re getting the best value?’ says Wait. ‘What health and visa advice are you getting? How are you looking after your people on the road? Do you even know where they are? If a business can’t answer questions like this, it needs a travel management company.’
"What health and visa advice are you getting? How are you looking after your people on the road? Do you even know where they are? If a business can’t answer questions like this, it needs a travel management company."