Research Reflects Importance of Policy: Surveys Portray Compliance as Both Great Challenge and Vital Tactic

A raft of research during the past two years points to travel policy compliance as a vital element of corporate travel programs, and one on which corporations increasingly are relying to drive cost savings. While tweaking policies and attempting to improve compliance have, at times, been underappreciated tactics--relative to, say, vendor negotiations--market data and anecdotal evidence show that's changing as supplier pricing leverage remains strong in a high-demand environment.

One of the latest indicators, from BCD Travel's 2007 Client Benchmark Survey of 219 customers, showed that the percentage of polled firms describing their travel policies as "strict" doubled to 6 percent between 2006 and 2007, while the portion that described policies as "lenient" fell to 6 percent, from 13 percent. Moreover, the "2007 survey marks the first time in three years that we've seen mandating travel policy rank as the No. 1 travel policy change," BCD Travel wrote.

GEOGRAPHIC VARIATIONS

Source: BCD Travel 2007 survey of 219 travel and procurement executives

The research followed a fourth-quarter 2005 survey by Carlson Wagonlit Travel of 650 travel managers in 13 countries, 54 percent of whom said their corporate travel policies were made significantly or slightly more restrictive during the prior three years.

A 2006 AirPlus study of more than 1,000 travel decision-makers found that 43 percent of respondents at companies with travel policies said their firms were "likely to tighten them further, while 50 percent said [the policies] would stay the same and only 5 percent thought they would relax policy."

But these changes generally would come only after what had been lower-than-desired performance in terms of compliance to travel policies, according to polls.

According to a 2006 Rearden Commerce-sponsored Lieberman Research Worldwide study of 500 "knowledge workers" who had traveled for business at least twice in the previous six months, 38 percent of employees consistently used company-preferred vendors even though 87 percent were aware of those suppliers. [Preferred vendors are among the most common travel program elements addressed by travel and entertainment policies.]

The CWT poll found that 49 percent of 2,100 business travelers book outside of corporate travel policy for air, car or hotel between one and 10 times per year. According to an Aug. 2006 Aberdeen Group research paper on 296 enterprises, an average of one in five "T&E expenses are not in compliance to corporate policy."

BCD found that preferred carrier status was the fifth "most important" characteristic in a typical traveler's decision about which airline to fly.

Ensuring policy compliance is seen as one of travel procurement's most difficult tasks. For BCD survey respondents in the Americas, policy compliance ranked higher among the top challenges of running a managed travel program, at 41 percent, than access to supplier content, online adoption and data consolidation.

"Being the bad guy with travelers and making them abide by company travel policy" similarly ranked first among the top challenges cited by travel manager respondents to the Carlson Wagonlit Travel survey--above senior-management pressure for cost savings, misperceptions about job functions and online adoption.

A tongue-in-cheek TRX statement described policy compliance as "the most heinous of industry villains," following a poll of 156 corporate travel buyers during the recent National Business Travel Association convention.

Even though compliance is difficult to enforce, travel buyers value the importance of what BCD Travel considers "the bulwark of an effective travel policy."

Citing such factors as "much greater emphasis on internal controls and transparent accounting" resulting from Sarbanes-Oxley requirements and the relative maturity of U.S. travel management, AirPlus found that 67 percent of American companies ranked policy compliance first or second among key travel management issues. Compared with programs elsewhere around the world, AirPlus said U.S. travel buying procedures suggest "a more sophisticated understanding ... of the essence of travel management and cost reduction."

"Compliance to travel policies is essential or important to achieving savings," according to 90 percent of respondents to a May 2007 Aberdeen Group study of 435 enterprises, sponsored by CWT, Gelco, MasterCard, Spendvision and TRX.

The first step, of course, is to create travel policies. But most firms seem to have a handle on that, according to the data. An Equation Research poll fielded in May 2007 and sponsored by Expedia Corporate Travel found that 180 of 205 surveyed corporate travel decision-makers worked for firms that had a travel policy.

The ECT poll also found that 96 percent of respondents with travel policies also had policies specifically on class of service selection in air travel, 79 percent had the same for car rental and 63 percent employed such rules for lodging.

Various studies indicated that support for both air travel and car rental policies is far higher than for hotel policies. "Efforts to police policy adherence are bearing fruit, as we have seen significant increases in air program compliance," BCD Travel wrote. However, "hotels continue to carry their own challenges, and companies continue to search for the best way to channel bookings to preferred properties--a task made more difficult by high occupancy rates."

Based on interviews with 160 industry executives during 2005 and 2006, PhoCusWright indicated that "corporate best practices for air are defined at 70 percent in policy. While rates vary radically by company, firms interviewed for this report indicate that 35 to 40 percent of hotel spend is purchased in policy."

BCD's research indicated that car rental policies tend to show compliance rates of 81 percent to 90 percent, air policies typically experience 71 percent to 80 percent compliance and hotel programs register at 61 percent to 70 percent.

While mandates on hotel program policies grew during the past year, according to the BCD research, less than half of respondents said their policies require travelers to make hotel bookings through the preferred TMC or electronic booking channels.

Overall, best-in-class compliance rates average about 90 percent, according to Aberdeen--aided by roughly 85 percent "adoption of preferred travel management company or online booking tool." Improving compliance largely comes down to senior management communication and corporate enforcement, but disconnects apparently remain on both scores, according to CWT's research: 82 percent of travel managers believe travel policy communications are effective, versus 68 percent of travelers; 82 percent of travel managers believe travelers understand there are ramifications for non-compliance, versus 46 percent of travelers.

Travel purchasing managers at such firms as Chubb, Nortel Networks, Siemens and Thomson are recognizing that an inward focus can help and have recently begun related initiatives.

"We have pretty good procurement practices, control of our T&E policy and employee vouchering practices," said Nortel global travel manager Robert Ridpath, during the Association of Corporate Travel Executives conference in May. "What we discovered was that our opportunities came from policy simplification and linking the policy closer to the employee receivables audit processes, which in turn drove up compliance and changed employee behaviors, allowing us to achieve our reduction objective." Ridpath cited better policy compliance for nearly all of a recent $32 million reduction in travel spend.