A recent study by Carlson Wagonlit Travel confirms the logic behind purchasing airfares at least a few weeks in advance to obtain cheaper prices, but also details the conditions for which that strategy will and won't work. An analysis of the travel management company's 100 highest-spending North American clients found that advance purchases save them nearly $100 (31 percent) per domestic segment, but that they start to lose out on those savings opportunities when they book too far in advance and/or experience high levels of ticket exchanges.
The CWT study follows success stories at many companies that have applied advance-purchase policies to realize savings. Booking early generally allows travel purchasers to select from a wider choice of ticket types and help to ensure availability in the high-demand environment.
Oraclein January introduced a seven-day advance-purchase policy which by this summer had helped cut average ticket prices by 15 percent. Hewlett-Packardtracks advance purchasing as part of travel behavior benchmarking. Dominion Resourcesapplied a Six Sigma analysis and found a 20-day threshold before which the financial advantages of advance purchases were lost.
According to the CWT report, companies first should examine available fares on their key routes, traveler booking behavior, how often travelers exchange tickets, how much those exchanges cost and whether that cost outweighs advance-purchase savings. The study of CWT's client base found that exchange-fee costs do not nullify advance-purchase savings.
Advance Purchase Savings | | $99 | | Average advance purchase savings | | -$87 | | Exchange fee loss |
| | $12Average aggregate savings |
Note: Exchange fee loss represents fees for exchanging tickets and any differences in price, spread across all tickets bought in advance
Source: CWT Travel Management Institute study of Carlson Wagonlit Travel's 100 largest North America clients |
Clients included in the study on average exchanged 12.9 percent of advance-purchase tickets. Using the average 66 percent compliance to seven-day advance booking policies achieved by those clients, CWT said "companies can still make net savings when they exchange up to 76 percent of advance-purchase tickets and deduct the associated costs from upfront savings."
"You have to understand the threshold of exchange percentage so you are not actually spending more money through advance purchase than if you waited until the last minute and were 100 percent sure" of your plans, said Dale Eastlund, air solutions project leader for the Carlson Wagonlit Travel Solutions Group.
Though the report suggested that "the likelihood of companies incurring a loss from advance booking is slim," CWT Solutions Group's Joe Blankrush noted certain circumstances where "we saw levels of exchange that were higher or more prevalent," including among sales professionals specifically and consulting companies generally.
In the other direction, CWT determined that booking more than four or five months out--when "airlines typically only offer medium inventory classes, not the lowest fares"--can offer diminishing returns. For example, the report described how one CWT client "paid $22 more per segment by booking more than four months in advance. ... Nevertheless, the average segment price was still $137 lower than for bookings made less than a week in advance."
Meanwhile, Eastlund said differences in airline ticket exchange policies--variations in exchange fees and whether they permit name changes, for example--has "minimal impact" on purchasing decisions. "It becomes more of a case of, 'We want you to book lowest fare at the time you make reservation, and we'll deal with change fees after the fact,' " he explained. Eastlund also noted that airlines are less willing to offer "waivers and favors" for such things as ticket exchanges, and that buyers during negotiations with airlines prioritize maximum point-of-sale discounts over ticket exchange leeway.
To foster compliance to advance purchase policies, CWT recommended communication to employees, incentives for in-policy bookings, sanctions for out-of-policy ones and requirements for employees to request pre-trip approval "within 48 hours of making a decision to travel."
But travel managers also must recognize that there will always be some last-minute travel. "There is a balancing act that has to take place as far as understanding their business needs versus trying to achieve savings," Eastlund said.
Other aspects to consider:
- While airline pricing typically starts to become cheaper at seven to 14 days in advance, "in cases where you are working with groups and meetings, there may be opportunities to incentivize them to book maybe 21 days in advance," Eastlund said.
- Advance-purchase policies are "beginning to get more traction" in regions outside North America, particularly in Europe, he explained. They can be important in markets where cheaper inventory is limited and available only in advance. Carlson Wagonlit Travel previously noted the need for advance purchases in Asia-Pacific, where travelers oftentimes have difficulty securing seats.
- Companies may benchmark their advance purchasing both internally and externally. "Best-in-class companies," Eastlund said, will see how they stack up not only against peers, but also companies in other industries.