Companies that spend more than $50 million annually on business travel generally apply more rigor to travel programs than smaller spenders because they have greater savings potential and can dedicate more employees to travel management and procurement. Recent research from the National Business Travel Association and Egencia reinforces that notion and also details how companies can realize substantial airfare savings--including reductions above 50 percent for international flights.
Based on an April-May survey of 689 travel managers in the United States and Canada, the largest-spending companies (more than $50 million in annual travel expenditures) are more likely to require bookings through designated travel management companies and/or online booking tools, allow business-class bookings for certain flights, address groups and meetings in travel policies and have plans to aid travelers during emergencies.
Those companies spending $50 million+ on travel (15 percent of total respondents) also generally have a higher ratio of international travel versus domestic, compared with those with smaller annual travel tabs, according to the survey, administered by TRW Travel & Expense Management consultancy.
Across all respondents, 31 percent allow business class on flights to Europe, 32 percent do so for flights to South America, 44 for flights to Asia Pacific and 41 percent for flights to India, Africa, or the Middle East. Nine percent permit premium class for flights within North America. For flights to all geographies, the largest-spending companies are more likely to authorize their travelers to fly in business class than smaller spenders, according to the report.
Overall, two-thirds of the 73 percent of companies that had updated travel policies in the past two years restricted business class air travel, according to the report. Researchers determined that "the premium charged by airlines for upgrading to first class in the U.S. and business class internationally averaged 223 percent, or $3,327, more than economy class on a basket of domestic and international airfares."
Cutting Average Airfares
Average fares discussed in the report were calculated by Egencia, which examined air pricing in global distribution systems "as close as possible to a hypothetically desired departure time of 8 a.m. on Tuesday, June 8, returning on Tuesday, June 15 at 5 p.m., with the fewest possible restrictions." Those "baseline" fares were compared with those obtained when applying various parameters, including advance purchase and/or nonrefundable tickets, flight connections, time windows (requiring cheaper flights that depart before or after a requested time) and alternate airports.
Taken together, and assuming an 80/20 split is domestic/international flying, these policy components would have reduced baseline domestic fares by 62 percent and baseline international fares by 58 percent, according to the study.
Some booking parameters can fall under the umbrella of "lowest logical fare" policies. According to the study, large organizations "are more likely to apply every criterion typically used to define the lowest logical fare at their organization than smaller ones." As defined by the report, lowest logical fare components can include:
- Nonrefundable tickets. Compared with unrestricted tickets, nonrefundables on average were 49 percent lower for flights within the United States and 56 percent lower for international flights. Nearly seven in 10 respondents encourage travelers to use nonrefundables. "The savings available by purchasing nonrefundable tickets would overwhelm the cost of airline change fees for all but the most volatile travelers," according to the authors. "It is unquestionably one of the easiest steps organizations can take to reduce travel expenses."
- Departure windows. Of the largest spenders, 87 percent cited use of departure windows, as did 81 percent of respondents overall. In both cases, it was the most cited lowest logical fare criteria listed in the survey. Of all respondents, 56 percent "required travelers to consider lower fare alternatives departing up to 120 minutes before or after their originally preferred departure time," according to the report. "Larger organizations tend to be the most aggressive in requiring travelers to consider alternatives in larger windows."
- Connections. Fifty-six percent of respondents' organizations "require travelers to accept connections when savings are available."
- Alternate airports. Twenty-two percent of respondents require travelers to use alternate airports "when it is less expensive."
Meanwhile, 96 percent of respondents "encourage" travelers to book in advance. International fares examined by researchers were 18 percent more expensive when purchased 14 days in advance instead of 21 days in advance, and 28 percent more when purchased seven days out instead of 14. On the day before departure, fares purchased were 50 percent more expensive than the 21-day advance purchase.
Booking Policies And Processes
Before some travel services are purchased at 58 percent of represented organizations, trips are submitted for pre-approval. Thirty percent submit all trips first for approval. Researchers found "surprising" the number of the largest spenders (56 percent) that had no pre-trip approval processes.
At the time of booking, six in 10 respondents' organizations require travelers to use preferred airlines when available. Bigger spenders are more likely to do so, "presumably because the total value of discount contracts is relatively large," according to the report. Similarly, 71 percent of all respondents require preferred vendors for car rentals, including 91 percent of the largest spenders. On lodging, 55 percent of all respondents said they "encourage" travelers to use preferred hotels; 27 percent "require" them.
Meanwhile, researchers deemed travel management company consolidation as "the most important best practice in travel management." According to survey results, 86 percent of all respondents require travelers to book with a designated TMC or TMCs--including 92 percent of those from organizations spending between $10 million and $50 million annually on travel and 98 percent of those spending more than $50 million.
The study noted that consolidating to a single TMC globally can be challenging, partly due to differences in agencies' resources and local expertise. Researchers also wrote that consolidating management information from multiple agencies "has become much easier."
Online booking "also is firmly established as a best practice," according to the report, as two-thirds of all respondents require travelers to book "some or all trips" through online, self-booking tools. Of those, 94 percent indicated that domestic flights must be booked through such channels versus 43 percent who said online booking tools must be used for international flights, "reflecting the reality that international trips are more likely to be complex and therefore benefit from support by a ‘live' travel agent," according to the study's authors. Online booking for hotel and car rental reservations is required at 72 percent of respondents' organizations.
Unlike many other areas of travel management, the smallest spenders (organizations with annual travel costs below $1 million) are more likely to require use of online booking tools (62 percent) than the largest spenders (41 percent of those spending between $10 million and $50 million, and 51 percent spending more than $50 million). "This may be because smaller organizations book more standard trips--like simple round-trips--that may be easier to book online versus complex itineraries," according to the report.