The soon-to-be-released 2004 Corporate Travel Card Benchmark Survey of more than 700 companies found that travel managers who use card data for negotiations yield an average reduction of nearly 9 percent in annual travel costs.
"The typical company with a travel budget of $50 million that used card data in vendor negotiations generated annual cost savings of $4.26 million through use of corporate travel card spending data," said the preliminary report of the findings by two university professors.
The final study, due out at the end of September, reinforces—and quantifies—best practices for managing travel expenses and forecasts approaching trends in how companies use cards to facilitate spending and gain data.
Richard Palmer, Lumpkin distinguished professor of business at Eastern Illinois University, and Mahendra Gupta, professor and senior associate dean at the Olin School of Business at St. Louis-based Washington University partnered to conduct the survey. Palmer and Gupta's study was funded by 14 commercial bankcard issuers, which, along with the National Business Travel Association, shared contact databases with the professors to tap into card-using companies.
American Express commissioned Accenture to conduct a similar survey of 110 companies released in May, yet focused only on its own client base. While the Palmer and Gupta survey is weighted more toward companies that use bank-issued cards and American Express' survey comprises exclusively its own client-base, the two surveys quantified the same amount of negotiated savings based on card data: 9 percent.
John Ohaver, vice president at travel management consulting firm Management Alternatives, said that while card data is crucial to negotiation leverage, it is among many data tools in the chest. "There are basically three kinds of data: booked, spent and expensed data," he said. "You have the booking tool, the card information and what comes through the expense reporting system. Each one of those three serves a different purpose for negotiating. From the card, you have the true total spend you have with a vendor."
American Electric Power would fall in the top quartile of companies that use card data to drive negotiations. Manager of employee expenses Steve Quincel said card data integrated into the company's expense reporting tool has resulted in a more consolidated view of travel spend. The impact was realized last year when American Electric Power witnessed a $1.6 million reduction in travel spend, which Quincel and the company attributed directly to the power of its data.
While the savings is significant for those who use card data for negotiations, there are a surprisingly large number of companies—61 percent, according to Gupta and Palmer's study—that use cards simply as a payment vehicle, largely ignoring the wealth of data they provide.
"Card data is a key to negotiations, whether it be T&E or commodities," said Lorraine Rostanzo, W.R. Grace & Co. director of global travel and support services, who was among those surveyed for American Express' study and found its program to be among the best in class.
Palmer and Gupta's preliminary study demonstrates several practices that the most efficient card programs shared: mandated cards, senior management support, trained cardholders and, of course, negotiations based on card data. These companies also were more likely to automate processes, using such procedures as electronic expense reports and direct deposits in lieu of paper-based alternatives.
Companies following these guidelines achieved more savings in both administrative costs and vendor negotiations than others, the study found.
The survey found that since "best practice" organizations were more likely to use cards for expenses, they had a higher percentage of cardholders, a higher average of per-month card transactions and a higher monthly spend per card—cutting down on leakage and leaving travel managers with additional data.
Although those exhibiting best practices used the card more frequently for more expenses, employees still are using cash or personal credit cards for 23 percent of travel spending. Reasons range from the lure of personal card reward programs or merchants that have yet to accept cards.
Meanwhile, the majority of those surveyed, 84 percent, said they expect spending on payment cards to rise in approaching years. The average volume on corporate travel card programs is expected to grow by 19 percent in the next year, 35 percent during the next three years and 56 percent during the next five years, the survey noted.
While these expectations seem a natural fit with the expected boost in both business travel and its associated costs, several other factors are spurring companies to put more volume on their cards. While 28 percent said the expected growth directly is attributable to increase in travel budgets, 30 percent of companies said they will increase the number of employees who are issued cards and 20 percent are expanding card spending to other non-T&E related categories
(see story).In fact, the survey shows that non-T&E transactions already are being placed on the card. As airfare, auto rentals, hotels and restaurants account for 73 percent of all spending on corporate travel cards, the other 27 percent falls in the "other" category.
One factor that bank issuers said led to more utilization of the card is the continued use of corporate card mandates. According to the survey, 12 percent of companies said plans to enact a mandate would bring further volume through payment cards.
JPMorgan Chase Commercial Payment Solutions vice president of marketing Michael Eichner has seen the effect of more companies mandating on overall corporate card volume, adding that while T&E volumes are not necessarily higher, companies have ensured that more expenses come through on the card.