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Business Travel Trends and Forecasts San Francisco
Hilton Chicago Hotel - November 20, 2019
Convene, 237 Park Avenue, NYC - November 22, 2019
Ask a longtime travel buyer about the relationship between the travel and finance departments, and many will think back to the 1990s demise of base airline commissions, which transformed corporate travel from a revenue generator to a cost center and, in effect, to a commodity subject to the same cost scrutiny as office supplies and other durable goods.
They might also call to memory the Great Recession of 2008, when travel took center stage as a primary scapegoat of wasteful spending in tough economic times. "Businesses worldwide responded quickly with sweeping cuts and drastic policies targeting T&E budgets," recalled a 2019 Harvard Business Review report, Safeguarding Travel Culture Through Data-Driven Insights. "Business travel slowed, client dinners were de-emphasized and customer outings diminished."
Since those days, however, changes have been brewing. Some of that is due to increased efforts for collaboration and awareness from the travel industry. At the same time, the finance field is undergoing its own shift, which could mean a less antagonistic relationship between travel and finance when the next recession inevitably arrives.
Priorities Beyond Savings
Cost isn't always the first word out of finance executives' mouths when asked about their biggest travel program concerns. "Safety and compliance are the two main areas," said Brett Cragun, finance manager for The Church of Jesus Christ of Latter-day Saints, which is among the BTN Corporate Travel 100 largest programs in terms of U.S.-booked air volume. "When you look from a finance perspective, we want to ensure people are traveling within policy and within the guidelines that are set for using approved vendors and going through our system so they can be booked through our contracts."
Steve Isom—VP of finance at software firm Flywheel, which has a much smaller travel program and about 215 total employees—said experience is a bigger focus than savings. "I want travel to be as good of an experience for the employee as possible. We spend quite a bit of money to fly all of these people into town for all company events, and it's a major expense, so we want to make sure that we are getting the credit for what we are doing."
Before Isom became more directly involved with travel, he saw the goal more as "keeping expenses as low as possible." He also thought incentivizing employees by passing some savings back—if they take cheaper, indirect flights, for example—was a good path. Over time, he thought more about overall service to employees. A company wouldn't issue employees the cheapest available laptops or monitors, for example, but rather models that fulfill their needs.
"You realize it's leading to a bad experience for employees. If you have someone fly in from Spain and tell them they need to do a six-hour layover at Heathrow to save $400 rather than get them to Omaha quicker so they can start fighting the jet lag, it's harder for them to be able to do the work that comes up. You have to think about it more strategically than just cost."
Ann Dery, global corporate travel and meetings operations and procurement manager for S&P Global, has seen an "evolution" in her experience working with finance in recent years. Dery herself reports to procurement, which rolls up into finance. At S&P Global, finance does not "put a tremendous amount of emphasis on just savings." Instead, it looks to balance service-delivery quality and savings, she said. "Finance now understands that travel is not just your typical commodity," Dery said. "It's really more so a service, and that has to be based on something beyond the transaction fee."
That's a natural progression as programs get more mature, she said. In the first few years after a program is introduced, it can report tremendous savings, but those savings will diminish over time. At the same time, buyers who constantly battle with their suppliers to achieve more savings risk harming their relationships. Pricing for travel, meanwhile, is becoming increasingly dynamic, which makes savings calculations even more difficult. "I don't think most large companies are focusing on [savings] these days, and if they are, they are missing the point of supplier relationship management," Dery said.
Opportunities for Collaboration
Even when savings is not driving the travel conversation, finance departments can be hands-on and frequently want direct access to travel data.
Cragun said one of his finance team members specializes in data and the business intelligence tools the church uses. They work together to determine what metrics they want to see. The team is most interested in trends and external benchmarks to see how the church compares with other organizations, he said.
In recent years, the church's travel team developed a metric that factors the quality of an airline's service into cost, showing what the team calls "quality cost per mile," which is more meaningful than the standard cost per mile. As with any initiative at the church, the finance team played a part of that development, global travel manager Nanette Sorensen said. "The finance team is very involved in being a part of our processes within travel. We are counseling together a lot on process improvement. If Brett's team sees a trend, we come together as a team to see how we can solve it, and any strategy is a shared strategy."
In that collaboration, finance is not so much a gatekeeper, telling the travel team what it cannot do, she said. Rather, it's a counselor, showing the right way of doing things within the organization. Travel and finance recently collaborated to reduce debit memos, Cragun said. One of the finance team members has a background as a travel agent, which has been integral, he said.
Finance now understands that travel is not just your typical commodity. It's really more so a service, and that has to be based on something beyond the transaction fee."
Dery said S&P uses PredictX to aggregate and visualize T&E data, and the finance manager in each business division has a license to access T&E data and customize dashboards and reports. S&P is working to implement a component called "the story," an automated, annotated T&E overview, visually similar to a company's annual report, that can be viewed on any mobile device. "It will give high-level, sleek visuals of T&E spend and volume, and eventually, we'd like to take that further and add in some predictive analytics and tie T&E spend back to the budget," she said. "We are trying to influence finance and other key decision makers within our company by creating these types of easily accessible dashboards of T&E metrics."
Dery's travel team also recently collaborated with finance to automate policy compliance controls using the PredictX tool, an area she'd identified where robotics could replace menial, repetitive tasks or just tasks the travel team didn't have the bandwidth to tackle. Finance helped the travel team automate alerts to show travelers when they book or expense something out of policy.
Isom, meanwhile, found himself directly involved in a travel initiative as he helped to implement travel management app Lola, which integrates with Flywheel's expense tool, Expensify. The travel program previously lived in the company's "employee experience" department, and a manager in that department had reached out to Isom's finance department for help. It was his first foray into corporate travel management, and he now oversees the travel program.
Implementing Lola has had a direct benefit on finance, as well as on the travelers, he said, particularly because Lola focuses on employee experience over cost. "Let's say you roll out a travel tool that has super high leakage, which makes it hard for me and my team to accurately account what the total cost was for a given event," Isom said. "If I can get a really easy-to-use tool that has high adoption, allows people to self-book and provides white-glove support, there's super low leakage and on the finance side, I can see how much an event costs and get perspective going forward."
Will It Last?
This detente between finance and travel owes some to the economic prosperity of the past several years. Economists tend to agree, however, that a recession is not only inevitable but probably overdue. When that happens, will this new perspective by financial executives give way to a return to austerity?
Not necessarily, Isom said. In his participation with Financial Executives International, an organization for senior-level financial executives for companies of all sizes, he sees a larger shift. "It's about how you take the finance function out of the back office into the front office and what the finance function will look like in 2025 as opposed to what it looked like in 1985," he said, referring to what he called the "old-school" philosophy of saving money at all costs.
Even in a recession, finance departments should understand the importance of travel, according to the Harvard Business Review report. In fact, investing in travel is even more important during recessions, as those are times for companies to work closely with their customers to maintain relationships. "As talk of the next recession picks up, experts agree that businesses must act more strategically," according to the paper. "In place of blanket cuts to T&E spending, organizations should work to identify smart cost savings, pinpoint growth opportunities and uncover new revenue streams."
Because of the relationship and understanding developed between the travel and finance teams, S&P's Dery is optimistic. "My company does promote a positive travel culture, and because of that, it does improve employee engagement and retention," Dery said. "It has a very positive effect on the way the whole company operates."