As the economy progresses toward recovery, we expect to see
travel demand continue to increase and air and hotel costs to increase as well.
According to the Egencia 2011 Forecast and Annual Hotel Negotiability Index,
average ticket prices for top corporate travel destinations will remain
relatively flat to slightly up, and average daily rates will be slightly up
overall in North America, Europe and the Asia/Pacific region.
2011 will bring new challenges and opportunities for travel
executives and their travelers. A major theme for 2011 is cost
avoidance—leveraging the policy, tools and negotiated agreements companies already
have in place to avoid additional costs.
Many companies during the height of the economic recession
in 2009 made major changes to their policies. As a result, many travel
executives are looking at 2011 as a year to fine-tune and fully leverage
existing policies. Cost avoidance is not about making massive policy changes
but more about digging into program details (e.g., reining in rogue travelers
and proactively communicating negotiated amenities) to achieve maximum
benefits.
Companies that don't implement cost-avoidance tactics are at
a disadvantage, as these best practices allow them to actively control their
budgets without compromising the comfort or safety of travelers. To realize
maximum cost savings, organizations need to employ a number of strategies,
including policy enforcement, supplier relationship management and travel spend
consolidation.
Policy Compliance
According to the 2011 Egencia Global Cost Avoidance Study of
348 travel executives worldwide, 95 percent view traveler compliance as important
or extremely important to the success of their travel program. Establishing and
enforcing a comprehensive corporate travel policy allows companies to reduce
annual travel spend by at least 45 percent or more, according to an August 2010
survey of 689 North American travel buyers by Egencia and the GBTA Foundation.
Proactively communicating and educating all travelers on the
importance of following corporate travel policies can have a considerable
impact on the bottom line. Travel executives should enlist executive support
and endorsement and communicate the benefits of policy compliance to all
travelers. Additionally, companies can hold a "travel day" seminar,
make the company policy easily accessible online and ensure that new updates to
the policy are regularly communicated.
Supplier Strategies
Sixty-eight percent of travel executives in the 2011 study
identified "failure to book air travel far enough in advance" as the
number-one area where travelers tend not to comply. Other identified frequently
breached areas of compliance include:
- Not booking preferred carriers or lowest logical fares (42
percent)
- Booking more expensive hotel rooms (32 percent)
- Not booking hotel rooms with preferred partners (30 percent)
To overcome these indiscretions, travel executives should
employ the following strategies:
Set a 21-30 day
advance purchase policy. The 2010 study showed that last-minute business
travelers in North American destinations saved up to 46 percent by booking
tickets in advance.
Require travelers to book
online. The more travelers book online, the lower the average ticket price.
In a 2010 study comparison of European flights, Egencia clients saved an
average of 16 percent on point-to-point tickets booked online compared to
offline purchases.
Require travelers to
book lowest logical fares. Respondents identified this as the most
effective cost-avoidance tactic, with 55 percent indicating that it is
effective or very effective.
Corporate travel executives also are increasingly focused on
negotiating additional amenities or better terms and conditions in their hotel
contracts, with 49 percent indicating that they are utilizing this tactic to
combat anticipated hotel rate increases in the coming year. Travel executives
focused most prominently on negotiating free breakfast (56 percent) in hotel
contracts, followed by free Wi-Fi (55 percent), free parking (39 percent),
last-day cancellation (36 percent) and last-room availability (24 percent).
In terms of cost avoidance, negotiating additional hotel
amenities and terms and conditions is a very effective strategy. However, it
can fall short if travelers are not aware of these benefits. The majority of
travel executives (57 percent) noted that they do not include reminders in
their travel policy communications about available hotel benefits.
This is a substantial missed opportunity, as using targeted
communications to educate travelers on the availability of these benefits can
dramatically increase their value.
Consolidate Spend
Consolidating spend with a travel management company
represents one of the most effective ways for controlling costs. Consolidation
can provide complete spend visibility, allowing organizations to effectively
manage their travel program, increase compliance and maximize negotiating power
with suppliers. Organizations can take advantage of substantial discounts and
perks negotiated by their travel management partner. For example, the Egencia
Preferred Rate program for hotel spend offers additional discounts of 10-25
percent off rack or published rates and such amenities as free Internet and
breakfast.
Air and hotel prices will continue to increase in 2011,
requiring companies to take a deeper look at their travel programs and their
travel spend. By following these simple recommendations, companies can meet the
challenge of rising prices—and even reduce their yearly corporate travel
spend—without reducing service, comfort and safety for their corporate
travelers.