Save money and see the world

• Josh Mehlman
• 24 September 2008
• Page 1 of 2 : single page

This year is not a good time for business travel.

Sky-high fuel prices have driven up airfares and transport costs. Nearly everyone is feeling the squeeze and business-related travel is one of the luxuries many companies are looking to reduce or learn to live without.

On the other hand, travel is often a critical part of business growth. So how can you afford to send your people out into the world, spending valuable face-to-face time with customers or potential partners and giving your business a top-line boost? Here are six steps to reining in your travel costs.

Look at the whole picture

The first step to controlling travel costs is looking at the company’s entire travel expenditure.

“Everyone always concentrates on the airline, but you also need to think about the lodging, meal allowances and per-diem allowances,” says Justin Morgan, Australia general manager at American Express Travel. “There’s
no point scrimping to get a $200 flight if you pay $500 a night for the hotel.

“You need to look at ways to control the total travel and entertainment spending. Even minor elements such as airport parking or running a small meeting in the hotel conference centre can add up. Look at the overall expense base and try to make it as efficient as possible.”

Shop around…

The travel industry is one of the stand-out successes of internet retailing. Online bookings and price comparison sites have put power in the hands of customers. For relatively infrequent travellers, it is easy to go online and hunt down the best price for airline tickets, accommodation and car rental.

“With online comparison sites you can compare hundreds of hotels on the one screen and know you’re getting a great rate,” says Angie Bohlmann from lastminute.com.au. “With flights, you can compare every single airline. Even if you want to fly to Melbourne one way on Qantas and return on Virgin Blue, it takes you five minues.”

Last-minute deals and restricted fares can offer significant savings for the frugal business traveller.

“Because you can book different tickets or classes of travel in different directions, think about having your outbound flight as a restricted ticket, but keeping your inbound flight with more flexibility,” says Morgan.

“This is because you will always want to leave at a particular time to get to a meeting on time, but it might run over or finish early and you want the most flexibility in getting back home.”

…but watch out for the hidden costs

However, this approach brings with it a range of hidden costs, from the time taken to hunt down the best fares, to the penalties for changing or cancelling restricted fares and last-minute deals.

“You can certainly get cheaper fares but you need to look at the time spent finding them as well,” says Morgan. “With last-minute and restricted deals, make sure you look into the terms and conditions of the sale and you are comfortable with those before you sign up.

“If you work with a travel management company, they can communicate those conditions to you upfront.”

Use a travel agent

Despite the speed and convenience of do-it-yourself online booking, most of the experts Nett spoke to recommended using a travel management company. One major reason: travel agents have economies of scale and buying power that small businesses generally don’t.

“We have global relationships with suppliers that small businesses can take advantage of to access discounts and preferential treatment,” says Morgan. “We bring a lot of negotiation power to the table and we go to suppliers on behalf of our clients.”

However, not all travel agents are created equal, warns Hassan Nasser, strategic procurement manager for travel at Expense Reduction Analysts.

“It makes a big difference who your travel management company is – a retail or corporate agent,” he says. “A lot of the time, small businesses have retail agents acting on their behalf, who don’t have the corporate experience, the technology or the buying power.”

And there are those who, for reasons which should be obvious, don’t see the need for a travel agent at all.

“Why would you need a travel agent when you can jump online and book it yourself with minimal fees involved?” asks Bohlmann. “We also have relationships with suppliers and have worked to negotiate discounts with our partners. Small businesses don’t need to negotiate the best price, because we already have.”

Enforce a travel policy

Most companies allow staff to book their own travel on company credit cards or reimburse them for travel expenses. This is the most expensive and hard-to-control way of going about it.

“If people book their own travel, you lose control and compliance,” says Nasser. “When people make their own bookings, they sometimes make bookings based on emotional factors or personal wants that aren’t necessities, and that cost extra. For example, people might book on Qantas because they get the frequent flyer points, even if Virgin Blue has a better price.

“It can cost a company 20–30% of its travel budget, because basically staff are not following what the company policy should be.”

The solution? Create a travel policy, communicate it to staff, stick to it, and ensure all travel bookings go through approved channels – either a travel agent or a person within the company.

“We see many companies, it doesn’t matter what size they are, putting greater emphasis on policy and promoting compliance,” says Morgan. “State up front what principles you’re going to put in place for travel, such as always flying economy class for domestic travel or getting approval for overseas trips. Make sure everyone knows what the rules are and you can get a lot more tactical in managing your spend.”

Nasser thinks this approach is most suitable for small businesses with large travel budgets.

“If they’re only spending $10,000 a year, a lot of these strategies won’t work,” says Nasser. “But even a company that has 4–6 people who are constantly travelling, it would help them as well.”

Stay home

Many technology and telecommunications vendors advocate staying in the office and using online or video conferencing instead.

High-tech videoconferencing and telepresence systems with high-bandwidth connections, big screens and clever cameras can make long-distance meetings almost indistinguishable from the real thing. IT services provider Dimension Data claims these systems can save businesses as much as 10% of their overall costs and improve productivity at the same time. The firm surveyed IT managers in large organisations and found the majority said unified communications systems were a key element in supporting their companies’ growth goals.