Another route

Another route

Travel remains a necessity for many companies, and although costs are being cut, quality can still be maintained.

The days of executives bedding down in plush hotels after a few hours of swilling champagne on the corporate jet have been banished from civilised corporate behaviour. At independent travel manager Goldman Travel Corporation, which handles company travel accounts, general manager David Goldman says his 25 consultants find that people are spending less. "People are thinking twice about trips." As the global crisis deepens, companies are cutting back on costs, downgrading hotels and booking best-of-day airfares in economy seats on budget carriers. "Everyone is looking at costs, even the clients of our clients," says Peter Hosper, managing director of global group The Travel Authority. He cites law firms putting their travel bills under more scrutiny. "A law firm would [once] on-charge anything and everything and would not [reduce] that cost because it didn't interest them," he says. "People are now under more scrutiny and are taking a much deeper interest."

Change old habits

Buying cheaper flights, encouraging executives to use public transport and booking budget hotel rooms are some of the obvious ways of reducing corporate travel costs. However, according to experts, probably one of the biggest changes chief financial officers could make would be to employ a travel manager. At first it sounds counter-intuitive - why would any finance head look to increase costs at a time when revenues are falling? But travel managers argue they could ensure that sales teams stay on the road and, crucially, in front of clients, at reduced cost.

Corporate travel specialist Adrian Miller, managing director of Aerius Travel Company, recommends companies hire a manager to keep an eye on industry offers, which change daily. "We have access to [special offers],'' he says, adding that despite the myriad budget websites, companies will not find that information online. "The online booking solution will give you only what it wants you to see."

Miller says the big cost is in the product. "There is not much the customer can squeeze the travel manager for. It has to come out of the cost of the hotel or the airfare." The other thing a manager can do is help to impose some discipline on travel costs. These often spiral out of control because senior executives want to travel as they see fit - not as the company sees fit.

Hosper is now teaching his clients, including cosmetics and finance company leaders in Sydney and oil and gas businesses in Perth, how to ensure staff and executives cut costs. "In the old days, executives would miss the 6am flight and go on the 7am flight and not be penalised," he says. "Whereas now the pressure is on to make that 6am flight because if they don't it will be a full loss of the airfare.

Over the past seven or eight months, the acceptance and adoption of this policy [among our clients] has been very high. It comes down to disciplining the client."

Executives are no longer allowed to pick and choose flights and remain uncommitted up to two hours before take-off - the blowtorch is being applied. "The finance sector and professional services companies would always book fully flexible fares because often they could on-charge them to clients. But question marks have been raised and policies have been changed."

Plan, switch and save

Costs may be coming under the microscope, but senior executive travel is still considered a necessity. And high-end clients are not doing it too tough at present, Mary Rossi Travel managing director Claudia Rossi Hudson says. She sees more executives downgrading from first class to business class than from business to economy. "Senior executives are unlikely to subject themselves to the rigours of economy-class travel if they need to be productive at the other end as soon as they arrive."

Rossi Hudson suggests booking well ahead to take advantage of early-bird discounts. "Remain flexible and ... in contact with your travel agent, so that you can get executives to Europe for $4000 less than you would normally pay. But remember the [executive] will usually have a pretty narrow time frame in which to travel."

But while those executives remain in the air they might no longer be travelling with their favourite airline. Goldman says many of his corporate clients are switching airlines to reduce costs. "Virgin Blue are very competitive and aggressive in the domestic market," he says.

"We have 35 to 40 per cent of our corporates using [them], switching from Qantas. This is purely because Virgin Blue introduced a cheaper fare."

Agents: assets or liabilities?

The big advantage of using a travel agent is access to their knowledge, advice and deals. Spencer Travel manages arrangements for small- to medium-sized companies with accounts ranging from $10,000 to$1.6 million a year.

"It comes back to knowing what they need and what they want," says managing director Penny Spencer, who has worked in corporate travel for 25 years.

"If you know your clients you can generally tailor to them. They might want the cheapest fare to London but they don't want five stops on the way. It's [about] being creative, knowing our product, having a relationship with the airlines so we can get the best deals and buy from the right suppliers."

Spencer manages accounts for the entertainment industry, which is usually pedantic about its travel requirements. "A lot of them prefer to stay in serviced apartments ... most are film crew and they want to be able to do their washing."

She says the focus is on trying to cut costs without cutting quality.

"We are not getting clients saying, 'don't book me into a five-star hotel'. We are getting clients saying, what deals do the five-star hotels have. Because we are part of a group called Virtuoso, which is a high-end leisure network based in the United States, we get a lot of value-added benefits through the hotels, such as free limo transfers, free breakfasts or a massage. They are still paying the same rate."

One part of containing travel costs, however, might be switching to a new agent. Goldman claims to have won three prestigious accounts (which he won't name) since November.

"It's been the weirdest thing," he says. "Even though there has obviously been a downturn, we are not cutting staff to four days, and we have been successful in winning business. Basically, our global buying power has helped us ... we have endorsed and enforce travel policy compliance within companies."

He says one of the reasons the company has just picked up accounts is because it is honest with clients about its commissions. "We manage all hotel, air and car bookings at a net level and add our fee. In the old days it was a smoke-and-mirrors commission basis."

That transparency will be key for travel agents, as buyers look closely for value for money. Goldman says reporting activities for the group, showing clients how the company is saving them money, have never been so intense. "Clients are asking us what are we doing to help them save money. They want to know our business continuity plans."

Travel tips

  • Rethink old corporate travel contracts. Companies can get bogged down in existing contracts and miss out on new bargain solutions.
  • Apply common sense. Companies also get trapped in policies that leave little room for manoeuvre. "Often there is potentially a property closer to the office for $30 less a night but because it's not on the list the travel manager can't book it, " Hosper says.
  • Employ and empower the travel manager. Their job is to plan to reduce costs - let them advise you.
  • Rethink hotel standards. Hosper believes four-and-a-half-star properties will be the big winners from the downturn because they offer good value for money. "They will suddenly find themselves in very high demand," he says. "There is very little difference in the quality between four-and-a-half-star and five-star properties."
  • Stay less time. Rossi Hudson says: "A significant part of the expense of the trip is time on the ground, not in the air."
  • Does loyalty bring rewards? This is contentious. Rossi Hudson suggests business executives discard their old loyalties to particular hotels and shop around. "They might find it's worth looking at other hotels for better rates than their favourite one. But a deal that has to be used within 10 days in Europe is usually not enough to convince that executive that he or she needs to get on the plane to take advantage of it." But Jones Lang LaSalle Hotels Asia-Pacific chief executive David Gibson says "loyalty will extract the best rates. For a volume client a negotiated corporate rate will always do better ...and take the train to the airport instead of the car."

This information was part of an article published in BRW.

Sidebar: Clipped wings

In Difficult economic times, one of the first areas to come under the knife is corporate travel and expenses. Senior executives looking at falling revenues want to take the scalpel to something that is easy to attack and so travel budgets get the snip.

This economic downturn will be no different as companies seek to save their pennies by clamping down on first-class travel and five-star hotels. Additionally, two other factors are coming into play - one is the current desire to demonstrate a certain austerity; and the other is the environmental pressure to cut down on carbon-heavy flights.

With all this on the agenda, it will be hard for business executives to defend their travel bill, but a company ignores the need for face-to-face communication at its peril. While technology may have got all whiz-bang - with futuristic telepresence technology making it seem as if you are in the same room as a client 200 kilometres away - nothing can replace the experience of real live contact.

Ideally, it would be better to consider more governance rather than blanket cuts. In many companies there are too many buying points for travel services, with corporations failing to aggregate their buying power to get a better result. Simply by not allowing executives to book flexible flights a small fortune could be saved, while still allowing those that need to press the flesh to be out there garnering sales. Only after governance has been put in place should a company decide where the travel cuts need to be. The thing about cost-cutting is that it needs to be a constant, not a once- in-a-decade reaction to a falling market.

And, naturally, don't discount technology. It's worth considering reallocating the money saved into better communication devices that will keep the travel budget in line for years to come.

Fairfax Business Media

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