Business Travel 2009: Costs and Benefits

Posted by: Justin Bachman on September 23

The fundamental changes this year from U.S. airlines have many companies approaching their travel spending in a far more rigorous, systematic way than ever before, according to the business travel unit of American Express (AXP). Gone are the days when a business trip was largely an ad hoc, willy-nilly affair planned by an employee or office manager.

“Travel has become a boardroom issue and now oversight of travel … is being discussed in the C-suites,” says Herve Sedky, a vice president and general manager of the travel unit’s meeting solutions and global services business. The company held a conference call Tuesday to discuss recent trends and a few predictions for how 2009 may shape up. A few of the more interesting expectations:

• U.S. hotel room rates will moderate because of increasing supply
• Automatic rental car upgrades for frequent customers are being negotiated out of corporate contracts
• Companies are hoping to wring concessions from airlines on some of the new fees and fuel surcharges assessed this year. Expect this to be a hard-fought battle; it remains unclear which side will win
• Employers will likely turn to short-term rentals instead of reimbursing workers for using their own cars

AmEx delayed its formal forecast for next year because of the financial upheavals last week, buying time to evaluate how it may affect travel. Not to say, of course, that the amount of travel will necessarily decrease, even with national economic turmoil and a tight global credit environment. Downturns, as any astute manager knows well, represent an excellent time to land new customers, build market share and cultivate new revenues. What’s more, “most companies can reduce their cost by 30% without actually reducing their travel at all,” said Frank Schnur, another AmEx vice president. “There’s a tremendous amount of savings that can be achieved just by traveling smarter.”

The secret is in better coordination and clear policies that help workers understand how money saved on travel and entertainment costs can translate directly to greater resources in other areas, be it R&D, bonuses or bolstering the overall sales force. “When they have lunch they have a decision: Do I go into the new airport restaurant and have a nice sushi lunch or do I grab a sandwich and save the company $20 or $30?” Schnur said. “There are dozens of those decisions on every single business trip.” OK, let’s say a guy on a trip can save the company an easy $75. Will he?

This issue, to my mind, raises a far larger question for companies: Do traveling employees really care? Is the trip seen as a perk, a chance to live on the company dime in LA for a few days because – despite fine performance reviews – the bonuses and salary raises since 2003 have been abysmal? Or is the monthly trip to the East Coast a complete hassle, mindless in its repetition, arguably marginal in terms of return, and a burden to the employee’s family? If either scenario is the case, how much money will he or she actually worry about saving the organization? It’s easy enough to live within the company’s expenditure guidelines, but consider how much discretion remains: sushi and sake or a turkey and Swiss from Subway? Compact or midsize? One bottle of wine or three? Within those decisions lie real dollars. Schnur says managers really “need to get inside the mind” of workers who travel, so that they buy into the concept of the trip as an investment that can yield enormous benefits when the costs are managed closely.

To that end, better measurements are en route. The travel “spend” as it’s called will soon be sliced and diced a hundred ways from Sunday to wring costs out of procurement. If you think your company has done scary, awe-inspiring things in terms of driving costs out of the operation, wait until the power of technology is brought to bear on travel spending. In the not-too-distant future, Sedky predicted, the process “will be viewed as a science instead of today’s view as an art.” That is also likely to minimize the comforts even further, as the Sept. 23 New York Times’ On The Road column notes.) Part of this will come from simply better collecting and examining price data. The pricing of airplane seats, rental cars, and hotel rooms remains as slippery as a wet eel, with dozens of rates available for the exact same product and prices that shift almost constantly. It is true the Internet has empowered us through better transparency but also left us slaves to the perpetual quest for a better price.