Investment during downturn can yield big gains
It’s no secret that travel programs are under scrutiny. The second- or third-largest expense at many companies, travel for many senior executives now appears ready for pruning.
But don’t be too fast in cutting away solid branches of travel, advises Mike Janssen, president of BCD Travel’s North America division. Companies can position themselves during the economic downturn to gain significant program improvements.
The current recession has forced painful decisions upon countless companies. Nevertheless, travel managers, procurement professionals and other decision makers should embrace the opportunities arising out of challenging times, says Janssen. Despite difficult times, many companies are in a position to lay the foundation for future successes.
“Travel managers, in their desire to quickly bring savings to their organizations, need to make sure any travel program changes stay in line with long-term company strategies,” Janssen says.
The commitment to continuing to travel may bring suppliers to the table with additional discounts on top of those offered in existing contracts. By spending wisely on travel when suppliers need the volume can result in a reduction of baseline costs that could benefit a company for years down the road.
In good times, change is more difficult because few people wish to disrupt success, Janssen says. The current economic climate, however, has opened new channels to travel managers for gaining access to C-level executives, many of whom are more receptive to travel program innovation.
“Travel managers now have greater authority than ever before to really drive compliance,” Janssen says. With the added authority, however, also comes a responsibility for travel managers to continue serving as the subject matter experts upon which successful programs rely, educating employees and providing sound solutions.
“Travel is one of the first things companies focus on in tough times—especially if the CEO reads in the newspaper that air fares are down 40 percent,” says Advito vice president Bob Brindley. A CEO, or even procurement director, may not realize the company already receives a 60 percent international discount under its negotiated rate with a preferred carrier.”
Travel managers must make sure companies focus on metrics that represent true savings rather than those that only appear on the surface to matter, says Mark Williams, Advito vice president of business development. Take, for instance, average ticket price.
“Yes, it’s a metric,” says Williams, “but you can’t rely upon average ticket prices as a measure of how your company compares to its peers, because city pairs differ widely from company to company.”
Travel managers play a critical role in helping companies understand the complexities of travel that distinguish it from other resource management. The key is focusing upon underlying drivers of travel costs, says Brindley. Is it a change in overall demand, traveler behavior or market mix? One Advito client actually saw overall contract savings drop after negotiating a larger discount. How could that be? The company’s intercontinental-to-domestic trip mix changed.
Falling occupancy rates now are creating the potential for best available room rates to fall below negotiated rates. Travelers need to know they should ask if a lower rate is available.
“The year 2009 will be known as the season the hotel procurement process never ended,” says Williams. “Hotels are even coming and offering to drop rates to keep you. Traditionally, by December the negotiating season is over. Now negotiations are ongoing even though most programs ended months ago.”
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This entry was posted on Thursday, April 16th, 2009 at 1:14 pm and is filed under Corporate Travel. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
