If your CFO or controller asked you to provide the organization’s total travel spend over the past year, how would you get that data? The obvious (and traditional) answer is to ask for reports from your travel agency, breaking down hotel, flight and rental car costs. That should give you a pretty accurate figure, right? Well – not really. According to data from TCG Consulting, only 59% of an organization’s overall travel-related spend passes through approved corporate travel agency channels.
While agency-booked flights and hotel stays are likely the largest individual line items, ancillary fees, out-of-pocket expenses and travel booked outside approved channels – rogue spend – could bump up the actual total cost of a corporate travel program by more than 50%, versus currently accepted reporting. Whether you’re a travel manager or a CFO, this type of variance isn’t the kind of thing you want to see.
This kind of revelation presents two challenges. First, how do you begin to understand all of these additional costs? Second, how can you capture, manage and reduce them?
While higher levels of travel spend aren’t necessarily a problem (in fact they may well mean your sales team are out meeting more prospects and generating more revenues), the lack of visibility into spend across all the channels, combined with every increasing complexity within the total travel “ecosystem,” can cause unpleasant surprises. It’s also important to understand which cost centers could be optimized and potentially deliver incremental ROI.
What is the Total Cost of Ownership of Your Program?
There are many factors and costs that make up the TCO of a travel program. Of course, bookings via the agency channel form a major component. However, data show that more than 10% of spend does not leverage contracted – and discounted – air, hotel, and ground rates, and that anywhere up to a third of business travel spend is done outside of company policy.
In addition to these travel bookings, out-of-pocket expenses – such as fees, meals and taxis or ride-sharing services – also represent a significant portion of corporate travel spend. Much of these two spend categories can be captured and monitored relatively easily, by analyzing and integrating expense reports and corporate card data.
However, that still doesn’t tell the whole story. What about the workflows required to book, execute and reimburse costs? Your travel agency’s management and administration fees? Cost of treasury? Internal administration costs, such as travel and expense administration and reconciliation? Have you considered your meetings and events costs? To create a full and accurate picture of a travel program’s total cost – and of course in order to streamline these costs where possible – you need to be able to factor in every element including these often-hidden costs. Also, a hidden offset to some costs are the rebates you could earn from a well-managed card program, across all your travel and meeting spend.
Streamlining Overall Travel Program Costs
Once you’ve got your arms around the overall cost of your program (and then maybe sat down for a few minutes to recover from the shock), the next stage is to identify where the opportunities and inefficiencies exist, and how these costs can be controlled more effectively. In some areas, this can be done relatively easily. Enforcing booking channel policies can increase the percentage of spend made at negotiated rates. Channeling spend through corporate cards can increase rebates. Implementing an expense automation solution will cut down on administration time from your in-house team, improve compliance with your well-thought-out policies, shorten the time for employees to be reimbursed and/or have their corporate cards paid, and provide effective data to drill down and identify unnecessary travel expenses or significant policy violations. Many organizations’ strategic imperatives include delivery of a superior user experience. In fact, introducing a TCO initiative to control overall spend you may reduce visible costs (outside of direct air and lodging spend via your travel agency) by almost 25%, and can reduce these newly-uncovered hidden costs by a third. In addition, a TCO strategic initiative can align and support other key company strategic imperatives including risk reduction, compliance, process efficiency etc.
Assuming that reducing your travel program’s TCO spend and improving your user experience is something that could be of interest, what’s the next step? Engaging in a TCO strategic initiative can help your organization gain visibility into your entire travel program spend, and give you the insight needed to potentially save millions. Benchmarking your travel program against your peers and best-in-class organizations can also help you to ensure that you give your employees the best travel experience, without costing you the earth.
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