Corporate Travel e-Publication

Managing Travel – “What a CFO/CPO

Should Know” (Revised 2.28.19)

Page  of

Introduction

Travel is generally a top “3” indirect expense category by volume and a challenging expense to manage.  

Inherent Procurement Challenges

Shorter Sourcing Cycles: Long term in the travel industry is 3 – 6 months. The best pricing and contractual terms negotiated today can quickly become outdated within 2 - 5 months, requiring a continuous sourcing - negotiation approach to remain competitive with your Air, Hotel, Car Rental and TMC supplier agreements.

Standard RFP Practices: RFP templates, scorecards and standard proposal/vendor processes commonly used for other indirect categories seldom align to travel.  Requires customized RFP and vendor processes.

Sourcing Specialists:  Travel is a unique category requiring procurement professionals with deep industry knowledge and recent category experience to negotiate the best buyer-centric agreements.

Hidden Revenue Streams:  Although historical base commission payments to travel agencies or TMCs have declined, there’s still an active third-party revenue stream influencing service and trip costs to unsuspecting buyers.

Ancillary Charges: Airline, Hotel and Car Rentals companies are assessing more cancellation or change penalties and an endless list of new add-on or ancillary fees (preferred seating, advance boarding, WIFI, upgrades, baggage, etc.). These fees increase historical base trip costs by 15% – 30%+, while also allowing these same travel entities the ability to increase pricing at any time.

It’s Not Just About Managing or Reducing Costs

Traveler/Employee Safety:  Individual traveler instances and threats are on the rise requiring new layers of services and costs to protect employees, including additional corporate liability.

Data Privacy: Travel requires storing and sharing large volumes of personal employee and corporate information with third parties (TMCs, Airlines, Hotels, Car Rental, etc.). Protecting and securing this information is a growing responsibility and liability. 

Cyber Security Threats:  Travel generally involves using public WiFi and accessing potentially unsecured sites or mobile apps by your employees, which creates greater cyber threats to your company.

Employee Burnout:  Traveler burnout is on the rise, resulting in production, recruitment/retention challenges.

Regulatory Lapses: Travel creates increased exposure to insurance gaps or other regulatory and compliance lapses locally, nationally and internationally (Tax, Labor Laws, GDPR, Industry specific regulations, etc.).

Corporate Strategy – Managing Travel

For companies with more than twenty travelers and especially companies with 100’s to 1,000’s of travelers, the only proven way to control costs and mitigate risks is to deploy a “Managed Travel Program” strategy.

There are “Six” linked components to a successful Managed Travel Program, with each requiring a dedicated strategy.

1 Consolidated Reservation Platform:  Formal processes to safely and securely book compliant or accountable travel 24/7/365 (Online, Mobile and Agent Assisted). To include; access to full market content (Travel Content), including company negotiated supplier discounts, and other internet/web rates; Ongoing air and hotel rate monitoring processes to continuously search for lower rates after original booking; Front-to-end administrative processes to managed cancellations or changes; Traveler tracking and trip disruption support processes  for weather, security, mechanical  or other delays; Front to end processes to track and apply unused ticket credits, and; Integration of internal corporate payment and expense systems or processes.

   *Note: All above typically sourced or support through a designated company TMC.

2 Corporate Travel Policy(s): Formal guidelines on who, when and how to book and secure travel with separate guidelines on approved and non-approved expenses.  May require separate policy/guidelines for varying user groups (Standard Employee Travel, Non-Employee Travel and Executive Travel) and trip category (Internal vs. External Travel and Groups or Meeting Travel). Requires continuous refreshing process to stay current with internal and external changes.

3 Corporate Payment Solution: Requires dedicated payment vehicles and processes to secure all travel.  Best practice is deployment of a portfolio of corporate credit cards (Central, Procurement, Individual and Virtual Cards).  Requires integration with other items above and below.

4 Formal Procurement Process: Sourcing strategy to negotiate buyer-centric agreements with Airline, Hotel, Car Rental and TMC entities. Best practice is to implement 360-Continuous Sourcing Process.

5 T&E Expense Process: Enterprise T&E expense system, fully integrated with policy and payment strategies above.

6 Risk Mitigation: Formal processes to support and mitigate Traveler Safety/Security events, Insurance and other Regulatory Lapses, Data & Cyber Security Breaches (Personal and Company Data) and other Financial Controls or compliance requirements.

Notes: Strategy assumes a front-to-end, integrated reporting processes of data from your TMC, Credit Card and Expense System. Key data is required from all three sources to effectively manage and leverage total travel spend.

Timeline & ROI of Deploying or Supporting Managed Travel Program

Timeline:  The timeline to establish a proper plan and then fully deploy all six strategies above for a new or first-time managed travel program is 6 – 12+ months for companies supporting a national travel program and 12 – 20+ months for global programs. Your actual timeline is largely contingent on current status, number of country locations in scope and then your ability to allocate or source qualified project resources to support.

Resource Requirements:  A Managed program will require a dedicated resource responsible for each of the strategies above, with ability to scale up during the planning or deployment phases. The challenge for most companies is it requires resources from multiple departments to fully support who likely report to different individuals with mis-aligned agendas or levels of interest (See below).

  1. Travel Category Resource:  Commonly referred to as Corporate Travel Manager. This is your internal travel industry expert responsible for day-to-day operational issues (Traveler booking and service issues, overseeing performance of TMC or internal travel department, assessing new corporate travel solutions, vendors and practices for potential application to your program and advisory support to finance for developing or integrating policies, credit card payment processes and procurement for supplier/vendor negotiations.  Historically this role reported to Finance, or Human Resources.  Today this resource commonly resides or reports through procurement or other departments (IT, Legal, Corp. Services).

  1. Financial Resource:  Largely responsible for travel policy or at least its expense guidelines, T&E expense reporting processes, Corporate Payment processes (Card or other) and other AP functions associated with travel suppliers and vendors.  Reports up through Finance, but travel credits cards are commonly controlled or shared responsibility with Treasury department.

  1. Procurement Resource:  Largely responsible to help support travel supplier/vendor negotiations and RFP processes.

  1. IT Resources: Largely responsible to approve and then help setup and/or maintain internal or external systems supporting travel, including traveler profile databases, online booking and expense systems, single sign on to third party solutions, data privacy requirements, etc.

  1. Legal/Risk Management:  Largely responsible to help support travel supplier/vendor agreements, internal policy and other regulatory or compliance requirements, traveler safety and security and mitigating other corporate risks associated with travel.

Staffing/Sourcing Program Resources. Another challenge to staffing resources to support your managed travel program is unless your annual travel spend is >$10M, it’s a fluctuating part time or seasonal role for many department roles above making it difficult to consistently allocate the right levels or qualified resources. Best practice is to assign one lead resource, typically the lead Travel Category Manager, who is then supported by a team of stakeholders with defined roles from the other departments.  For reporting channels, it’s best to assign the fewest number of Sr. EVP owners for travel to provide clear ownership of all managed travel program activities within the organization. (e.g., CFO, CAO, CPO, other EVPs).

If your travel volume warrants, you can insource all program FTEs above.  However, for many companies a larger ROI can be obtained by partially or fully outsourcing the lead Travel Manager/Category and Procurement roles to independent third parties.

Cost:  The cost to support a Managed Travel Program will typically range between 4% - 7% of your Total Travel Spend (Sum of air, rail, hotel and ground transportation expenses). See cost categories below.

Category

Cost/Total Travel Spend

Note

TMC

1% - 4%

Varies based on service package with your TMC and percentage of online bookings.

Other Vendor Costs

0.25% - 2%

Internal direct travel vendor or systems costs not sourced through TMC (Expense Tools, Booking Tools, Safety, Security, other).

Internal FTE

0.25% - 2%

Internal costs of designated FTE resources supporting activity.  Should include time and costs associated with allocated resources.  Very difficult to measure for many companies.

Outsource Support

0.25% - 1.5%

Cost for third party contractors or resources if you outsource some FTE allocations or roles to third parties.

Note:  a small portion of this cost can be offset with backend rebates from credit card vendors if you properly deploy a consolidated corporate card strategy to support the managed program. Backend rebates or incentives are also a potential from your Air, Hotel, Car Rental or other supporting suppliers/vendors, but should be pursued carefully because may result in overpaying for services upfront or unfairly creating a cost shift internally.

ROI Of Managed Program:  As referenced earlier, a properly supported managed travel program should deliver 8%-20% savings in comparable travel costs.  Based on a 4% - 7% cost basis, a 2 – 5:1 ROI is easily achievable and should warrant pursuing by most companies. This ROI does not factor risk mitigation and other indirect value.

Note: Savings are difficult to track and require proper setup of reporting processes during planning. Also worth noting, most savings will be cost avoidances unless you are able to reduce travel budgets and control usage on the front end.  Inflated savings are commonly reported by TMCs, so be sure to validate.

For questions on starting or improving a Managed Travel Program strategy for your organization, contact CTBR at salessupport@ctbrtravel.com

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