Travel and expense management (TEM) represents the second largest controllable expense for most mid-market and larger businesses. Given the size of the expense and the consistent desire to control and reduce costs, it’s no surprise that travel management is among the most common services that go out to RFP.
Yet, despite the frequency of travel management RFPs, very few are developed in a manner that will actually reduce your cost structure. The costs associated with travel and expense management can be highly variant from year-to-year; with most variables totally outside the control of either your company or your travel management provider.
Think of it this way - if the economy heats up and/or your business requires more travel – your travel and expense costs are going up no matter what you do. The reverse is also true. A slower economy will make it look like you’re controlling expenses, even when you (or your provider) may not be.
Two common mistakes that are made when seeking the procurement of travel services are:
- A misguided focus on minimizing fees to lower costs. When assessing a travel management company (TMC), fees are only a portion of the cost structure. You must also assess their ability to access lower fares. Many times the best TMCs charge higher booking fees but more than make up for those fees by providing added value through cost savings.
- An narrow focus on booking travel. Another common surprise for companies is that the travel booking process is only a small piece of travel management. Additional areas of focus should include negotiating vendor agreements, travel authorizations, payment management, program support, access to data, comprehensive analytics and overall control. Each of these factors contribute to your bottom line and employee productivity.
When I work with companies to help them design travel program requests, I teach them to think in the same way they think about procurement in other areas of their business.
For example, you probably have a procurement process for office supplies. Your employees do not order their own pens and staplers. Rather, they send their request to a specific person who fills out a form and places the order. You may even have specific pens or paper that are ordered regularly. Having a process in place gives you the opportunity to negotiate with office supply vendors to get the best deals.
Travel is no different. A healthy travel program must:
- Manage complexities
- Balance competing interests
- Apply specific knowledge to unique situations
- Apply defined processes for booking travel, negotiating agreements, curating and applying effective data and driving continuous improvement
While some of the work done by a TMC may not look very different from a traditional travel agency or an online booking platform; what’s happening behind the scenes is what will really determine the success of your TEM efforts.
As you consider ways to improve the results of your travel management program, here are the first four steps you should take.
1. Your Initial Assessment
As with any successful initiative, you first need to assess your current goals. For example, if saving money is a primary objective (and it is for most organizations), then you will want to have processes for booking and authorizations, and supplier agreements in place. It is no secret that if your employees book their own travel through a consumer-facing website like Expedia.com, they are overpaying. The reason is because those sites use predictive technology to show fares based on previous purchases. In other words, if you have a traveler who prefers to fly with American Airlines, those are the first flights shown.
As you think about improving your travel process, talk with your top business travelers and find out what they like and dislike about the current travel program. That will give you some insight into what is working and what is not working. You will also want to review your current supplier agreements and processes, as well as review your company objectives to ensure they are in alignment.
In our Secrets to Travel Procurement Guide, we offer you a list of questions to ask your travel team around services and operations. Those questions range from “How easy do you find it to book travel?” to “How much money did your company lose last year in unused, nonrefundable tickets?”
One note: data is crucial for an effective assessment and, unfortunately, most mid-sized organizations don’t have the data that is necessary to drive cost, productivity and performance improvements. This is one of the reasons that using the right TMC is so important. They can provide data, as well as benchmarking to ensure your program is working effectively.
2. Streamline Your Processes with Technology
There are many technologies available to streamline your travel program. They include automated expense tools that will allow your business travelers to input their expenses while on the road and forward them on to a manager. This eliminates the need to keep up with paper receipts and reconciling them later; saving time and frustration.
Technology can also simplify booking and authorizations. There are online booking tools that can automatically show preferred suppliers and have a customizable approval process if a traveler needs to go around pre-set guidelines.
3. Leverage Your Data
Once you know information like the number of hotel nights your organization typically requires in a year, and how your travelers currently prefer to travel, then you are in a better position to negotiate rates with suppliers.
Your TMC can help you understand your options and can also use their existing network of supplier relationships to negotiate better deals for you.
4. Develop a Defined and Measurable Processes
One of my favorite sayings is that the success of your travel program is a matter of laying the proper plumbing. While the “fixtures” get all the attention (and sometimes the gold plating) it’s what’s happening behind the walls that determines how well your program operates.
This is simply another way of saying processes are crucial to the success of TEM. Outlining the processes needed for a successful travel management program would require an entire eBook. So we wrote one on the keys to effective travel and expense management that covers all the important details of this process.
These four steps will create the clarity you need to drive greater productivity, reduce costs and improve employee morale, while ensuring that you design a successful RFP. So while the four steps outlined here are not necessarily easy to do on your own, with the right travel management partner, the payoff is well worth it!