An essential piece of a well-run travel program is the negotiated discounts and/or benefits that are put into place with your travel suppliers. Travel vendors can include airlines, car rental agencies, hotels and credit card companies, and discounts with these businesses can have a significant impact on your bottom line. In a 2014 study conducted by the Global Business Travel Association (GBTA), “negotiated discounts” was cited as the item that lead to the biggest business travel savings. How can your business benefit from the savings produced by these discounts? Are discounts available for small and medium-sized businesses? What systems does your business need to have in place to negotiate discounts?
Before we talk specifically about how to negotiate discounts, let’s first arm ourselves with the information that your suppliers will need to make their best offer.
The information that’s gathered from your travel and expense reporting system will be able to give your travel suppliers the data they need to give you the best discount options. Items such as most-used travel destinations, largest hotel spend, and the number of travelers each year will allow suppliers to gauge what makes the most sense for your business. It’s imperative that you have systems in place to gather this information, and that your employees who travel follow the travel and expense policies and report expenses in a timely manner to effectively utilize this data.
If you’re a small or mid-sized organization, the word “volume” shouldn’t scare you. While it’s true that larger volumes lead to larger discounts, it doesn’t preclude smaller businesses from taking advantage of volume discounts from your suppliers. When you know your businesses data points, and can effectively share them with suppliers, they in turn can offer discounts based on what their thresholds require.
When you speak with a supplier about the needs of your organization, they will want to hear about your travel policy and how it’s enforced in your organization. If they sense that your business has minimal control over how and when your business travelers are booking their travel itineraries, they will be less confident in your ability to stay within their needs for discounted travel. It’s critical that travelers understand and adhere to your business’ travel and expense policy.
Once you have these three critical pieces of information, you’re ready to start the conversation with your suppliers about discounts for your business. Here to follow when starting the negotiation.
1. Establish and work on the relationship
It almost sounds like marriage, doesn’t it?! All kidding aside, the relationship that you have with your current suppliers can make or break your ability to negotiate discounts. Have your employees been utilizing their services on a regular basis? Does your travel manager touch base with suppliers consistently to address improvements or updates to travel policy? If you’re already talking with your suppliers on a regular basis, the “ask” for a discount becomes a natural next step in your business partnership.
2. Get rid of the “I’m too small” idea
Preferred supplier programs are available to a wide range of organizations. These agreements can range from corporate affinity programs where suppliers provide benefits to smaller businesses based on volume provided to that supplier, to meeting agreements, where discounts are given when 100 or more employees are travelling to one location. Work with your suppliers to ensure that you’re implementing the most beneficial programs for your organization, no matter what the size.
3. Ask your most frequently used hotels for a discount
Most likely your travelers are consistently staying in hotels, and use specific brands based on preferences and availability in destination cities. While reaching national agreements is sometimes hard to do, you may be able to directly negotiate with hotels in your frequently travelled cities. Consider not only negotiating on discounted room rates, but other considerations like free Wi-Fi, free parking, room upgrades or easy check-out options. Also, consider partnering with fewer, preferred hotels to maximize your leverage.
4. Don’t forget about car rental agencies and credit card companies
Like hotels, car rental agencies can offer value-added benefits if you direct the majority of your business through them. As you continue to work on that relationship and your volume increases, you can then negotiate for significant discounts on rates.
One example is the Enterprise Plus program. This program is free to join and allows you to earn points towards free rental days and elite status with every rental. You also get access to rental services through National Car Rental and earn points at their North America locations.
Credit card companies are also open to negotiating options for your business account. Depending on your business’s total transaction volume, you may be able to negotiate higher credit limits, lower annual fees or frequent-flyer type discounts related to card use. Have you considered using travel/frequent flyer points toward your employee travel? This may significantly reduce your travel budget.
5. Make your travel supplier negotiation part of your overall business strategy
When you start the process of negotiating supplier benefits, most likely your vendors will supply you with a code that’s used for tracking purposes. As you monitor this process, and are able to efficiently track spending, you’ll better understand who qualifies for discounts. This information can then be used in making strategic business decisions that need to be articulated in your travel policy, with emphasis on the advantages of the discount program. Once shared, this makes it easy for your travelers to comply with the travel policy and as a result, benefit your road warriors and your business’ bottom line.
The travel and entertainment line item is the second largest controllable expense in your business’ budget. Knowing how much your company spends on travel, understanding your travel volume and your business traveler habits can help significantly when talking with travel vendors. By following the above negotiation tips, you’ll be reaping the savings benefits in no time.
If you’re interested in learning more about negotiating with travel suppliers or picking the right travel management company, please download a copy of “The Secrets of Effective Business Travel Procurement.” This step-by-step guide will help you lower your travel costs and improve control over you travel program.