The MacNair Travel Leadership Blog

Controlling Your Travel Costs: Travel Management Company vs. Employee Booking

Posted by Mike MacNair on Aug 27, 2015 5:00:00 PM

controlling-travel-costs-travel-management-employee-bookingAt MacNair Travel Management, we regularly talk with our clients about the balance between keeping employees happy and costs under control. Employees like autonomy, especially when it comes to travel. The perception of more choices, supplier loyalty and personal benefit from a rewards program motivate employees to book travel on their own. As the second most controllable line item in your budget, the ability to manage travel and entertainment becomes very important. How do you control this line item and keep your employees happy?

Working with a travel management company (TMC) can give you this balance – we call it the “yin and yang” of travel management - balancing the needs of travelers with the needs of the organization by putting reasonable controls in place. To effectively do this, your business needs to first look at the barriers that stand in the way of employees using your travel management program or TMC.

It’s been our pleasure to work with a number a successful businesses and associations, including the United States Chamber of Commerce (USCOC). They came to us with this challenge: Overhaul the USCOC’s travel system in order to create efficiencies, eliminate redundancy and reduce spending. We started first by looking at what barriers existed in their organization – and these can apply to your business as well. In our experience, the following barriers prove to be the most significant.

  • Fee avoidance – “If I book through the TMC, I have to pay an extra fee, which then costs the company and/or my department more money.” Have you heard this from your business travelers? Travel management companies develop relationships with a number of different travel companies who then provide discounts for their programs. If you’re paying an extra $50 fee to book through the TMC, chances are this fare is already at a significantly reduced cost vs. the published rate online.
  • Culture of procurement – Does your business have a procurement policy in place for office supplies? My guess is you do. If you need new pencils, you complete an online form, submit the request, and the expense is billed back to your department. The same should be true for your travel procurement. We’ve found that in most businesses, an employee books his/her travel – air, hotel and car – and then submits their receipts afterward for reimbursement. This process reinforces the ability for employees to independently book travel, instead of following an effective process for procuring travel.
  • Predictive technology – Have you noticed that once you began shopping online for that new vehicle, suddenly every time you’re logged in, the pop-up ad for the new Toyota models magically appear? Predictive technology is a body of tools capable of discovering and analyzing patterns in data so that past behavior can be used to forecast likely future behavior. If your employees have used United Airlines to book the majority of their vacations, this pop-up will appear as soon as they go online, specifically pushing them to book a trip through their site again and again. And why wouldn’t they? It’s easy and it’s right there in front of them.

After assessing the barriers, ask yourself what value - specific to controlling costs - can a travel management company bring to your organization? In our years of experience, that value answer is clear: a 10-20% reduction to the travel and expense line item in your business’ budget. The following four key components provided by a TMC drive savings in your organization.cost-control-travel-management-employee-booking

1. Leverage deals. Most TMC’s have worked hard to develop relationships with preferred travel suppliers. This should include car rental agencies, an airline rewards program for the company, a contractual discount, or hotel agreements with your most frequented properties. Through automated tools, your TMC will track what you spend, using the data to ensure you have the best deals with the right suppliers. Effectively communicating this key piece of information to your employees will reduce what we call the “travel anarchy” of employee booking in your organization.

2. Expand considerations. This speaks directly to those employees who feel they are getting a “better option” from their preferred suppliers outside of your travel program, and are actively targeted by predictive technology. Three things should be of concern: (1) Not every site delivers all potential suppliers and fares; (2) Some are set to be wildly biased to their preferred suppliers; (3) Some sites are wildly biased to the traveler (using predictive technology) making it hard for them to assess all possibilities. Yikes. Make sure you direct travelers to an unbiased tool, or a tool that is biased to the company’s preferred suppliers. Without reasonable controls, this alone will drive up costs. 

3. Enforce policy. Most organizations direct their travelers to fly coach, except in a few extraordinary circumstances. Do you dictate which coach fare? For example, should the traveler take the full coach ticket to LA for $1,200 or the same basic routing for $285? Policies so often fall short in defining monetary thresholds that indicate when travelers should consider other options. An alternate airport or departure time, a connection, or the traveler’s non-preferred airline may need to be considered. Your culture should respect convenience but within well-defined, reasonable limits.

4. Pre-trip authorization. When someone wants a fare that is outside the value as defined in your companies’ travel policy, have a system in place to say yes or no. A TMC provides the automation and personal attention to be sure the right data is available to make the right decision.

Take the time to analyze the barriers that exist in your organization regarding travel and costs. Ask your travel management company to assess and apply these four basic components that will control costs in your organization. Our experts can reduce this line item by 10-20%. The US Chamber of Commerce proves that it works. The result of our time with them? They saved nearly a quarter million dollars in travel. Their average ticket price decreased from $591 to $459, and preferred supplier agreements were established and maximized.

Working with a travel management company proved to be the answer to controlling costs in their organization and can be for your organization as well. By finding the balance between what’s best for your business and the needs of your employees, you and your business will be successful in controlling costs.