The MacNair Travel Leadership Blog

How Much Can be Saved by Using a Travel Management Company?

Posted by Mike MacNair on Aug 14, 2015 11:00:00 AM

How-much-can-be-saved-using-travel-management-companyBusinesses are always looking for ways to save money, but when travel is an important part of your company’s success, expenses can skyrocket. The travel and entertainment (T&E) line item not only takes a toll on your bottom line, but for employees to book their travel, reconcile credit card reports, and other travel-related follow-up takes away valuable time from their day-to-day job responsibilities.

Enter a travel management company – a great solution, right? Travel management companies (TMCs) are able to take over the responsibility of booking and managing your overal travel management process, but are they really saving you money? Are they making an impact on the bottom line? The answer is, "Yes."'

Read this whitepaper to learn how a Travel Management Company differs from a  Travel Agency by delivering the most value to your company. 

According to the Global Travel Management Association (GBTA) negotiated discounts, better policy management and more efficient processes lead to the biggest business travel savings. This information comes from a new study where nearly 200 U.S. based travel managers of companies with a global or multi-national presence were surveyed. Results of the survey show that these three key items delivered by a TMC save companies money over the long-term. In fact, using a TMC to manage your travel needs represents a 10-20% savings in your travel and entertainment budget line item.

Negotiated Discounts

The financial benefit of using a travel management company to secure discounts is clearly identifiable.  TMCs develop relationships with airlines, hotels, car rental agencies and are able to secure discounts based on the volume of business they procure. In fact, a Topaz International audit revealed that today’s travel management companies found business travel fares that average $56 less per itinerary, per person than what internet travel sites (e.g., Travelocity, Expedia, Orbitz and various airline-direct sites) offered for the same booking. The cost savings adds up quickly – if you’ve got a team of six people contracted to fly twice a month over a 6-month timeframe - at $56/itinerary that’s a savings of more than $4,000 just for that group.

Negotiation also takes time – time that your business may not have. As the experts in business travel, a travel management company has the dedicated personnel and leverage to manage the negotiations and subsequent discounts that are then passed along to customers. GBTA points out that more than 90% of its members have negotiated agreements with one or more air carriers. This savings contributes to the 10-20% savings in the travel and entertainment line item for your company.

Better Policy Management

The Global Business Travel Association states that setting a clear corporate travel policy and enforcing it consistently are the most important steps you can take to reduce travel costs. This one document - your company’s travel policy - can make a tremendous cost difference for your business, and needs to direct employees in the following three areas:

Control – Your travel policy should clearly inform your business travelers what authorizations are needed, what procedures need to be followed and what preferred suppliers your business is working with to achieve the best rate and/or ROI for that particular trip.

Alignment – Be sure that the policy makes sense to your employees and is in agreement with your corporate culture. With clear explanations of why policies are in place, as well as the complete list of benefits to using the program, travelers will better understand why the Marriot is used instead of the Ritz Carlton. 

Savings – This piece of your travel policy is essential to your budget. Clear communication within your travel policy regarding allowable expenses, spending thresholds and travel decisions that are based on the various levels of management is key.

Setting clear expectations on price for your business traveler is the number one way that you can save money. Key price threshold considerations include those associated with airfare, hotel stays, car rental type and additional options for upper management travel.

One example to consider: At what savings thresholds should a traveler select a low-cost carrier, a connection, or even an alternate airport? At what price point should the traveler select a connecting flight? If it saves the organization $100? Or if it’s a savings of $500? While these are tough decisions to make, once they are part of your travel policy and communicated effectively to your travelers, the savings in both dollars and time spent is critical.

Efficient Processes

Negotiated discounts and a more effectively managed travel policy represent cost savings without a doubt. But how are all of these processes managed and more importantly, how can all of this save time and money?

The continual advances in technology and travel management software benefit your business by providing processes by which data is collected and analyzed. An expert travel management company will provide you with the tools to manage your travel data and easily reconcile expenses. In addition, a customer service agent is available 24/7 for any changes or emergencies that arise.

Productivity can be profoundly affected by an employee booking their own travel arrangements. Consider this comment from one customer comparing travel management and accounting, “I can do our corporate tax return on my own, but why would I? My accountant saves me the time, and – more importantly – his skill and expertise allow me to concentrate on my area of expertise. I apply the same reasoning when I choose a professional travel management firm.”  

Visiting four or more web sites to find the lowest fare takes even the savviest of internet users fifteen minutes per site – and that’s just to look and book. This does not include the time it takes to seek proper authorization to change reservations, reconcile expenses or to follow-up on problems during the trip. Time is a valuable resource in all businesses, and saving time for your business travelers saves money.

Through negotiated discounts, better travel policy management and efficient travel processes, a true travel management company can provide the tools and resources to reduce T&E expense in your organization by 10-20% while keeping the goals of your organization a top priority. This in turn will increase control, productivity and predictability with your company’s travel program, saving time and money for your business.

Whitepaper- TMC's What They Mean For Your Company

Topics: Corporate Travel, Travel Manager, Travel Management, business travel, business process outsourcing, Managed Travel, Travel Management Company, Supplier Negotiations, Travel and Expense Management