There are many ways to keep your company’s travel budget under control, including planning ahead for travel, using an unbiased search tool, and strict adherence to your company’s travel policy. In the current global marketplace, small and medium sized enterprises (SMEs) find travel necessary, and are working to keep corporate travel as cost effective as possible. Keeping the budget under control is critical.
One area that can have a significant effect on your travel budget is ancillary fees. These fees can be found in all parts of the travel puzzle; additional airline costs for Wi-Fi and in-flight entertainment, the use of the minibar or room service at hotels, or toll fees and fuel charges from car rental firms. While some of these expenses seem small in comparison to the thousands of dollars spent on airline tickets, they quickly add up. Travel vendors are benefiting from adding fees for the travel experience. Recent information from IdeaWorks and CarTrawler indicate that airline ancillary fees were projected to be more than $5 billion in 2015.
More than $5 billion?? This blows my mind. As airlines work on branding fares (including extra “perks” with the base cost of a ticket such as limousine services, lounge access or additional frequent flyer miles) the ability for SME finance executives to track expenses as a result of ancillary fees is very complex.
Ancillary fee review is a part of travel leadership and is vital to saving your travel budget. Finance executives must distinguish ancillary fees, work to control them and ensure that business travelers are in compliance with established travel policies.
What is considered an ancillary fee?
The first step in combatting rising ancillary fees is to determine what they are. Information from the Global Business Travel Association (GBTA) and Business Travel News (BTN) list a number of ancillary fees that travelers are subject to:
- Extra luggage costs
- Ticket change fees
- Onboard food and beverage
- In-flight internet access
- Early boarding
- Extra legroom
- Airport club access
- In-flight entertainment
- Expedited security line access
- In-flight food and drink
- In-flight headset use
- Car rental fees for toll passage
- Car rental fees for late returns
- Car rental fees for drop-off or a one-way rental
- Car rental fees for fuel charges
- Hotel related fees for internet use
- Hotel related fees for parking
- Hotel fees for minibar or room service use.
These seemingly small items (under $8 for an in-flight movie) can quickly add up for a business traveler. Suddenly the neatly packaged $450 flight + $150 hotel room budget item jumps to more than $700 in travel expenses.
Understanding exactly what ancillary add-ons travelers have available are an important first step in controlling and reducing costs associated with these fees.
Tip: Look closely at what value-added options are available for your travelers and assess whether the associated ancillary fee is justified. Premium economy seating is quite impactful as more airlines set aside more seats in this category. If left unaddressed, you may be paying for premium economy when it doesn’t align with the value your organization needs. Conversely, some organizations are building this option into their philosophies in the event that upper class is accepted. Clearly analyze what options can best balance comfort and value.
Tracking and pre-approving ancillary fees
One of the biggest challenges in controlling ancillary fees is the ability to track when and how these costs are being incurred, and then ensuring they are streamlined into the approval process.
One of the most efficient ways to track and approve these fees is to integrate the approval process through an automated travel and expense (T&E) system. Including a place for ancillary fees within the T&E system provides transparency and allows finance executives to see who is expensing these items, and what ancillary fees are being utilized most frequently. Once this information is available, appropriate steps can be taken to control these costs through the travel and expense policy.
A quick note on automated travel and expense systems. We know that a lot of SMEs have not yet invested in this technology; it’s a large expense for businesses. Yet we see time and again the increased efficiencies and monetary savings that result from automation, and highly recommend the investment.
Adding ancillary fee management into your travel policy
While the task may seem terribly complex and downright daunting, incorporating language regarding ancillary fees into your travel policy is essential to combat this rising cost. Adding clear language into your company’s travel policy regarding ancillary fees helps to manage these costs while allowing your road warriors to have some flexibility when they travel. As you consider the options, ask yourself these questions:
- What ancillary fees are being tracked right now? How much expense is currently being incurred due to these fees?
- What fees are acceptable for travelers and what fees are not reimbursable?
- Is there clear communication on reimbursement of ancillary fees?
- How can travelers gain approval for fees that are not reimbursable?
- Are certain ancillary fees acceptable for different “classes” of travelers? For example, if the CEO is travelling can they incur additional fees? Are there exceptions for international flights?
- Will you include options for travelers if certain ancillary fees are not approved?
Thoroughly explore the questions, opinions and current data available related to ancillary fees that your travelers are incurring. This information will contribute to a travel policy that makes sense for your business, and easily keeps travelers in compliance.
Tip: One example that keeps travelers within policy and reduces cost is allowing travelers to purchase “bundled fares.” for their trip. The jetBlue Blue Plus program includes one checked bag resulting in overall savings, and reduced change fees. This option for travelers results in reduced accounting hassles for the finance department, and a higher value ticket if changes are required.
Communicate and enforce ancillary fee travel policy
Once the travel policy includes the appropriate procedures for ancillary fee approvals, it’s important that the policy is enforced.
Clearly communicate this to your travelers and be sure that managers and directors are on-board with the policies in place. Ask road warriors for continual feedback on the policy. Are there fees that they feel add value to their trip that are not addressed in the policy? If so, make adjustments as needed. Continuous dialogue between travelers, finance, travel managers and executives, guarantees that travelers understand expectations and can stay compliant within the travel policy.
Tip: To further ensure compliance, spot-check your employees expense reports or credit card statements to verify that the reimbursement requested is for an approved charge. If it’s not approved, work with the employee on understanding and staying compliant with ancillary fees.
Your company’s travel budget, and most importantly, the rising ancillary fees associated with travel can be controlled. Take the necessary time to assess ancillary fees, track and develop an approval system and then incorporate this process into your travel policy. Communicate the policy and make sure it’s enforced. When this process is followed, expect a drop in expenses and an increase in overall budget control and predictability.
Many more pricing and systematic changes are slated for 2016 that will impact your travel budget and how you manage corporate travel. Stay a step ahead and manage your budget proactively and effectively by reading 2016 Trends in Corporate Travel Management for the SME Marketplace today.