Many Small to Medium Enterprises (SMEs) believe the most advantageous way to reduce corporate travel cost is to eliminate Travel Management Company (TMC) fees, but cutting TMC fees is a short- sighted approach when it comes to saving money on corporate travel expenses.
A forward-looking approach is to implement a strategy that takes advantage of the significant value TMCs provide organizations. A TMC can leverage exceptional high-volume discounts unavailable to the traveler, while establishing and enforcing policies and procedures to help facilitate preferred supplier agreements. A TMC should introduce automated pre-trip authorization processes and reduce the number of rogue travelers within an organization.
An experienced TMC can save SMEs up to twenty percent in additional savings on corporate travel spend each year while supporting travel policies that improve traveler productivity. This article discusses key areas SMEs should focus on in order to reduce corporate travel costs, far more than the minimal savings that would be realized by cutting out a TMCs’ booking fees.
There is a misconception among SMEs that a fare is a fare no matter where it is procured, and that line of reasoning is simply not correct. Here is why:
Predictive technologies used on public and supplier websites display biased content by capturing desirable selection criteria based on a traveler’s previous searches. Search results are personalized based upon the web history of the traveler, and what is best for the traveler does not always correlate with what is best for the company, especially when it comes to an SME’s bottom line.
When booking corporate travel for SMEs, NGOs, associations and government contractors, TMCs provide significant value, including:
- Comprehensive, unbiased fare options, otherwise unavailable to travelers
- Enforceable travel policy options
- Preferred supplier agreements
- Expedited service
For example, MacNair’s average fare price was 19% lower than the national average and 40% lower for international airfares. Is your SME paying too much for airfare?
Enforce Policy and Control
Typically, after payroll, travel is the largest operating expense for a business. Consider that against the fact that many SMEs give travelers complete freedom when it comes to ordering airline tickets, arranging hotel accommodations and procuring car rental services. SMEs would never permit an employee to enter a computer store and purchase whichever computer they wanted, order supplies from any vendor or dictate which health insurance broker they would like to use. There is always a procurement policy in place.
Allowing rogue travelers unfettered expensing privileges while on business travel leaves an SME with no way to control their travel budget. Unmanaged travel makes ensuring travel policy compliance, defining and meeting expectations, upholding duty of care to travelers and properly adhering to tax laws nearly impossible.
Allowing travelers to select their suppliers not only means that the rates and tickets cost more, this approach also establishes a clear message of inconsistency and lack of management. Every occasion a MacNair representative visits an organization with unmanaged travel, we find that travelers booking outside the TMC system or out of policy are paying more—one hundred percent of the time.
Without travel policies and procedures in place, there is no way to know exactly how much corporate travel is costing a business. If traveling expenses cannot be measured, then they cannot be managed. While it may seem contradictory to pay money to save money, the savings afforded by a TMC quickly offset any fees incurred. Aside from the clear financial benefits, working with a reputable TMC makes for hassle-free travel arrangements, provides finance managers with valuable and insightful reporting, and sets the tone from the top down that all corporate spending must adhere to corporate policy.
Enhanced Productivity and Unrealized Value
Time is money and when a CFO, VP of Finance, or Director of Accounting is ultimately responsible for reconciling travel and entertainment expenses, a TMC can deliver more control, clarity, and predictability through granular and accurate reporting.
Frequently, an Office Manager or Human Resources employee assumes the role of Travel Manager in addition to his or her primary job. When placed in this position, the employee can waste hours browsing the internet for the best travel deals, distracting that person from completing the job that they have been hired to do. Without the required “know-how” to leverage beneficial cost reductions on airline, hotels, and car rentals, the energy spent managing travel becomes a misuse of company resources and leads to frustration for both the employee and management.
When booking travel without a TMC, it is not unusual to be left on hold for hours. Time wasted is especially significant when booking multiple services, such as flight, car rental and hotel. Searching for each service exponentially increases the time spent “browsing”, as well as exposing the SME to potential cost errors.
Aside from the soft value of time lost when not working with a TMC, hard dollar savings can also go unrealized. Business plans change all too often, resulting in costly re-booking charges when not handled properly. Many companies do not track their unused plane tickets toward future travel expenditures. TMCs have systems in place to monitor unused tickets and re-utilize them which drives value to the corporate bottom line.
Improved Travel Experience
TMCs are customer-focused. The travel experience does not end with the purchase of a ticket. If itineraries change due to weather, flight delays or local emergencies, TMCs know how to react quickly, with travelers’ safety in mind. While it is impossible to put a price tag on duty of care, according to TravelMarket, it ranks as the third most important trend in corporate travel for 2016.
TMCs offer ongoing support for all types of travel disruptions, including delays, inclement weather, health complications or unforeseen acts of terror. In these instances, TMCs have people and technologies capable of supporting travelers worldwide 24 hours a day, 365 days a year. As such, communication with travelers during emergencies is handled swiftly and proactively. Without the support of a TMC, travelers are left to rely on the minimal travel support services offered by the supplier – where status determines priority.
Smart Payment Management
A TMC can help guide an SME through various payment options. If, for example, corporate or individual cards are used on an ad hoc basis, a TMC can build travel policy guidelines around the use of payment options to ensure that credit card payments are consolidated as much as possible in order to increase eligibility for various credit card company benefits, rewards and special offers.
By introducing virtual payment options or through consolidating corporate card payments, simple payment management changes can go a long way in helping an SME improve the ROI on their travel program.
Because TMC fees are simple to identify when reviewing travel expense reports, the first choice many SMEs make when trying to reduce travel expenditures is to eliminate them. The result is typically that the organization’s travel program will revert back to an unmanaged state. This short-sighted solution does not take into account the unmatched savings, program stability and process improvements that TMCs provide.
If SMEs do not have a managed travel program in place with access to negotiated supplier agreements, unbiased databases for fare searching, enforceable policy measures, disruption management processes and consolidated payment options, a reliable TMC can offer significant value and savings that outweighs the comparatively nominal booking or management fees.