I recently sat down with the Jon Esperanza*, a travel manager of a U.S.-based global company with offices in more than 60 countries. We discussed his travel policy goals, greatest challenges, advice for other travel managers, and why he has yet to visit the Grand Canyon. Enjoy this excerpt of our conversation!
What would you say is the profile of a typical travel manager?
There’s not really a school for travel management. It’s more of a hands-on “learn on the job” kind of thing. As for myself, I worked at one of the global travel management companies (TMCs) for more than 15 years and understand well what a TMC can offer. This knowledge is a tremendous help when it comes to managing the relationship with our own TMC and accomplishing my daily tasks.
As a travel manager, I have a group of travel manager “friends” with whom I maintain regular contact. We share our methods for tackling certain issues and discuss topics such as what trends are developing. I’ve discovered that many of the travel managers I interact with come from a finance/procurement background. I think it’s important to make note of this because the skill set of someone with TMC experience versus finance experience is quite different. We both now manage travel, but we each do so from a different perspective.
How would you describe your group’s overall travel program?
Travel management sits under finance/procurement. We recently reorganized and now have a more centralized approach with a global travel manager, and less decision-making powers within the various regions. This makes more sense because by combining the spend volume of all our regions, we’re able to more effectively negotiate with our preferred suppliers and drive costs down.
The trick though, is finding the right balance between creating a global policy and configuring each online booking tool (OBT) for cost efficiencies, while still allowing for localization of the travel policy for end-traveler satisfaction. The travelers and country culture strongly influence how an OBT should be configured for a given site.
Did the “globalization” change your role and relationship with other regional travel managers in your group?
Yes and no. In terms of my role, local decision-making power has reduced, as I mentioned, but we’re now aggregating greater volume from all of our travel spending so this helping our overall negotiation with key suppliers.
In regards to my relationships with other regional travel managers, I wouldn’t say much has changed except a shift in where we put our focus. Previously, we would consult each other on how we each managed our regional program. Today, we are all pretty much aligned in this area, and our focus has moved toward how to drive global supplier negotiations.
What is the ultimate goal of your group’s travel policy?
The goal of our travel policy is twofold:
- To set boundaries for our travelers. Left to their own device, any traveler would choose the most comfortable and rewarding travels, in terms of fare type, time and frequent flyer rewards!
- To drive travelers to use our preferred suppliers. By doing so we can then use this consolidated volume to our advantage when renegotiating contracts. Benefits may include:
- Better average air ticket, hotel room rate, and daily car rate
- Use of corporate cards that bring monetary rebates
- Free ancillaries
- Free breakfast with hotel bookings
- Complimentary insurance with car bookings
- Free upgrades to Business Class for our most traveled-to destinations
Where are you finding cost savings today?
Savings can come in two forms:
- Hard or Direct Savings (e.g. average ticket price)
- Soft or Indirect Savings (e.g. free breakfast with hotel bookings)
Today, we’re seeing a falling average ticket price, approximately 6 percent, which can be attributed to the airline’s changing fare structure (e.g. fare families). However, we’re seeing a rise in costs elsewhere, particularly with ancillaries such as baggage. And average room rates are rising 4 to 6 percent per year.
When negotiating, the key factor for our cost-saving success is that we have a complete view of our travel program spend. We must understand where and on what we’re really spending. With the changes in cost structures, average ticket price is no longer the only driver in bringing costs down. We now have to keep a close eye on other growing costs as well.
What are your main challenges in managing your travel program?
Travelers are strongly driven by their frequent flyer programs and aim to book around that. Travelers can be crafty and will find loopholes to book what they desire.
I typically find that travelers will adhere to the overall philosophy of the travel policy, such as sticking to a hotel budget of $200 per night, but won’t commit to it all the way. For example, they may not book our preferred programs. Travelers tend to have a short-term view when it comes to abiding by the travel program. They don’t see the bigger picture in terms of future negotiations or what we’re doing in the long run.
On average, air tends to be well respected in terms of booking, either through our OBT or TMC. The challenge, however, is getting travelers to use our preferred vendor. The latest report from our TMC showed that less than 50 percent of our tickets were booked with preferred suppliers.
One good thing though, is that since nearly all tickets are booked through our TMC or OBT, we have a clear picture of tickets booked.
Hotel & risk management
Hotels are one of our biggest challenges. Today, less than 30 percent of hotels are booked through our OBT or TMC. And the reason comes down to content.
It’s impossible to source a preferred program with ALL the hotel chains in the world. If we did, then we wouldn’t have enough critical volume to leverage in supplier negotiations. On the other hand, travelers are very picky about hotels. Finding the balance is tough.
In essence, we have three problems concerning hotels booked outside of the system:
- We are not building that critical volume.
- Risk management – we don’t actually know where travelers are. We may know they are in a given city, but where in that city?
- We don’t get the reports through one single source of information. We have to compile expense and travel data to get a full view.
You mentioned reporting a few times – surely that’s an easy thing with the OBT/TMC?
Ha! This is probably the biggest thorn in my side. Reporting is vitally important for the reasons I already mentioned. Plus, the finance department wants to see consistent detailed reports in a timely manner.
It typically takes me two to four days per month to extract the data, compile it, and clean it so that it’s comprehensible for finance/accounting. That equates to about 48 days per year! That’s a lot of time (and indirect costs) I could be spending on other activities – like visiting the Grand Canyon!
What would you say is your primary use of the expense data?
Although I’m not a finance person, the expense data is very important to me for three reasons:
- It presents a view of total travel spend. With costs happening post booking or outside the system, an increasing amount of our travel spend is not being captured by the TMC or OBT. For example, we see from our TMC report that our air/hotel ratio is about 4:1. In reality, it’s 4:2 when you take direct bookings into the picture.
- It provides the ability to see what’s booked (and associated cost) outside the system. This gives me an idea of where we need to be attentive when negotiating future contracts.
- I can see where our travelers are being compliant and where they’re not. This helps me determine how our travel policy should/could evolve.
What are some key takeaways others can learn from based on your experience?
- The most important is that top management needs to mandate the travel policy and lead by example! Why respect a rule if your boss doesn’t?
- Mandate a ‘book ahead of time’ period (e.g. 7 days ahead minimum). It’s critical for keeping average costs down. Our recent TMC report showed that travel booked within seven days of departure can cost up to $200 more! Travel booked 21 days ahead would see a 20 to 30 percent savings versus our average.
- You must decide if you’re going to mandate and enforce your travel program, and penalize travelers who don’t respect it. Or if that’s not your company culture, you have to accept that your policy compliance might not be as high and instead find creative ways to motivate travelers to respect it.
- Make the travel agency accountable for any offline bookings. I’ve directed our TMC to automatically direct the traveler back to our OBT for simple bookings.
- Perform regular spot checks on travelers and travel agents carrying out bookings. Supervision, even if it’s not continuous, keeps everyone on their toes.
- Maintain a good reporting system and a clean integration with expense data. This is associated with what is captured during booking but also the reporting tools. The cleaner and more transparent your reporting is, the faster you compile data, keep track of the hidden costs, and make decisions on how the program should evolve.
- Provide regular training for employees. This benefits new employees as well as current staff who just need a reminder regarding key travel policy elements, and how the OBT should be used effectively.
- Keep an open mind. Your travel policy will evolve with time, new content and traveler profiles.
*Not his real name
Stay tuned for part 2 on how travel and expense is managed within a global company.