Travel and expense management (TEM) represents the second largest controllable cost for most mid-market and larger businesses. Given the size of the expense and the consistent desire to control and reduce costs, it’s no surprise that travel management is among the most common services that go out to bid.
Yet, despite the frequency of travel management RFPs, very few are developed in a manner that will actually reduce your cost structure. The costs associated with TEM can be highly variant from year to year; with most variables totally outside the control of either your organization or your travel management company (TMC).
Think of it this way – if the economy heats up and/or your business requires more travel – your T&E costs are going up no matter what you do. The reverse is also true. A slower economy will make it look like you’re controlling expenses, even when you (or your provider) may not be.
Two common mistakes that are made when seeking to procure managed travel services are:
- A misguided focus on minimizing fees to lower costs. When assessing a TMC, fees are only a portion of the cost structure. You must also evaluate their ability to access lower fares. Many times the best TMCs charge higher booking fees but more than make up for those fees by providing added value through cost savings.
- A narrow focus on booking travel. Another common surprise for companies is that the travel booking process is only a small piece of a managed travel program. Additional areas of focus should include negotiating vendor agreements, travel authorizations, payment management, program support, access to data, comprehensive analytics, and overall control. Each of these factors contribute to your bottom line and employee productivity.
If you are a first time buyer or an experienced travel manager in search of a new TMC, try to think in the same way you might think about procurement in other areas of your business. For example, you probably have a procurement process for office supplies. Employees do not order their own pens and staplers. Rather, they send their request to a specific person who fills out a form and places the order. You may even have specific pens or paper that are ordered regularly. Having a process in place gives you the opportunity to negotiate with office supply vendors to get the best deals.
Travel is no different. A healthy travel program must:
- Manage complexities
- Balance competing interests
- Apply defined processes for booking travel, negotiating agreements, analyzing data and driving continuous improvement
While some of the work done by a TMC may not look very different from a traditional travel agency or an online booking platform; what’s happening behind the scenes is what will really determine the success of your TEM efforts.
As you consider ways to improve the results of your travel management program, here are the first four steps you should take.
#1 Your Initial Assessment
As with any successful initiative, you first need to assess your current goals. For example, if saving money is a primary objective (and it is for most organizations), then you will want to have processes for booking, authorizations and supplier agreements. It is no secret that if your employees book their own travel through consumer-facing websites, they are most likely overpaying. The reason is because third party sites use predictive technology to display fares based on previous purchases. In other words, if you have a traveler who prefers to fly with American Airlines, those are the first flights shown.
As you think about improving your travel program, talk with your top business travelers and find out what they like and dislike about the current travel program. That will give you some insight into what is working and what is not working. You will also want to review your current supplier agreements and processes, as well as review your company objectives to ensure they are all in alignment.
One note: Data is crucial for an effective assessment and, unfortunately, most mid-sized organizations don’t have the data that is necessary to drive cost, productivity and performance improvements. This is one of the reasons that using the right TMC is so important – to provide data and benchmarking to ensure your program is working effectively.
#2 Streamline Your Program with Technology
There are many technologies available that can help streamline your travel program. They include automated expense reporting tools that will allow your business travelers to input their expenses while on the road and forward them on to a manager. This eliminates the need to keep up with paper receipts and reconciling them later; saving time and frustration.
Technology can also simplify booking and authorizations. There are online booking tools that can automatically show preferred suppliers and have a customizable approval process if a traveler needs to work around pre-set guidelines.
#3 Leverage Your Data
Once you know information like the number of hotel nights your organization typically requires in a year, and how your travelers currently prefer to travel, then you are in a better position to negotiate rates with suppliers.
A TMC can help you understand your company’s preferred supplier options and negotiate discounts on your behalf. TMCs will also use their existing network of supplier relationships to negotiate better deals for you.
#4 Define Processes and KPIs
Smooth and reliable processes are crucial for the success of any managed travel program. Identify the critical functions behind your program – backed up by accurate data – and then establish KPIs from which to measure baseline performance. You might find it helpful to review our T&E Process Guide and use the 9 phases of a managed travel program as guidelines for understanding the critical functions within your program.
A TMC can work with your data and use benchmarking best practices to determine realistic goals that can help you measure and define success within each phase of your program. When designing your RFP, be sure to already have your program goals and KPIs established – this will set the bar for all TMCs that offer proposals for your business.
These four steps will create the clarity you need to drive greater productivity, reduce costs and improve employee morale while ensuring that you design a successful RFP. So, while the four steps outlined here are not necessarily easy to do on your own, with the right travel management partner, the payoff is well worth it!
