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So why book with a ‘corporate travel management’ company?

Firstly, corporate travel management companies need to acknowledge that the scheduled airlines and, to a lesser degree, low-cost airlines actively encourage the travellers to book directly – via a call centre or logging on to their website. Furthermore, by booking directly with the airline, corporations avoid the payment of any agency fees.

Whilst the initial savings would appear impressive, a corporate travel management company would argue this to be a false economy. For any traveller, a number of business factors need consideration before a commercial decision can be reached. The examples below illustrate the difference in approach when appointing a corporate travel management company: 

• Are you able to depart 30 minutes earlier with British Midland, as the fare would reduce by £100?
• Are you aware the ticket is non-changeable on the inbound, particularly as you mentioned the meeting may be delayed prior to your return?
• Did you know that if you travel with S.A.S. in business class to Copenhagen, you are entitled to one night’s free accommodation at a deluxe hotel?

Which fee structure do I choose – transaction fees or management fees?

For any company undertaking a strategic review of corporate travel, the decision of which fee structure to implement is preceded by one simple factor – you need a fundamental understanding of your travel pattern and expenditure, which is only achieved with accurate travel data. You need to ensure your incumbent travel company is providing you with the management tools to evaluate your travel expenditure effectively.

The argument as to which fee structure is the better option will only be determined after a comprehensive travel audit has been completed, either by your existing corporate travel company or through a tender process.

Historically, the larger multiple travel companies advocated management fees as the recommended pricing policy. The business framework behind a management fee was very simple: calculate the operating costs needed to provide a comprehensive travel management service and return back all travel supplier revenues. However, this was based on the assumption that income streams would remain stable, when the reality proved to be very different.  

There is no question that management fees can be very cost-effective, particularly for companies with a high propensity for short-haul destinations, but at the same time you need to ensure the operating costs are clearly defined, and more importantly, justifiable. For example, if your company is being charged £1,000 for publications and £2,000 for staff training, is this really tangible? Another key pointer is establishing whether you will be charged additional fees if actual travel expenditure falls below or exceeds the projected figures.

While management fees are a constant, transaction fees are a true reflection of your travel activity and charges are always determined by the peaks and troughs of your business. A key denominator when negotiating transaction fees is establishing what the fees include. For example, will the transaction fee for an airline ticket include document delivery and use of the 24-hour emergency service? Will your company be able to request a bespoke travel report at no additional expense?

The key message is simple: providing the corporate travel management company has a fundamental understanding of your company’s travel pattern and expenditure the pricing policy implemented will be the correct choice.  

What simple steps can be taken to reduce my travel budget?

A corporate travel management company recognises that the travel remit will differ from corporation to corporation. However, there are some basic principles of travel management that can be applied which will lead to impressive results.

Air travel

With the growing influence of low-cost airlines across the European landscape, the major scheduled airlines have responded with competitive air tariffs. However, on closer inspection, only the economy class fares have fallen dramatically, whereas business-class fares have continually increased. Whilst business-class will provide the traveller with lounge access, a superior in-flight service and separate check-in, a finance director may want to review travel policy for flights under 2 hours, for example. However, for those in senior management authorised to travel in business class, staying with one airline in both directions reduces the costs significantly. The cheaper economy class fares are often restrictive, but can be combined with more flexible fares – a traveller can therefore maximise the savings on the outbound flight, whilst having the ability to change the inbound flight, without incurring penalty charges.

For any corporation with significant spend on European routes, and armed with statistical travel data from your corporate travel management company, a corporate agreement can often be negotiated with an airline. However, you need to ascertain whether the discount is based on reaching certain threshold levels, or a front-end discount at the point of sale.

With Virgin Atlantic introducing the innovative Premium Economy product, the three-tier service on long-haul routes was a welcome addition to the business community.

There is no question that the upgraded economy service is a viable alternative, but the reality is a number of senior executives are still travelling in business class. Furthermore, corporations are still purchasing standard business class fares, despite occupancy levels falling on major routes and discounting becoming more prevalent. Whilst the need for flexibility is often paramount when travelling, consolidated fares are saving companies up to 40 per cent on their travel budget. In addition, the ticketing conditions are less prohibitive with inbound dates changeable for a moderate charge of £100. With the leading airlines now discounting on many routes, the perception that you need to travel via Reykjavik to New York, in order to save money, is a distant memory.

Corporate reward programmes:

For travellers who ultimately purchase a ticket at a standard fare, the finance director needs to ensure the company enrol into one of the many airline corporate reward programmes.

Whilst the airlines traditionally rewarded the individual traveller through frequent flyer programmes, they also recognised the growing importance of the small and medium-sized enterprises sector; a sector where corporations travelled frequently, but not at the levels to warrant a corporate agreement.

With British Airways also launching its own corporate rewards programme - On Business – airlines are now effectively operating a double-bonus frequent flyer programme, with reward points for the individual traveller and the corporation. Based on current figures, the corporate reward programmes are saving corporations up to 5 per cent on standard scheduled fares so it’s worth checking to see if ensure you are taking advantage of these benefits.

Travel policy compliance:

How often have you reviewed your travel management reports, and, in particular, the potential savings column with a growing sense of frustration?

By simply introducing a non-compliance procedure, you have an effective management tool for safeguarding your potential savings. As a matter of policy and, more importantly, at the point of sale, your appointed travel executives can notify the appropriate authority that a saving was declined. If the company decision is to obtain the lowest fare, the reservation will be amended accordingly, and your potential savings will now appear in the actual savings column!

Whether integrating online booking tools to company intranets, or simply creating an electronic travel authority form, the corporate travel management company continues adapting to industry demands, and remains a vital ally to the serious travel buyer.

(This article was originally published in Director of Finance 2004 edition)