How travel management has evolved post-recession

by Stewart Harvey, Group Commercial Director

"When the going gets tough," the old cliché says, "the tough get going." I disagree. In the world of travel management, it is when the market starts to improve again that the tough really have to get going.

What do I mean by that? Well, think back to the height of the recession. Almost all travel managers suddenly found far less resistance to controls on policy, trip approval and use of travel alternatives like video-conferencing. When the economic going got tough, therefore, travel management got easier. The much bigger challenge is the situation we are in now, when the economy is slowly improving and employees are pushing to be allowed on their travels once more – and in more comfort than during the financial crisis.

Managing increased expectation, and indeed an increased need to travel, against budgets that still need to be watched carefully is a real challenge but at HRG we are seeing our clients rise to it very successfully. Although business travel activity has picked up, their determination to control that pick-up has increased even more. Companies don't want to give a complete green light to travel but they don’t want to give a complete red light either.

I would say that balance is about right. It's certainly very important that companies do let employees travel again, because they cannot grow their businesses without getting back on the road, and right now there are some excellent commercial opportunities worldwide. In particular, travel to Asia – especially China and India, which are up about 30 per cent – is booming. A few years ago, our customers flew to the region overwhelmingly to source raw materials or factory production. Today, they still go there to buy, but now they are also increasingly visiting Asia to sell goods and services to these increasingly affluent markets.

We are therefore seeing a higher proportion of long-haul journey in our clients' travel mix at HRG, and that is one contributor to higher costs overall. Another factor making a big difference is the growth in extras on an air ticket: items like fuel surcharges, government taxes and, in some cases, ancillary fees, such as charges for checked luggage.

The other day I saw a customer's ticket where the combined total for extras came to £470. That's easily the cost of an air ticket in its own right, and it’s important to remember that these additional fees are ring-fenced by the airline from corporate fare negotiations. We have seen base air fares fall over the last two years, yet total ticket prices are going up.

I think this is a very important point for travel managers, because it is a good example why the time-honoured strategy of supplier management can only take you so far in gaining control over travel costs. The rest of your control – arguably most of it – has to be achieved through demand management, and that’s why companies are still being very careful about who they send where.

In particular, pre-trip approval is just as important as during the recession. Companies are continuing to ask travellers not only “where are you going?” but also "why are you going – have you been invited, instructed or are you using your own initiative?"

By capturing the reasons for travel and other data, HRG is beginning to build a picture of the behaviour micro-climates within our clients’ organisations. We can show, for example, that the sales team travels mainly to meet clients or potential clients, while other departments travel mainly for internal reasons. We may also discover that one part of the business books well in advance (helping to increase savings opportunities), while another part books at the last minute. Or we can identify that certain employees are flying to the same destination twice in one week, when an overnight stay instead would be much cheaper than two flights.

Once we have created these micro-climate pictures, we can recommend action to help reduce costs, such as continuing to allow customer-facing travel but replacing some internal meetings with technological alternatives. As a logical consequence, we are also helping clients manage their travel programmes and video-conferencing facilities in a much more joined-up way than before, such as integrating booking arrangements for both.

All of this means we no longer simply help clients understand the cost of a trip. Instead, we help them understand the value of a trip, which is why we are adding yet another crucial dimension into the mix: time. We now provide some customers with evaluations of how long a trip will keep a traveller away. Then they can ask further important questions, like is it worth travelling a day out and a day back to Chicago for a three-hour meeting? If it is to clinch a multi-million dollar deal, the answer is probably yes; if not, the answer may be no.

I don’t think it is stretching a point too far to say that the strategic purpose of travel management is shifting at the moment, and we at HRG are shifting our focus with it. Clients are increasingly outsourcing their roles and skills to us, and we are reflecting their own working techniques back to them by introducing more project management. On the demand management side, we are also more involved than ever in communicating to and influencing our clients' travellers and bookers, and, back on the supply management side, there is more rigorous monitoring of vendor performance.

To return to where I started, the irony of the new travel management is that if the tough get going with the value-driven travel management I have described here, the going may actually get easier for some corporate travellers. That’s because if employees can demonstrate there will be a value to their proposed trip, they may be allowed better travelling conditions. We are already seeing evidence of companies reinvesting some of the money they are saving from eliminating unnecessary trips in re-upgrading travellers on the trips that really are necessary.

Expect to see more policies reflecting a readjusted, value-based perspective. For example, the rule for short-haul trips may be to use a budget carrier or rail or not travel at all, whereas long-haul trips may be in business class. Similarly, purpose of travel may dictate class of travel: business for sales trip but economy for training courses. I suspect we may see quite a lot of policy re-thinks over the next 12 months.