Negotiating the travel minefield

Business travel is one of the most costly and difficult services to manage, but there are some simple principles for keeping it under control, advises Mark Whitehead.

Buy the wrong kind of office equipment and employees may protest. Employ the wrong consultant and it may be disruptive and costly. But pick an unreliable airline or a substandard hotel for your key executives, and you will quite likely have a mutiny on your hands. Buying travel, unlike most other goods and services, is a minefield.

Business travel impacts directly on personal experience, and people take it personally. 'It's not like buying widgets,' says Lorraine Holdcroft, executive director of the Institute of Travel Management. 'It's all about getting people from A to B in way that they're reasonably happy with and that enables them to do their job effectively. You've got to take people's emotions into account and that is not a simple matter.'

People have their own preferences when it comes to airlines, hotels and cars and getting control over maverick spending is notoriously difficult in this area, especially with the arrival of on line booking offering cheap deals. It's axiomatic that any attempt to bring travel spending under control should tackle this problem. But an element of flexibility should be built into an organisation's travel policy, Holdcroft says, so that people feel they have some control over their own experience. 'It's all about giving individuals a certain element of choice while working within a corporate policy. You don't want to mandate everything. People feel better about things if they have some choice over how they are going to travel. And there are local differences to take into account. What works in Basildon will not necessarily work in Japan or the US. Sound purchasing principles still apply, but you can't be too rigid.'

Travel is in itself a complicated business: there are multiple suppliers, dozens of airlines, ticketing deals, routes to choose from and so on. Juggling these to come up with the right solution for every business trip demands specialised knowledge.

Managing travel in-house is quite likely to be effective for smaller companies with relatively simple travel requirements over regular routes. Online booking means anyone can reserve a flight, hotel or car at the touch of a button through a preferred supplier. There are more sophisticated systems available - aimed principally at smaller organisations - through which an entire travel policy can be managed.

For larger organisations, the services of a travel management company or TMC are likely to be required. Travel procurement can be handed over totally to the TMC so that the parent organisation takes no day-to-day responsibility for it. A TMC not only has specialist knowledge of the travel business but will also provide detailed management information on all the trips undertaken over a given period. Alternatively, in what is generally thought to be a preferable arrangement, an in-house manager, or team of managers, depending on the size of the organisation, can be appointed to look after the business relationship with the TMC.

Tony Archer, manager of global procurement at ICI, describes how the company moved from a situation where more than 100 travel agents were being used by people throughout the organisation to one where all bookings are made through a TMC. This, he says, has clear benefits to ICI in terms of savings and of ensuring company policy is followed. 'If you have a travel policy that says you must go business class here and economy class there, you only need to say that once to your TMC. Previously we had more than 100 travel agents, so it was much more difficult to get those kind of messages out.'

Whether to outsource or not, he says, is as usual a question of core competence. 'Our core competence is not the travel industry so we don't have links into booking systems and so on. We regard that as a very specific area of expertise that we don't have in-house, so we prefer to outsource it.

'The big question for many organisations is whether they can implement that kind of approach. Travel is a very emotive subject. Quite a few people may need to change from their existing travel agent to another one and that's not always an easy thing to do.'

Jeannette Harrison, purchasing adviser for business travel at Nottingham University, is planning to reduce the number of preferred suppliers from three to one by the end of this year, from a total of six as recently as three years ago. 'The arguments for consolidating all travel procurement through a single supplier are unassailable,' she says. 'We're here to make sure we get the best value for money both for the individual traveller and for the university. The best way to do that is through a single TMC.'
Either way, it is crucial to ensure that the total cost of travel is being monitored carefully. It is estimated that fees paid to airlines and other providers usually amount to about five per cent of total spending, while the cost of internal processes - the time it takes to deal with procurement of travel plus overheads - is likely to be about a further three per cent.

This means that by far the biggest area of spend is on the products bought - airline tickets, hotel bookings, car hire and incidental expenses - so this is the area offering the best opportunities for savings, or making sure maximum value for money is achieved. That could mean persuading people to use cheaper airlines and less luxurious hotels. Or it could mean negotiating with suppliers for upgrades, better quality cars or other benefits at no extra cost.

In an attempt to establish an effective travel policy, the first challenge, as in any procurement exercise, is to identify what spending is taking place and by whom. Fairly obviously, if you can't identify it, you can't manage it. Secondly, the policy must be clear and easily understood, and communicated effectively to all those who will be affected by it. Excellent communication in such a sensitive area is essential. Listen to feedback and address people's concerns.

Gaining the support of top management is crucial as there is very likely to be some resistance to change. Persuasion is, of course, by far the best route, but there may be some need to enforce the policy. Doing this without support from the top is likely to be ineffective.

The good news is that most people understand the need to control spending if it is put firmly in the context of the business's objectives. Again, effective communication is the key.