This is the first in a two-part series on managing secondary spend.
Travel managers are missing a major opportunity to save money for their companies by not managing the so-called “secondary spend” of dining and ground transportation.
Eighty percent of respondents to a recent survey by the Association of Corporate Travel Executives (ACTE) said they were not managing their dining spend. Nearly half, 48%, said they were not managing ground transportation spend.
“We shouldn’t be having a secondary spend discussion at all,” said Bev Heinritz, vice president of client development for Dinova, one of the country’s largest corporate dining network providers. “This is a big number and a big opportunity to bring savings to your travel program.”
At an ACTE webinar on “managing secondary spend” earlier this month, Heinritz detailed the advantages of a corporate dining program.
Big chunk of change
Spending on dining and ground transportation accounts for 18% of the typical corporate travel spend, according to the Advito 2013 Industry Forecast.
Meanwhile, 2012 data from Concur, a provider of integrated travel and expense management solutions, found that air, lodging and dining accounted for 65% of the total U.S. business spend. Thirty percent was spent on air, 20% on lodging and 15% on dining.
The move to manage secondary spend resembles actions taken in the 1990s to manage primary spend. Both focus on starting with the largest companies and the largest spend.
Dining program challenges
Dinova currently manages $750 million in annual dining spend, Heinritz said. That’s a relative drop in the bucket for the total $632 billion U.S restaurant spend. But companies have to start somewhere, she said.
One problem is fragmentation. The $632 billion spent at restaurants is spread across 970,000 locations, according to the National Restaurant Association.
With no dominant dining vendors and little opportunity for centralized purchasing, it’s difficult to move market share to specific restaurants or restaurant chains, said Heinritz. That’s where companies like Dinova can help, she added.
Creating preferred vendor networks
Dining management companies such as Dinova serve as intermediaries between companies and restaurants, helping corporations create preferred vendor networks for their travelers, meeting and events programs, catering and other food and beverage needs.
The arrangement is a familiar one: Preferred vendors get increased volume and companies get rebates and a procurement-like approach to dining expenditures.
There’s also location-based advice for travelers on where to eat and real-time data for travel managers on where travelers are eating and how much they are spending.
“The reality is that you have a lot of employees with corporate cards using their phones to look for a place to eat,” Heinritz said. “Most smartphone searches for restaurants are for eating within an hour, 87% are for a meal that same day.
“You can provide a mobile corporate dining program to guide their eating into your preferred network and drive savings.”
How much in savings?
Teva Pharmaceuticals expects to earn $32,000 in rebates on its $26 million annual U.S. dining spend simply by tracking where employees eat.
The company is looking at $500,000 in annual rebates after 18 months of educating employees about the advantages of eating in preferred restaurants.
Next time: Getting a handle on secondary spend on ground transportation.