With technology putting more cost-effective, decision-making power into the hands of travelers, companies need to completely rethink their approach to travel management.
It’s time to move on to Travel 2.0.
Out of touch
Travel managers who are stuck in the old mindset of eking out percentage savings from last year’s travel spend are out of touch with reality, according to travel consultant Scott Gillespie, CEO of Gillespie’s Guide to Travel+Procurement
“This industry is hung up on savings,” he said. “Savings is a nice way to keep score, like a golf handicap, but it’s not real. In the real world, the CFO cares about budget, not some savings goal.”
That realization changes the game for travel managers and the companies they work for.
Failure of strict mandates
The old rules, what Gillespie called Travel 1.0, measure success and failure by spend. Success is generating savings based on prior spending or an industry benchmark, and failure is spending more.
That simple analysis moves companies to impose travel policy and mandates as a way to increase savings. But instead of saving money, companies with strict travel policy mandates are losing.
They are losing traveler compliance, losing employee satisfaction, and losing money.
Surprising survey results
According to a GBTA survey, the typical unmanaged traveler spends an extra half-day on the road compared to managed travelers and spends $1,200 less per trip doing it. (See story: “Biz Travel Programs Are Failing in 3 Key Areas,” Aug. 9, 2012.) http://www.travelmarketreport.com/articles/Biz-Travel-Programs-Are-Failing-in-3-Key-Areas
“This is a stop-the-press moment for every company that tries to mandate travel policy,” Gillespie said during the recent GBTA conference in Boston. “Those savings are even more striking when you realize that unmanaged travelers typically work for smaller companies that have less purchasing power.”
Out of tune
About two-thirds of companies are practicing Travel 1.0. Whether these companies are using strict policy mandates or simply suggesting that travelers use specific buying channels and supplier partners, they are out of tune with the real world.
Travel 1.0 aims to deliver significant cost savings and high levels of compliance by standardizing the travel process. Procurement makes the rules. Organizations push road warriors to use company-approved booking tools to buy from company-approved vendors at company-approved prices.
The result: managed travelers spend an average of $3,663 for 3.4 nights on the road. Unmanaged travelers spend an average of $2,457 for 3.9 nights on the road. Turning road warriors loose to book what they want, how they want, when they want is less expensive than trying to keep them within policy.
Online beats negotiated
Why? Because travelers have more complete information at the point of decision than travel managers have when they are negotiating rates with preferred vendors. Consumer rates that are freely available online routinely beat negotiated rates for air, hotel, car, and other products, said travel consultant Evan Konwiser, cofounder of Flightcaster.
“The iPhone has changed the way people shop, book, and buy travel,” he said. “The consumer travel world has rocketed ahead but the corporate world has not accelerated as fast. That should be a worry. Consumers, not corporations, are now the drivers of travel.”
Move to Travel 2.0
Smart companies are moving into what Gillespie and Konwiser called Travel 2.0. These companies recognize that technology has shifted information and power to the traveler and are using that shift to improve the return on travel spending.
Travel 2.0 aims to deliver traveler safety within budget and provide relevant data to the company by giving travelers the maximum freedom and flexibility possible.
Instead of a complex travel policy, there are just two rules. One, stay within budget. Two, ensure that full trip data is transmitted so the company can meet its duty of care obligations.
“Travel 2.0 is not saying book anywhere and we don’t care,” Gillespie said. “It is saying book anywhere as long as we get the data. That’s a safety issue.
“Travel 2.0 deprioritizes travel policy and emphasizes traveler welfare, traveler productivity, and traveler satisfaction. What is more important to the CFO when it’s time to report to the Board and to Wall Street, the actual adherence to budget or some percentage of savings? The budget wins every time.”
Rewrite the rules
That doesn’t mean travel managers have to abandon all rules. They just have to rewrite the rules.
“We would like to see the travel manager be the active leader in creating the best, most productive travel experience for the traveler,” Gillespie explained.
“Travel managers should be the voice of the traveler within the organization, not the voice of the organization to the traveler. We should all be traveling within safety and budget goals, not under a savings burden.”
Data channel critical
Under Travel 1.0, the booking channel is key. Under Travel 2.0, the data channel rules.
“If you don’t know where your travelers are going, how they are buying, and how much they are spending, then you have a problem,” Gillespie said. “The data channel is critical.”
Travel managers should refocus from mandating behavior to motivating loyalty, Konwiser said. It’s using a carrot to move traveler behavior instead of stick.
Focus on value
“Focus on value for the traveler and for the buyer, not on price,” he advised. “If you negotiate gold status for your employees on Delta, they will rush to fly Delta because it’s better for them.
“You can accept a rate from revenue management, because they are going to get it one way or another. But you should negotiate for value, things like better data for the company and better perks for your travelers.
“Make it a value proposition for employees and they will flock to do the right thing.”