What keeps travel managers awake at night? The short answer is managing the ever-increasing costs of travel. A more precise answer is controlling costs by managing very specific areas of spend.
This is especially pressing after a year in which many companies exhausted their travel budgets well before year-end.
Travel managers are especially concerned with cutting air and ground transportation costs; improving traveler compliance; optimizing hotel spend, and optimizing online adoption, according to the latest survey of travel managers worldwide by Carlson Wagonlit Travel.
All four items were ranked as their top priorities by at least 50% of travel managers who responded to CWT’s Travel Management Priorities for 2012.
Exhausted travel budgets
“The primary driver is increasing costs in all travel categories,” Joel Wartgow, senior director, CWT Solutions Group – Americas told Travel Market Report.
“By mid-year 2011, many companies had exhausted their travel budgets for the year or were on track to use them up earlier than expected.
“When travel managers were responding to the survey, they were searching for ways to fund the travel that was necessary for their companies to meet their business objectives. That’s what we’re seeing reflected in these results.”
Just where travel managers are trying to tighten up varies from region to region and company to company.
Compliance is the top priority in North America and Asia Pacific while air and ground transportation spend tops the list in EMEA and Latin America.
Hotel spend is number five in North America but number two for the rest of the world.
What travel managers everywhere have in common is a need to better manage costs. And CWT has a few suggestions.
How to save on air
• Consider separate negotiations for high-volume city pairs to drive incremental savings, even as overall ticket prices increase. One tactic: A reverse auction to select one carrier for each key route that is separate from overall preferred carrier contracts.
• Travel managers should continually monitor prices and air spend to maximize program performance. That could mean quarterly reviews of market share commitments and any spot buying opportunities.
• Keep an eye on new entrants, including low-cost carriers and rail entrants.
• Look at different ways to evaluate contract savings.
• One possibility is the net effective savings rate (NESR), which divides actual savings within a negotiated contract by the hypothetical spend using published, non-discounted fares.
How to save on hotel
• Push hard for last-room availability (LRA). These deals may be harder to get this year and may cost 5% to 10% more than non-LRA negotiated rates, but they can bring net savings over the contract term.
Last-room availability is especially valuable in cities where occupancy rates are high year-round.
• Contract with the right number of properties on a city-by-city basis. If your volume is too low to qualify for a reasonable discount in specific cities, try using TMC-negotiated rates.
• Think about mid-year negotiations for Europe. If EU economic conditions continue to falter, some properties in some cities may be willing to talk.
How to save on ground
• Consolidate car rental spend. The car rental industry has consolidated, especially in Europe (three primary suppliers) and North America (four vendors). That may offer opportunities for deals covering a wider geographic range with deeper discounts and better services for travelers.
• Question bids that include a price increase. Market conditions should hold rates flat or even lower costs this year.
• Go beyond rates. Add more premium car types or amenities like GPS in negotiations.
• Consider rail instead of air for shorter trips. Rail networks are expanding dramatically in Europe and much of Asia and could even beat air for some US travel.
“Travel managers are eager for new solutions,” Wartgow said.
“I don’t think any travel manager has a strong appetite to drive a mandated policy.
“The question is how we encourage travelers by giving them access to information and to the impact of the decisions they make in order to help them choose well."