The ongoing economic uncertainty has challenged traditional business models in the corporate travel industry. This means travel managers need to find new ways to do more with less, while aiming to quantify the return on travel investment.
In particular, the airline industry has changed tremendously. Demand has fallen, capacity has been cut and fewer travelers are in premium seats. Airlines are coping by unbundling services and tacking on fees.
Given these changes, companies should be identifying areas for cost reduction by reconsidering certain long-held beliefs about their accepted methods for airfare savings. They must look for creative ways to challenge the status quo. Following are three tested tactics, based on actual travel transaction data, that companies can use to save money and keep employees in the air without sacrificing number of trips or comfort.
Premium Economy With the introduction of new compelling categories of service for many routes, companies can choose premium economy for the daytime leg of long-haul flights, rather than business class. Based on an analysis of 2009 transactions, this can save companies an average of $2,000 per trip -- yielding millions in annual savings for many firms that frequent international routes -- without sacrificing traveler comfort. Notably, daytime flights do not require a fully reclining bed, and travelers still can get work done in these premium seats, which are wider than those in economy class, with added legroom and amenities. In 2009, a company could have saved an average of $1,435 per ticket from London to New York by choosing premium economy over business class during the daytime leg only.
Restricted Tickets Restricted fares certainly can be more economical than nonrestricted fares, and in recent times encouraging travelers to take advantage of them was conventional wisdom. However, more than one-third of the short-haul, nonrestricted tickets we examined in 2009 were less expensive, on average, when purchased in ultracompetitive business markets where corporate discounts were in place and employees changed tickets more often.
For example, for a competitive route like Bangkok to Singapore, analysis of 2009 transaction data shows that nonrestricted airfares cost an average of $273 less per ticket than restricted tickets, taking into account change fees and overall traveler behavior. Conversely, from New York to London, restricted airfares cost an average of $1,024 less per ticket than nonrestricted fares. We theorize that business travelers tend to plan better for long-haul trips and make fewer changes; also, long-haul restricted tickets generally carry a more significant discount than short-haul restricted fares.
Quick-Hit Trips Providing employees with the flexibility to travel on the least expensive day of the week can cut costs of same-day round-trip airfares by more than 50 percent per trip, on average. In our analysis, the lowest same-day roundtrip fare between JFK in New York and San Francisco was, on average, $537 on Tuesdays, but jumped to $925 on Thursdays. Giving travelers this information can lead to considerable savings.
Forging Ahead Corporate travel managers should anticipate a continued evolution within the airline industry, with more unbundling of services and fees. As such, they must continue to identify creative cost-saving strategies, prove value and quantify financial return -- and monitor the impact any changes have on the company's bottom line.