Today, curbing costs is critical to competitiveness and even business survival. Because travel is the second-largest controllable expense at most firms, it is being subjected to intense scrutiny and, in many cases, significant cuts.
In a poll conducted by T&E Research in August -- before the depth of the nation's financial crisis was fully evident -- 45 percent of travel managers said their firms had reduced travel volume this year. When conditions worsened in October, more than a quarter of 196 travel managers surveyed by the Radnor, Pa.-based Business Travel Coalition said their firms had made additional "emergency" cutbacks in recent weeks, including travel freezes or further reductions in volume.
Clearly, it is time to take a hard look at travel's impact on the bottom line. But there's a good reason travel is such a huge cost to begin with: It is an investment that ultimately generates revenue for the organization. Are we really willing to close the door on potential revenue?
Following are a few steps companies can take to strike a balance between the objectives and desires of their travelers and the needs and budget of the company.
Steps for savings
First, take smart measures to be sure travel dollars are being used wisely.
1. Establish a "travel squad." Create a team that represents travelers from all parts of your organization, including operational staff, middle management, C-level executives, international employees, board members, schedulers and finance. The squad should be small enough to ensure effectiveness; its primary objective is to make decisions that will strike a balance between the different parties' needs.
2. Review policy. This is a good time to make changes. Some decisions for the travel squad's consideration:
• Connecting flights vs. nonstops. More companies are encouraging the use of connections within tighter thresholds. Within what price differential should you allow travelers to select nonstops vs. connecting flights?
• Alternative airports. Apply the same concept to set thresholds with regard to potential savings.
• Preferred suppliers. A solid travel policy should direct travelers to the organization's preferred airlines, hotels and car rental companies, within a certain price threshold. Define your commitment to these suppliers for increased savings.
• Hotel selection. Organizations are reducing their travel costs by defining expectations for hotels by brand or per diem. Should employees select a Hampton Inn or Days Inn, or can they go to a Ritz-Carlton or Four Seasons? What variables determine the appropriate level of property?
• Car size and type. Define the size and type of car for traveling alone and with customers, as well as refueling practices, insurance coverage, and when to choose limos or taxis.
• Advance purchasing. Booking early factors into fare calculations, so defining advance-purchase expectations can make a difference.
• Miscellaneous costs. What's acceptable with regard to dry cleaning, communication and entertainment costs?
Explain to executive leadership how the travel squad has come to these decisions. Together, determine under what C-level signature this communication will be delivered to employees.
Make department heads responsible for approving travel for their direct reports. Arm them with the tools to evaluate a proposed trip with respect to estimated cost and potential return on investment. For example, is it possible to boost ROI by having travelers visit more customers per trip?
Hold travel squad meetings regularly to react to market changes and internal business conditions.
Most important of all: Take a smart approach to travel. Now is the time for increased control and scrutiny, not knee-jerk actions that cut off bottom-line revenue potential.
Michael MacNair is the owner of MacNair Travel Management (macnairtravel.com), based in Alexandria, Va.