As business travel expenses nose upward, companies realize that better value management techniques will make a difference
Companies of Travel Expenses
US. Company travel expenses rocketed to more than $143 billion in 1994, in line with American Express’ most current survey on business travel management. Private-sector employers pay an estimated $2,484 per employee for travel and entertainment, a 17 percent increase over the past four years.
Company T&E costs, currently the third-largest controllable expense behind sales and data-processing prices, are under new scrutiny. Corporations realize that even a savings of 1 p.c or 2 % will translate into a lot of greenbacks added to their bottom line.
Savings of that order are positive to induce management’s attention, which is a demand for this sort of project. Involvement begins with understanding and evaluating the components of T&E management to regulate and monitor it more efficiently.
Hands-on management includes assigning responsibility for travel management, implementing a high-quality measurement system for travel services used, and writing and distributing a formal travel policy. Only 64 percent of U.S. companies have travel plans.
Even with senior management’s support, the road to savings is rocky solely one in three firms has successfully instituted an enclosed program that can help cut travel expenses, and therefore the multiple aspects of travel are thus overwhelming, most firms don’t apprehend where to start. “The business of the trip is predicated on information,” says Steven R. Schoen, founder and CEO of The Global Group Inc. “Until a passenger sets foot on the plane, they’ve [solely] been buying information.”
If that’s the case, information technology looks a viable place to hammer out those elusive, however highly sought once, savings. “Technological innovations in the business travel industry are permitting firms to appreciate the potential of automation to manage and cut back indirect [travel] costs,” says Roger H. Ballou, president of the Travel Services Group USA of American Express. “Also, several companies are embarking on quality programs that embrace sophisticated method improvement and reengineering efforts designed to improve T&E management processes and reduce indirect costs substantially.”
As companies look to technology to make potential savings a reality, they’ll get very creative about the ways they employ.
The Great Leveler
Centralized reservation systems were long the exclusive domain of travel agents and other business professionals. However, all that changed in November 1992 when a Department of Transportation ruling allowed the public access to systems like Apollo and SABRE. Travel-management software, such as TripPower and TravelNet, immediately sprang up, providing firms insight into where their T&E dollars are being spent.
The software tracks spending trends by interfacing with the corporation’s database and providing access to centralized reservation systems that offer immediate reservation data to airlines, hotels and car rental agencies. These programs additionally enable users to generate computerized travel reports on price savings with details on where discounts were obtained, hotel and car usage and patterns of travel between cities. The actual information offers companies added leverage when negotiating discounts with travel suppliers.
“When you own the information, you do not have to go back to face one each time you opt to change agencies,” says Mary Savoie Stephens, travel manager for biotech giant Chiron Corp.
Sybase Inc., a client/server software leader with an annual T&E budget of more than $fifteen million, agrees. “Software offers us unprecedented visibility into how the staff is spending their travel dollars and higher leverage to barter with travel service suppliers,” says Robert Lerner, director of credit and corporate travel services for Sybase Inc. “We tend to have better access to data, faster, in a real-time setting, which is predicted to bring us huge savings in T&E. Now we tend to have management over our travel information and now not should depend solely on the agencies and airlines.”
The cost for this privilege depends on the amount of business. One-time purchases of travel management software will run from beneath $1000 to a lot of than $125,000. Some software suppliers can accommodate smaller users by selling software piecemeal for $5 to $12 per booked trip, still significant saving from the $50 trade norm per transaction.
No Additional Tickets
Paperless travel is catching on faster than the paperless workplace ever did as each service providers, and shoppers work along to reduce price ticket costs for business travelers. Perhaps the foremost cutting-edge of the advances is “ticketless” travel, which virtually all the leading airlines are testing.
Within the meantime, travel suppliers and agencies are experimenting with new technologies to enable travelers to book travel services via the Internet, e-mail and unattended ticketing kiosks. Best Western International, Hyatt Hotels, and many other major hotel chains market on the Web. These services cut back the need for paper and supply higher service and such peripheral advantages like increased efficiency improved tracking of travel expenses and trends, and cost reduction.
Dennis Egolf, CFO of the Veterans Affairs Medical Center in Louisville, Ky., realized that the medical center’s decentralized location, one / 4-mile from the hospital, created efficiency difficult. “We tend to be losing production time, and things got lost,” he says. “Every memo had to be hand-carried for approval, and we needed seven entirely different copies of each travel order.” As a result, Egolf tried an off-the-shelf, paper-reduction software package designed for the federal government.
The software allows the hospital to manage travel on-line, from tracking per-diem allowances and calculating expenses to generating cash advance forms and authorizing reimbursement vouchers. The software additionally lets the hospital keep a running account of its travel expenses and its remaining travel budget.
“Today, for all sensible functions, the system is paperless,” says Egolf. The software has helped the hospital cut back document processing time by 93 percent. “The original goal centered on managing employee travel without paper,” he says. “We tend to have achieved that goal, in half thanks to the efforts of the employees and the half thanks to the accuracy of the software.”
With solely a $6,000 investment, the hospital saved $70 each employee trip and saved almost half of its $200,000 T&E budget through the paper reduction program.
Consolidation of company travel arrangements by fewer agencies has been a growing trend since 1982. Nearly three out of 4 firms currently create travel plans for their business locations through 1 body vs. 51 percent in 1988. Two upper edges of agency consolidation are the facilitation of accounting and T&E budgeting, in addition to leverage in negotiating future travel discounts.
A significant technological advance that permits this consolidation trend to flourish is that the introduction of satellite ticket printers (STPs). Using STPs enables a travel agency to consolidate all operations to at least one home office, and still send all necessary tickets to various locations instantly via various wire services. As the term implies, the machinery prints out airline tickets on the website immediately, eliminating delivery charges.
For London Fog, STPs are a blessing. London Fog’s annual T&E budget of additional than $fifteen million is split equally between its two locations in Eldersburg, Md., and New York City. Each site purchases the same number of tickets, so equal access to ticketing from their agency may be a must. With an STP in their 2 locations, the company services both offices with one firm in Baltimore. Every office has access to live tickets and still manages to save by not having to pay courier and express mail charges that may range up to $15 for every of a lot of than five hundred tickets every purchase annually.
Conde Nast Publications’ annual T&E budget of more than $20 million is allocated among its locations in Los Angeles, San Francisco, Chicago, New York and Detroit. Since 1994, travel arrangements have been handled by a centralized agency, Advanced Travel Management in New York City, by putting in an STP in each of these five locations. Besides increased efficiency due to consolidation, Conde Nast currently will amendment travel plans at a moment’s notice and have new tickets in hand instantly.
The real profit is that the machines are owned and maintained by the travel agency., so there’s no value to the company. Thanks to the first expense concerned, but, STPs stay an option solely for significant price ticket purchasers. “STPs are a viable possibility during this process for any location that purchases more than $five hundred,00zero per year in tickets,” says Shoen.
As airfare averages 43 percent of any company’s T&E expenses, savings obtainable through the various uses of technology became dramatic. For example, the ability of companies to gather and analyze their travel trends has led to the creation of internet-fare buying-negotiating a value between a company and an airline to purchase tickets that do not embody the added expenses of commissions, overrides, transaction fees, agency transaction fees and different discounts.
Although most major U.S. carriers publicly proclaim that they do not negotiate company discounts below printed market fares, the American Categorical survey on business travel management found that thirty-eight percent of U.S. companies had access to, or already had implemented negotiated airline discounts. The availability and mechanics of these arrangements vary widely by carrier.
What’s the Value?
Fred Shaffer, a transportation manager for Hewlett-Packard and a robust advocate of the online pricing system, has pioneered the concept of fee-based mostly pricing with travel-management companies below contract with H-P. He states that H-P that spends additional than $528 million per year on T&E plans to have all air travel based mostly on internet-fare pricing. “Currently, we tend to have several internet fares at various stages of the agreement,” he says. “These fares are negotiated with the airlines at the company level, then trickle down to each of our seven countries.”
Frank Kent, a Western regional manager for United Airlines, concurs: “United Airlines participates in corporate volume discounting, like bulk price tag purchases, however not with web pricing. I have nevertheless to see one web-fare agreement that produces sense to us. We have a tendency tore not opposed to it. However, we just do not perceive it right now.”
Kent stresses, “Airlines ought to approach firms with long-term strategic relationships rather than just discounts. We would love to see ourselves committed to an organization rather than directly concerned.”
As business travel expenses nose upward, corporations realize that better price management techniques can make a distinction.
US. Company travel expenses rocketed to a lot of than $143 billion in 1994, in keeping with American Express’ most current survey on business travel management. Private-sector employers pay an estimated $2,484 per employee for travel and entertainment, a 17 p.C increase over the past four years.
Corporate T&E costs, now the third-largest controllable expense behind sales and data-processing prices, are under new scrutiny. Firms realize that even a savings of one percent or two % can translate into many bucks added to their bottom line.
Savings of that order are sure to induce management’s attention, which may be a demand for this type of project. Involvement begins with understanding and evaluating the components of T&E management to manage and monitor it a lot of effectively.
Hands-on management includes assigning responsibility for travel management, implementing a high-quality measurement system for travel services used, and writing and distributing a proper travel policy. Only 64 percent of U.S. companies have travel plans.
Even with senior management’s support, the road to savings is rocky-solely one in 3 corporations has successfully instituted an internal program that can help cut travel expenses, and the multiple aspects of travel are therefore overwhelming, most companies do not apprehend where to start out. “The industry of the trip is based on the info,” says Steven R. Schoen, founder and CEO of The Global Group Inc. “Until a passenger sets foot on the plane, they’ve [only] been purchasing information.”
If that is the case, data technology looks a viable place to hammer out those elusive, however highly sought when savings. “Technological innovations within the business travel industry are allowing corporations to appreciate the potential of automation to regulate and cut back indirect [travel] prices,” says Roger H. Ballou, president of the Travel Services Group USA of American Express. “Also, many firms are embarking on quality programs that include sophisticated process improvement and reengineering efforts designed to improve T&E management processes and scale back indirect costs substantially.”
As firms look to technology to make potential savings a reality, they will get very creative concerning the methods they use.