As organisation travel costs nose up, business are recognizing that much better cost-management techniques can make a distinction
US. business travel expenditures soared to more than $143 billion in 1994, inning accordance with American Express’ newest study on company travel management. Private-sector employers invest an approximated $2,484 per worker on travel and home entertainment, a 17 percent boost over the past 4 years.
Corporate T&E expenses, now the third-largest controllable cost behind sales and data-processing expenses, are under brand-new analysis. Corporations are recognizing that even a savings of 1 percent or 2 percent can translate into millions of dollars added to their bottom line.
Cost savings of that order make certain to get management’s attention, which is a requirement for this type of project. Involvement begins with understanding and examining the components of T&E management in order to manage and monitor it more effectively.
Hands-on management includes assigning responsibility for travel management, implementing a quality-measurement system for travel services utilized, and composing and dispersing an official travel policy. Just 64 percent of U.S. corporations have travel policies.
Even with senior management’s support, the road to savings is rocky-only one in three business has effectively set up an internal program that will help cut travel expenditures, and the myriad aspects of travel are so overwhelming, the majority of business have no idea where to begin. “The industry of travel is based upon info,” says Steven R. Schoen, creator and CEO of The Global Group Inc. “Until such time as a guest really sets foot on the aircraft, they’ve [just] been acquiring details.”
If that’s the case, information technology seems a practical place to work out those evasive, however highly sought-after, cost savings. “Technological developments in the business travel industry are permitting firms to realize the capacity of automation to manage and minimize indirect [travel] costs,” states Roger H. Ballou, president of the Travel Services Group USA of American Express. “In addition, many business are embarking on quality programs that consist of advanced procedure enhancement and reengineering efforts developed to significantly enhance T&E management procedures and lower indirect costs.”
As companies aim to innovation to make possible cost savings a truth, they can get extremely innovative about the methods they utilize.
The Great Leveler
Centralized booking systems were long the special domain of travel representatives and other industry professionals. But all that changed in November 1992 when a Department of Transportation ruling allowed the general public access to systems such as Apollo and SABRE. Travel-management software, such as TripPower and TravelNet, immediately sprang up, providing corporations insight into where their T&E dollars are being spent.
The software application tracks costs trends by interfacing with the corporation’s database and offering access to centralized booking systems that provide instant reservation details to airline companies, hotels and automobile rental agencies. These programs likewise allow users to produce electronic travel reports on expense savings with details on where discount rates were gotten, hotel and automobile use and patterns of travel between cities. Actual data provides corporations added leverage when working out discounts with travel providers.
” When you own the info, you do not have to go back to square one each time you decide to change agencies,” states Mary Savovie Stephens, travel supervisor for biotech giant Chiron Corp
. Sybase Inc., a client/server software leader with an annual T&E budget of more than $15 million, concurs. “Software provides us unmatched visibility into how staff members are spending their travel dollars and better take advantage of to work out with travel service suppliers,” states Robert Lerner, director of credit and corporate travel services for Sybase Inc. “We have much better access to information, quicker, in a real-time environment, which is expected to bring us big savings in T&E. Now we have control over our travel details and no longer have to depend solely on the companies and airline companies.”
The expense for this advantage depends on the volume of organisation. One-time purchases of travel-management software can range from under $100 to more than $125,000. Some software suppliers will accommodate smaller users by offering software piecemeal for $5 to $12 per booked journey, still a significant cost savings from the $50 market standard per transaction.
No More Tickets
Paperless travel is catching on faster than the paperless workplace ever did as both provider and customers work together to lower ticket prices for business tourists. Maybe the most cutting-edge of the advances is “ticketless” travel, which almost all significant airlines are evaluating.
In the meantime, travel service providers and firms are try out brand-new innovations to make it possible for travelers to book travel services by means of the Internet, email and unattended ticketing kiosks. Best Western International, Hyatt Hotels and numerous other major hotel chains market on the Internet. These services reduce the requirement for paper and offer much better service and such peripheral advantages as increased efficiency, enhanced tracking of travel expenses and trends, and cost reduction.
Dennis Egolf, CFO of the Veterans Affairs Medical Center in Louisville, Ky., recognized that the medical center’s decentralized place, a quarter-mile from the health center, made effectiveness tough. “We were losing production time and things got lost,” he says. “Every memo needed to be hand-carried for approval, and we needed seven different copies of each travel order.” As a result, Egolf attempted an off-the-shelf, paper-reduction software package designed for the federal government.
The software allows the health center to handle travel on-line, from tracking per-diem allowances and determining costs to creating cash loan types and licensing compensation coupons. The software also lets the hospital keep a running account of its travel costs and its remaining travel budget.
” Today, for all useful purposes, the system is paperless,” says Egolf. The software has actually helped the medical facility minimize document processing time by 93 percent. “The initial goal focused on handling employee travel without paper,” he says. “We have actually accomplished that objective, in part due to the efforts of the personnel and in part due to the accuracy of the software.”
With only a $6,000 investment, the healthcare facility saved $70 each worker trip and saved almost half of its $200,000 T&E budget plan through the paper-reduction program.
Combination of business travel plans by fewer agencies has been a growing pattern considering that 1982. Almost 3 out of four companies now make travel plans for their company places through a single firm as opposed to 51 percent in 1988. Two significant advantages of agency consolidation are the assistance of accounting and T&E budgeting, as well as take advantage of in negotiating future travel discounts.
A significant technological advance that enables this combination trend to thrive is the introduction of satellite ticket printers (STPs). Using STPs allows a travel bureau to combine all operations to one home office, and still send all essential tickets to numerous places quickly via numerous wire services. As the term suggests, the machinery prints out airline tickets on-site instantly, removing shipment charges.
For London Fog, STPs are a true blessing. London Fog’s annual T&E budget plan of more than $15 million is split similarly between its 2 areas in Eldersburg, Md., and New York City. Each location purchases the same number of tickets, so equal access to ticketing from their company is a must. With an STP in their 2 places, the company services both offices with one company in Baltimore. Each workplace has access to instant tickets and still manages to save by not having to pay courier and express mail charges that can range as much as $15 for each of the more than 500 tickets each purchases every year.
Conde Nast Publications’ annual T&E budget plan of more than $20 million is allocated among its areas in Los Angeles, San Francisco, Chicago, New York and Detroit. Given that 1994, travel arrangements have been dealt with by a central agency, Advanced Travel Management in New York City, by setting up an STP in each of these 5 places. In addition to increased performance due to consolidation, Conde Nast now has the capability to alter itinerary at a moment’s notice and have new tickets in hand quickly.
The genuine benefit is that the machines are owned and maintained by the travel agency., so there is no charge to the company. Due to the significant expense included, however, STPs remain an option just for major ticket purchasers. “STPs are a viable alternative in this process for any place that purchases more than $500,000 per year in tickets,” states Shoen.
As airfare averages 43 percent of any company’s T&E costs, cost savings obtainable through the numerous uses of technology have ended up being dramatic. For instance, the capability of corporations to collect and analyze their own travel patterns has resulted in the production of net-fare purchasing-negotiating a price in between a corporation and an airline company to purchase tickets that does not consist of the added expenses of commissions, overrides, deal charges, firm deal charges and other discount rates.