The Benefits a Managed Travel Program
Brings to Your Company
written by Marina Velikova for the
National Business Travel Association

In a time when videoconferencing has become a reality, Internet trip booking has gained popularity, and the economic recession compels companies to cut travel costs, some senior mangers might have called into question the role and value of the managed travel program at their companies. The decision whether to have such a program or not may depend on the specific circumstances at each company but it is essential that those involved in the decision making process are familiar with the full array of benefits that travel management brings to a company.

Talking to representatives of several different organizations from all over the country, NBTA has found out that managed travel programs still bring significant benefits to companies. Both travel and senior managers shared that travel is still an essential part of doing business and that the role of the corporate travel department extends well beyond simply booking flights. As it became clear, travel management ensures cost tracking and control, facilitates adherence to corporate travel policies, realizes savings through negotiated discounts, and serves as a valuable information center for employees and managers in times when travel is not as smooth and carefree as it used to be.

Cost Control and Policy Adherence

Since the cost of travel is a corporation's second or third largest controllable expense, monitoring and analyzing travel expenditures is essential for realizing cost cutting opportunities. When senior managers at Mitretek, a non-profit research and consulting organization, gathered last year to discuss the importance of their managed travel program, they came to understand that it was a valuable cost-control tool. "You can control costs only if you have the information that you need," says William Franklin, travel manager at Mitretek. "Our senior management realized that a managed travel program was a necessity. They were 100% behind the decision to continue with it." And Mitretek is not the only organization realizing this benefit.

Cost control and tracking have been pointed out by all companies as an important reason for and benefit of having a managed travel program. Gathering travel data and setting up lean travel policies is important but it is only the first step to realizing actual financial benefits. Policy adherence is the other essential factor. Although some companies in search of fare discounts contemplate allowing employees to book their trips independently on the Internet, many avoid this costly path because corporations might loose control over adherence to corporate travel policies. Having a centralized travel department can induce employees to travel the way management recommends.

Starting this year for example, Iomega, a worldwide technology corporation of about 2,000 employees, is introducing a cost-cutting travel policy and its travel department plays an essential role in implementing it. Booking through the corporate program, all employees traveling overseas will be getting economy instead of business class tickets. "Travel management can empower corporate managers by giving them visibility to costs and patterns within their department and helping them find solutions to trim their budgets while still getting their job done," says Antoinette Cirone, Travel Program Coordinator at Iomega Corporation.

The Bottom Line: Managed Travel Program Costs vs. Company Travel Savings

Control over costs and policy implementation is needed, but at what cost? Is it feasible to have a managed travel program now that videoconferencing is an alternative to travel and that the Internet offers unprecedented travel deals?

Yes, managers say, it is still worth having it. "It takes away the need for employees to handle their own arrangements," says Anne Englander, a senior manager at International SEMATECH, a Texas-based international research consortium of thirteen semiconductor manufacturing companies, with 600 employees. "It takes advantage of supplier discounts… and it pays for itself through cost avoidance and negotiated revenue streams [rebates, incentive payments, etc.] On average we realize negotiated savings of 15%, that is, cost avoidance for air, car and hotel," shares Englander.

At Oki Data Americas Inc., savings realized through the corporate travel program account for even larger percentage of about 30%-40%, according to David Jones, Manager of Corporate Services. A subsidiary of a Japanese corporation, Oki Data Americas Inc. markets printers and facsimile products to businesses in North and South America. About 200 of its 500 employees travel during each year, taking mainly customer-related trips for sales, training, support, and other purposes. "We do use videoconferencing," says Jones, "but travel still plays an important role in doing business at our company. Face-to-face contact is essential for our business relationships with our best customers."

Other companies, however, might have different ways of doing business, which prompt them to look for alternatives to managed travel programs. They might be lured by low Internet fares to let employees shop online for themselves. Such an approach might seem to be a feasible alternative to a corporate travel program but it hides some potential disadvantages that experienced travel managers warn about, and that a senior manager might want to consider.

Although employees occasionally find online fares cheaper than those negotiated through the corporate travel program, Internet deals are usually highly restrictive and therefore not appropriate for business travelers. Cheap Internet fares are often rigid in terms of schedule options, and does not have favorable refund and upgrading polices. While a few employees can strike a deal, many others may have to purchase services at much higher price if their schedules do not fit the deal options.

In addition, when business trips need to be rescheduled urgently, the company might end up not only losing the savings but also actually incurring a loss due to non-refund policies and penalties. Adding the fact that arranging a trip is a time consuming process taking employees time, it turns out that in most cases the overall savings from a managed travel program outweigh those from independent Internet purchasing.

Beyond the Immediate Impact on the Bottom Line

While the monetary benefits of a managed travel program to a company are clear, there are also valuable strategic, non-monetary benefits that are less visible. At least they were before the tragic events on September 11th. On that unfortunate day, travel managers at all levels realized the enormous non-monetary benefits of their corporate travel departments and the value of the human factor. "The importance of being able to contact our travelers and report on their well-being was recognized by our executive staff as they communicated with the rest of the company," says Antoinette Cirone. "The role of the travel department can now be seen as a critical segment of any crisis management plan." And there is little doubt that any senior manager would agree with her opinion.

The new security policies and constant changes in the travel industry have changed the macro environment in which companies operate and have expanded the role of the corporate travel department. Its role as a provider of critical information is now more important than ever before. Mark Johnson, Corporate Travel Manager at Cessna Aircraft Company, describes this recent change: "The role of the department has further evolved into an information center that provides valuable insights on how to save money when traveling, and allows the company to know specifically where any traveler may be located when on the road conducting business."

Clearly, management at Cessna Aircraft Company has recognized the full array of benefits that a managed travel program brings to their organization. Thus, Cessna has developed a new approach to corporate travel. As Johnson says: " Since the September 11th incident, all travel must be booked through the travel department - no exceptions what-so-ever."