How to Cut Employee Travel Costs
No company wants to waste money on travel, but most don’t have a plan for how to manage this major expense. If you’re looking to get a handle on travel spending at your company, you’ve come to the right place. Read on below to see the steps – some big, some small – that any company should follow to reduce its travel expenses.
1. Find the right travel management style.
Travel management style refers to the different ways a company can set up a system for overseeing employees’ trips. A company’s size, industry, trip volume, and employee demographics all impact how complex its travel management needs are.
For some organizations, it makes sense to work with a travel management company (TMC). A TMC provides booking support (either online or via an agent) and negotiates discounted rates with vendors. This can be a significant source of cost-savings, especially for large companies with major travel volume.
Other organizations prefer to avoid travel management fees by having employees to book their trips online. “Open-booking” is a flexible system, but it presents challenges, such as capturing relevant expense data and supporting employees when travel plans changes unexpectedly. If your company does allow open booking, educate employees on how they can find the best deals online using bundled packages and direct vendor booking.
2. Improve travel policy compliance.
A official travel policy reduces expenses by setting clear guidelines for expected spending. However, even the best-designed policy will be ineffective without employee buy-in. A 2015 survey conducted by the Association of Corporate Travel Executives found that 72% of travel managers have not yet achieved their desired travel policy compliance level. Why is that?
In many cases, employees might not be aware their company has a travel policy, let alone know what it says. Travel and expense (T&E) policy is often mentioned during new employee on-boarding, then never again. But T&E is too important to be kept out of sight and out of mind. That’s why it’s important to involve employees in periodic policy reviews. Learn what’s working well and what could be improved, then have executive leadership communicate the updated policy throughout the entire organization (not just to new employees). Policy compliance is an ongoing project, and employees will be more willing to help a company achieve its travel management objectives if they’ve been involved in the conversation.
3. Increase advance booking.
When it comes to booking a business trip, good things don’t come to those who wait. One analysis of employee expense data from Concur found that tickets booked fewer than seven days before departure cost an average of 44% more than if it they had been booked 15 or more days in advance.
Though last minute business travel is sometimes unavoidable, there are measures a company can take to get employees to book in advance. Requiring trip pre-approval can drastically reduce instances of last-minute booking, but also creates additional work for managers. A less drastic approach would be to ask employees to get in the habit of planning their travel for the month ahead. It’s common for companies to send monthly reminder emails about expense reimbursement; extending this practice to travel booking can yield major costs savings.
4. Encourage employees to book on the cheapest day.
Airfares don’t just increase as the departure date draws near, they also fluctuate throughout the course of a given week. A company can reduce its travel costs by encouraging employees to book when prices are cheapest: Tuesday afternoon, according to data from FareCompare.
Creating a standardized booking process helps save time and money: download a copy of Rocketrip’s Essential Travel Booking Toolkit to set up your own easy-to-follow system.
5. Create common-sense spending guidelines.
Spending caps often backfire. No single number can accurately reflect all the factors that determine how much a given business trip should cost. Prices vary based on the specific itinerary, seasonal demand, and how far in advance the trip is booked. Static spending allowances invariably miss the mark: they’re either too tight for employees to find suitable flights and hotels, or too loose to reduce costs.
It’s more effective to give employees clear examples of travel spending that is policy compliant. For instance, rather than drawing an arbitrary line on nightly hotel costs, specify the type of hotels that employees should consider on their trips (e.g. four star, three star, two star). Better yet, ground these guidelines in representative examples (e.g. the Hilton, the Courtyard by Marriott, the Holiday Inn). Since flight and hotel prices are unpredictable, it’s impossible to mandate exactly how much employees should spend. But it is possible to give employees an idea of what spending will be considered reasonable.
If you’d like to learn about reducing travel costs using smart spending guidelines, read more about Rocketrip’s algorithmic budgeting.
6. Update cabin class rules.
Travel policies usually contain rules governing when employees can fly business class instead of economy. But these guidelines are rarely detailed enough to address the expanded range of fare classes that airlines have added in recent years.
In addition to the familiar options of first class, business class, and economy, travelers can now choose premium economy and basic economy, not to mention the niche classes offered only on some routes (here’s one example from Delta). More choice means more potential for confusion. But it also presents an opportunity for employees to find options that are more comfortable than economy, and still more affordable than traditional business class.
7. Reduce ground transportation costs.
Expense data from Certify shows that Uber and Lyft have overtaken taxis and rental cars in use among business travelers. These ride hailing services also boast a lower average cost per trip. Yet many companies haven’t updated their travel policies to permit their use. Encouraging use of affordable ground transportation options (including public transportation) can reduce costs in this often-overlooked expense category.
Rocketrip cuts a company’s travel costs by motivating employees to spend less on their flights, hotels, and rental cars. Our algorithms generate custom trip budgets based on the prices of available options that fit an employee’s itinerary and his company’s travel policy. If the employee comes in under budget, he keeps half of the difference.With this incentive to spend carefully, business travelers become cost-conscious and look for ways to save. They book the flight with the lowest available fare, choose affordable hotels, or even eliminate hotel expenses altogether by staying with friends and family. It’s an incentive-based approach to managing expenses that reduces trip costs by an average of 30%.
Check out these case studies to learn how it works in practice.