“We often receive inquiries from companies seeking guidance on managing their travel costs”, Kevin Lomax, Managing Director of Wings Travel tells SmartProcurement. “To answer this question, we have a discussion that helps us understand the Total Cost of Travel and the drivers of said cost components throughout the travel service lifecycle.”
Strategic Context
“Firstly, we need to understand the strategic context of travel within the organisation. Understanding the identity of the company is paramount. Firsthand insights from individuals within the organization are irreplaceable in order to grasp company purpose, values, market presence, and customer base, allowing us to align the travel service with their identity effectively, “ he says.
Specification development
“We then find out their reasons for traveling. Understanding if they travel for sales meetings, conferences, branch visits, supplier engagements, maintenance work etc., helps us understand what type of service configuration is needed. It helps us understand who the travelers are. Whether they are C-level executives, engineers, sports people or sales managers we focus on the traveler profiles and configure them according to policy and rules. “
“Once we understand the why, we can start to understand the where. Do they travel domestically, regionally or internationally? Taking this detail down to exact locations. We also ask about the future. Do they expect to be expanding to new markets? Where do they see changes in future? These first three parts of discovery are often quite easy. Passionate employees love to talk about their company, displaying their knowledge of why staff travel and the destinations and regions. “
Total Cost Management
“When we get to the “how much” question it is often where we find a lack of insights on the client side. Even if they have some estimates of travel spend, it is often at a high level and not at sufficient detail to address cost drivers.
This is when we spend time with our customers on the concept of Total Cost of Ownership. It forms an important part of monthly and quarterly reporting, with insights derived from multiple sources to give a consolidated picture as indicated below:”
Why Do Companies Not Have Insight?
Multiple data sources
“If travel management is shared across Travel Management Companies (TMC’s) due to regional or decentralized models, it is very hard to consolidate data to develop insights. Consolidation and centralization is a solution to this.
Forms of payment
Often a company will have multiple forms of payment:
- Lodge card for air
- Billback for land arrangements
- Settle direct (card in wallet) for certain travelers
We often talk to customers about forms of credit and forms of payment. Consolidating credit with a lodge card issuer puts the liquidity management in the right environment, while still allowing the TMC to be the preferred form of payment, using our channels, technology and supplier relationships. “
Reporting platforms
“Not many companies have access to sophisticated travel management and reporting platforms. Often relying on taking in data from multiple sources and consolidating into Microsoft Excel. Modern reporting platforms such as Wings Analytics simplify this exercise for customers and enable configuration of user interfaces,” says Lomax.
Travel category
A common reason for not having granularity is that companies don’t use expense and other category codes when making travel bookings. Was the trip for sales? Was it a conference? Was it maintenance at the customer site? Making category code set up part of the implementation is a way to resolve this, and keeping codes updated through self-service platforms or through the TMC is important for managing travel expenses.
Benchmarking and ROI
Once a company has an understanding of TCO, what can they do with these insights? Whilst travel as a spend category is often low in comparison to other procurement categories in many organisations, it is still important to find ways to measure the ROI on travel spend and benchmark against peers. And coming out of lockdowns, companies are probably finding that travel expenses are growing at an exponential rate with high inflationary drivers.
In the 2023 Business Travel Index, GBTI published useful data on industry sales and business travel spend. Below is an extract:
If you are a company in the wholesale trade sector and your travel spend makes up less than 0,69% of sales, you may ask yourself if you are at risk of not traveling enough to grow and manage the business. If your spend is significantly higher, it probably warrants a review and cost containment strategy.
“It is forecast that global business travel spend will reach $1,8 trillion by 202, therefore all organizations should be very focused on understanding, managing and achieving a positive ROI on their travel TCO,” Lomax concludes.
