Are travel management companies causing increased travel costs? One of the measures used for benchmarking Corporate Air travel is the average savings achieved against the published fares and, while organisations recognise that this savings methodology is not necessarily the best, it has been applied consistently and is useful to track savings over time.
The graph below shows the average savings achieved across a wide range of SA corporations in various industry sectors: (Purchasing Index (PI) has been using this as a method to benchmark domestic air travel for SA organisations for a number of years.) The trend in savings applied to each organisation that participated in the PI benchmarks – all organisational savings increased in the period June to September 2006, fell in February to April 2007 and rose again in July to October 2007.
Travel Management companies the cause?
“What was the cause of this trend?” Asks Alan Low, MD at Purchasing Index. He told SmartProcurement that “All participants use Travel Management Companies (TMC): Were the TMCs attempting to increase their income towards the end of the year (by increasing the overrides from the main airlines)? If that is the case, how can client organisations be sure that TMCs are helping to enforce cost management in domestic air travel spend? Or, perhaps, it is partly as a result of the volume of leisure traffic in the summer months?”
“In any case organisations need to press their TMCs to explain why this is happening and to make their operational methods more transparent.”
A further cause of lost savings opportunities is the high number of late or changed bookings that are still very prevalent in most SA organisations. Not all organisations measure ticket changes, but some of the findings are:
• up to 55% of initial itineraries change, and
• up to 50% of issued tickets change.
Organisations that are able to book in advance regularly show the highest savings achieved in PI benchmark reports.
In addition, use of low cost airlines can materially increase savings. With the increasing number of daily flights available on weekday major domestic routes, PI expects more organisations to change their internal policies for certain types of travel to take advantage of these reduced airfares.
Alan Low can be contacted on
Cell: +27 84 890 0005
Email: alan@pricetrak.co.za
