- June 13, 2017
How to reframe the way your business measures travel to optimise spend.
In order to support commercial success, travel departments are often tasked with trying to decrease costs. Unfortunately, this usually results in a travel programme riddled with inefficiencies and poor standards for employees.
From urging travellers to share rooms to focussing too heavily on negotiated TMC rates, the wrong approach to cost-savings in business travel can have far-reaching consequences.
The link between travel and increased sales
Do you believe that you can have an impact on sales? If you understand the links between travel and sales increases, the business will alleviate short term cost cutting.
Research suggests that the average business will see a $15 increase in sales for every $1 spent on travel. Imagine being in possession of that knowledge as a travel manager, or understanding that cutting travel costs too far has proven to have a negative effect on sales.
By swapping cost for value, you will feel less pressure to cut and be more inclined to drive ROI. And, while the law of diminishing returns certainly applies, by understanding the value of business travel, your organisation can establish the link between spend and increased revenue.
To do this, you need to invest in the link between your travel data and sales data. Join up systems and departments and you’ll see how the travel department can become an extended member of the sales team.
Connecting the investment with the return
Sometimes, it pays to take a broader view. Rather than looking at cost reduction, you should be thinking about how your actions will help build the business.
For example, if you know the target revenue for next year, you can pitch it against the cost of sending people on client-facing trips. This way, travel becomes a true cost of sale; can the same revenue be achieved with fewer trips?
Your business will have a way of calculating the cost of sale, but it needs to ensure travel is viewed as that, rather than purely an overhead.
Two kinds of trip
Investments are typically viewed in one of two ways; either a purchase that will appreciate in value (i.e. shares), or spend on a development that increases the capacity to make money (i.e. new equipment).
Business travel ROI usually falls into the latter category, but just as there are two types of investment, there are two kinds of trip.
Consider the business that sends a team of British network engineers to the USA in order to address an infrastructure issue. Such a cost would be seen as a necessity, but incapable of bringing in more revenue.
However, if they were to instead send a team of engineers who are based in the USA, the cost of travel might be reduced. The spend could therefore be considered an investment, rather than a way of maximising value, and any incremental revenue generated as a result viewed as positive ROI.
Linking travel cost-savings and business strategy
Decisions based around cost-cutting are normally reactive, because they’re only made when a business already has a problem.
Every travel cost-saving measure needs to be connected to the business strategy; costs should only be cut if they don’t support the strategy, and be followed by a proactive approach to redirect the resources where they’re needed:
- Speak with your local teams to identify where trip consolidation is sensible. This will avoid the common error of misinterpreting the link between strategy and travel cost-savings, which usually results in high performance units being starved of resources
- Provide you with a deep understanding of the costs you control. Just like the head of sales, the you needs to have an in-depth knowledge of the kind of client meetings that can be conducted remotely rather than in person
Travel spend can only be prioritised if your business reframes how it measures travel.
Want to find out more? Read our latest guide: How to Improve Travel Management Cost-Savings. It’ll give you the inside scoop on how to bring true value to your organisation, through your travel management programme.