Business travel can be expensive. Saving money on business travel requires effort from all employees, not just a new top-level approach. From the finance manager looking to reel in yearly costs, to the travel manager bogged down with details and wanting to please coworkers, to the weary traveler who may feel the need to spend more in a pinch — this is a team effort.
How to be more cost-effective in business travel
The primary method to cost saving during business travel is to set an accurate, reasonable expense rule in your business travel policy.
The second most effective saving method is having an adequate travel insurance policy for corporate travel. Find out everything you need to know about business travel insurance here.
Without sacrificing comfort and quality, here are our tips for cutting costs in each of the necessary areas of corporate travel:
- Saving money on flights - It may seem counterproductive, but paying extra for flexible business flights can save thousands on travel costs annually. While travel websites are a good place to start searching for airfares, we recommend you check the airline’s website before making your payment, as often they offer similar rates for flights without the added service costs of travel websites. It’s wise to plan well in advance to get the best deals on flights.
- Saving money on accommodation - When selecting your hotel for business travel, be sure to select a room that includes complimentary Wi-Fi, free breakfast and provides free access to meeting/conference rooms. It may also be beneficial to select a hotel that offers free parking as well as free cancellation in place of urgent trip changes. Booking in advance will also help save costs.
- Saving money on rental cars - To save money on corporate car rentals, you should consider avoiding rental agencies at airports, as they often charge a daily airport tax as high as 25% of the total cost. Also, some business credit cards cover rental car insurance. Booking well in advance will help save costs.
- Saving money on meals - Booking a hotel with breakfast included is one of the best ways to cut food and meals costs during business travel. When restaurants are necessary for meeting with a client, recommend lunch meetings as lunch meals are often less expensive than dinner meals with similar portion sizes.
Business travel strategy can help you manage cost
Without understanding the link between strategy and travel cost-savings, reduction targets are often set so that each business unit takes on its ‘fair share’ - regardless of whether or not this aligns with the strategy. As a result, this can starve high performance units of resources they need to grow and leave some underperforming units with more than they need.
For travel managers to make effective cost-cutting decisions, they need the insight to understand the reasons for the travel costs. For example, only someone like the country sales manager has the in-depth knowledge to know which client meetings need to be face-to-face and which can be done by alternative means, like video conferencing.
When meetings need to be face-to-face, costs can further be reduced with an increased choice of hotel options, including more bespoke hotels and B&B options that both appeal to the traveler but are also cheaper than corporate hotels.
It’s only by working with these internal stakeholders and understanding the strategic priorities that you can uncover where to prioritize travel spend. The same thinking applies when looking to consolidate business trips. While there’ll be occasions where it makes sense to combine or extend business trips to save on costs, it won’t always make business sense. For instance, arranging to meet more than one client when traveling could save the cost of an extra flight or night in a hotel.
However, if there are unexpected delays, which means the second meeting is cancelled, or travelers are too tired to perform well in the meeting, the cost saving isn’t necessarily the right decision. Again, speaking with local teams will help you identify where trip consolidation makes sense and where it will cost more than it’ll save.
How to manage hidden business costs
Travel managers usually have a good handle on the headline costs of business travel, like food and drink, flights and accommodation. Even in instances when these are purchased out of policy, it’s possible to reconcile the information through corporate credit card data and expenses reports - though this is not an ideal situation. However, there are many ‘hidden’ costs associated with business travel that aren’t as easy to monitor. These include:
- International sales taxes - These can be reclaimed on some purchases, but need to be monitored for this to happen.
- Mobile charges for out of contract uses - Upgrading employee contracts before trips can help to save on data and other call charges.
- Tipping - Depending on local custom, tipping can add up to 20% to the cost of food and drink. Including guidance on tipping in your travel policy is one way to manage this cost. Also, encouraging tips to be paid on corporate credit cards will give more visibility on how much has been spent.
- Seasonal cost fluctuations - Local holidays, national celebrations and even large business conferences can all drive up room occupancy rates and overall travel costs. If travelers don’t need to be in a location during a peak time, delaying trips can reduce the cost.
- Paper/manual processes - It’s not just travelers that can add to the hidden costs of a travel program. According to a report by Certify, 20% of enterprises are still using some form of manual process (either paper or spreadsheet) to manage their travel and expenses data, making mistakes and reporting errors more likely.
- Currency conversions - In what currency is the spend made and in what currency is it expensed? Any discrepancies?
- Time - How long does it take for employees to book their travel? Improving the booking user experience can reduce cost in terms of employee time.
The main problem with these hidden costs is that they cause gaps in your spend data, which can lead to the following:
- Exceeding your travel budget, because you don’t have visibility over all your costs
- Less effective supplier negotiations, as you don’t have a complete view of everything being spent with a supplier
- Issues with duty of care fulfilment, as you don’t know where travelers are staying, which makes it harder to contact them in an emergency
To manage travel spend, you have to know what data to look for and where to find it.
How to set your business travel budget
An important factor in cost-savings is having an effective budget in place. For travel managers, knowing the best way to budget for your organization can be the difference between keeping costs down and seeing them spiral out of control. Try these 4 tips for setting your corporate travel budget:
- Fixed budgeting - Planned ahead of a set period of time, a fixed budget is a set amount allocated to cover the expected expenditure.
- Flexible budgeting - Budgets are set for a period of time, but these can be changed during the period of time, to reflect demand.
- Performance budgeting - Budgets are allocated to fund activities that contribute to business goals. It’s not designed to punish or reward any business unit, but performance budgets focus on working towards a common goal. This approach makes it easier to justify budgetary changes to meet business needs. It’s often used in the public sector, but can be applied to the private sector.
- Zero-base budgeting - All expenses must be justified for each new period. Under this approach, each business unit is assessed for its needs and costs. Budgets are then created based on what is needed for the upcoming period, regardless of whether this is higher or lower than previous budgets.
Benchmarking your business travel costs
Establishing the type of budget to use is only part of the puzzle. The other piece is setting a benchmark for your travel budget. There are several types of business travel budget. Find out which best suits your need:
- Historical spend data - Set your budget based on what you’ve spent in previous years.
- Annual budgeting allocation - Through an annual budgeting process, a set amount is allocated to cover travel and expenses.
Making cost-savings to your travel program is never going to be easy. You’re trying to provide value to the business without breaking the bank or being too restrictive. There’s no single approach to control costs. But bringing a fresh approach to cost-savings, by refocusing on your strategy, and rethinking how you set your travel budget, it’s possible to gain greater insight that allows you to make informed decisions on your costs. It’s about working to understand the needs of the business and creating an approach to cost-savings that brings true value to the organization.
As part of a travel cost-saving initiative, it's crucial that all costs are tracked including the hidden costs mentioned. This data can come from expense reports, corporate credit card data and online booking engines, but the key is to make sure this data is easily consolidated and visible. Where travelers are booking using their own tools, you might consider plugging these tools into your current travel management program to keep visibility and spend reporting accurate.