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 lower yearly costs, to the travel manager bogged down with details and wanting to please coworkers, to the weary traveler who may 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 for 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 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 flights, we recommend checking the airline’s website before paying because they usually offer similar rates without the added service costs of travel websites. Plan well in advance to get the best deals on flights.
- Saving money on accommodations - When selecting your hotel for business travel, select a room that includes free WiFi, free breakfast, and provides free access to meeting rooms. It’s also beneficial to select a hotel that offers free parking as well as free cancellation in case plans change. Booking in advance will also help save costs.
- Saving money on rental cars - To save money on corporate car rentals, consider avoiding rental agencies at airports because 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 early will help save costs.
- Saving money on meals - Booking a hotel with breakfast included is one of the best ways to cut food and meal costs during business travel. When restaurants are necessary for meeting with a client, recommend lunch since it’s often less expensive than dinner but 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 on a video call or similar.
When meetings need to be face-to-face, costs can be reduced with an increased choice of hotel options, including more bespoke hotels and B&B options that both appeal to travelers but are also cheaper than corporate hotels.
By working with these internal stakeholders and understanding the strategic priorities, you can uncover how to prioritize travel spending. The same thinking applies when looking to consolidate business trips. While there will be occasions when it makes sense to combine or extend business trips to save on costs, it won’t always make business sense. For example, 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 that cancel the second meeting 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 when trip consolidation makes sense and when it will cost more than it’ll save.
How to manage hidden business costs
Travel managers usually have a good handle on the main costs of business travel, like food and drink, flights, and accommodations. Even when these are purchased out of policy, it’s possible to compile the information through corporate credit card data and expense reports, - though this isn’t 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.
- Cell phone charges for out of contract usage - Upgrading employee contracts before trips can help save on data and other call charges.
- Tipping - Depending on local custom, tipping can add up to 20% to the cost of meals. 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 is 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 costs.
- Paper/manual processes - It’s not just travelers that can add to the hidden costs of travel. According to a report by Certify, 20% of businesses still use some form of manual process (e.g. paper, spreadsheet) to manage their travel and expense data, which makes mistakes and reporting errors more likely.
- Currency conversions - In what currency are expenses made and in what currency are they 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 spending data, which can lead to:
- Exceeding your travel budget because you don’t have visibility over all your costs
- Less effective supplier negotiations because you don’t have a complete view of everything being spent
- Issues with duty of care because if you don’t know where travelers are staying, it’s harder to contact them in an emergency
To manage travel expenses, 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 time, a fixed budget is a set amount allocated to cover the expected expense.
- Flexible budgeting - Budgets are set for a period of time, but can be changed 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. Instead, performance budgets focus on working toward a common goal. This approach makes it easier to justify budget changes to meet business needs. It’s often used in the public sector but can also 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 created based on what’s needed for the upcoming period, regardless of whether this is higher or lower than previous budgets.
Benchmarking your business travel costs
Establishing which 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 budgets. Find out which best suits your needs:
- Historical spending 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 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. By bringing a fresh approach to cost-savings, refocusing your strategy, and rethinking how to set your travel budget, it’s possible to gain greater insight that will allow you to make informed decisions. It’s about working to understand the needs of the business and creating an approach to cost-savings that bring 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 above. 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 consolidated and visible. When travelers book using their own tools, consider plugging these tools into your current travel management program to keep visibility and expense reporting accurate.