5 levers to smartly cut your travel spend by 30%
When your teams begin to travel once more the travel environment will have drastically changed. Airline capacities have been substantially reduced, government regulations on travel continue to be both restrictive and volatile, and airports, having adapted to social distancing guidelines, feel very foreign. Moreover, for most businesses, increased cost control will remain the new normal, as companies aim to find funds to re-invest in growth and return to profitability. Is it possible to cut a chunk of your travel spend without jeopardising your business?
While it may be tempting to cut travel across-the-board, this might actually hurt your business. For instance, your competitors may travel more frequently to meet your existing or potential clients. Moreover, the strategy has limited impact because people tend to find workarounds (e.g., “I know we are over budget, but this trip is really important.”). You need to take a targeted approach to cost-cutting; there are many levers you can pull that do not require you to cut indiscriminately.
Drivers of total travel cost
We’ve come up with a simple methodology to understand the drivers of total travel cost and the actions you can take to reduce that cost. You can strategically find savings by reducing unnecessary trips, lowering the average price you pay per trip, and simplifying complicated travel-related admin processes. We expand on each lever below.
1 — Avoid unnecessary trips (10–15% savings)
Surgically reduce volume: do a critical assessment of your organisation’s business travel needs and ask if certain travel is necessary. Some ideas to consider:
- Check if certain meetings can be run virtually and invest in fit-for-purpose videoconferencing tools and employee training
- Assess if you can achieve the same results with local talent
- Consider restricting travel to critical personnel only (eg., sales, management)
2a — Get the best rates (3–5% savings)
Assess your travel rates against what's available in the market. You want to implement streamlined processes that help boost compliance, but all will be for not if you’re paying more than you should for flights, hotels, and trains. Some ideas to consider:
- Compare your (agency’s) rates with those directly available from airlines/rail providers; they should be more or less on par
- Renegotiate hotel rates with preferential hotels (this could be especially impactful now, while hotels are generally well below occupancy)
- Negotiate/eliminate travel agency fees (again, now is a great time to kick-start this discussion)
2b — Optimise your policy (5–8% savings)
If travel is necessary, don’t hold it back, but implement reductions in your spending guidelines to make them more cost-effective. Some ideas to consider:
- Stop basing your travel policy on the class of service, but rather create trip budgets to manage overall spend. Well-designed trip budgets will dynamically incorporate dates of travel, destination, and duration at the very least
- Move travellers to low-cost airlines where possible
- Downgrade allowable classes of service (e.g., move long-haul flights from business to premium economy, or even further down to economy)
- Introduce or extend your advance booking days requirement
- Reduce city-cap rates
These granular changes will require implementing or changing your travel policy. For a deep-dive on how to do so effectively, we’ve put together a simple yet helpful 7-step plan to create an effective travel policy as well as a Travel Policy Template you can use as a base.
2c — Improve compliance (8–10 % savings)
Travel policy updates are worthless if guidelines are not actually applied and adhered to. Develop strategies that will boost compliance. Some ideas to consider:
- Ensure travellers enjoy using your booking tool so they stop slipping to out-of-tool sites: it should be simple corporate travel tool, which is easy-to-use, have a great booking experience, and empower travellers to make their own choices within the limits of your travel policy
- Use online approval workflows to review out-of-budget trips prior to booking (this will also help avoid unnecessary trips)
- Implement strict expense policies whereby employees will not be reimbursed for out-of-policy portions of their travel
3 — Automate internal processes (5–8% savings)
A source of large, hidden cost in business travel is the secondary processes and productivity losses that go along with it. Simplify those and you will unlock tremendous value. Some ideas to consider:
- Automate expenses: The average person spends 2 to 3 hours doing their post-travel expense reports. Invest in automated expense tools that allow folks to expense on the fly. As an added step you can centralise travel invoices and payments (e.g., for flights, rail, hotels) — this will also help with employee cashflow
- Streamline reconciliation: Invest in processes that improve the productivity of your accounting team. For example, add project codes to your bookings and directly link your travel invoices with your accounting system for automated reconciliation
- De-centralise bookings: Eliminate booking bottlenecks and hundreds of back-and-forth emails for business travel approval by letting travellers make their own bookings. Use technology to simplify the process and inserts control as-and-when required (e.g., simple validation workflows)
At the highest level, there are essentially two variables to consider when coordinating travel in your organisation: managed vs. unmanaged, and centralised vs. de-centralised. The traditional way to cut travel costs is to default to a strictly managed, centralised system with blanket travel cuts.
This may seem easy and impactful at first, but it can hurt the health of your business and rarely leads to the deep reductions you were expecting. However, a managed, de-centralised model that empowers your travellers and leverages an effective travel management platform is the best route forward. To help you think through which opportunities for cost reduction would be most effective for your specific business check out our article on the 4 archetypes of business travel management.
We've also put together a Travel Savings Calculator tool which will help you pinpoint where and how much economies you can make based on your company's specific numbers.
Other related articles you might like:
- How to optimize the price of your ticket by being more flexible
- 7 safe European destinations to organise your seminar during Covid
- Introducing Fairjungle's Covid Travel Reboot Kit
- How to make your business travel more sustainable