The value of meeting clients face-to-face is undisputed, but business travel can be expensive. Here's how to rein in costs - By Jean-Guy Duguay
Back in 1995, Ed Pearce, then publisher of The Hockey News, decided to go after the multi-million-dollar, five-year publishing and printing contract for Canadian Airlines' in-flight magazine, Canadian. Negotiations between Pearce's people, based in Toronto, and Canadian executives, who were in Calgary, dragged. The two parties exchanged countless phone calls over many weeks. Mail correspondence piled up. To Pearce, it seemed that things were going nowhere. That's when he decided to pull out all the stops and, along with a team of four others, fly to Calgary and make a face-to-face presentation. It was an expensive gamble - the trip cost about $15,000 - but it was one that certainly paid oft Pearce signed the contract a week later.
In today's competitive business world, it's unrealistic to believe that you can attract new clients, sell products and finance your company without getting out and meeting contacts in person. While the IT revolution has streamlined informationretrieval and communication, allowing you to get an enormous amount of work done right at your desk, even the most inexperienced neophyte knows it's impossible to conduct all your business from the comfort of your office.
For the majority of companies, especially those with national and international clients, travel and entertainment expenses are among their biggest budget items. Businesses surveyed in 1997 by Amex Canada Inc. and The Conference Board of Canada ranked travel and entertainment as their second-largest controllable expense. At CIBC, for example, $47.5 million is spent annually on plane tickets alone; at around $100 million a year, T&E expenses are the bank's third-largest controllable cost, behind payroll and information technology.
The survey showed that business travel is not only a lucrative industry, it's growing at an astonishing rate: Canadian companies spent $12.9 billion on travel in 1997, more than double the amount spent 10 years ago. Business travel from Canada to the US increased by 40% between 1994 and 1997; to other destinations, it increased by 29% over the same period.
So, how carefully are companies watching travel and entertainment expenses? Surprisingly, the Amex-Conference Board study showed that a full 38% of privatesector companies have only informal travel guidelines or no policy at all. But by managing travel costs effectively and curtailing frivolous expenditures - even during the good times - companies can save a lot of money by following a few simple tips.
In The Carswell Guide to Expense Reduction, published annually, Toronto author W. Wayne Sigen suggests as many as 121 ways to reduce company T&E expenses. Other books propose similar solutions. Here, I'll present a few of them some draconian, others more conservative - along with those picked up from interviews with travel specialists.
Is that trip absolutely necessary?
Most experts will say that before you book your flights and hotels, first ask yourself whether there is an alternative. Could technology be used instead? With videoconferencing and web-casting, there are some meetings and seminars you can attend without leaving your office. Consider this: the price of a return, full-fare economy, Toronto-Chicago plane ticket would pay for the initial installation of a videoconferencing service.
Secondly, you should ask yourself if a number of trips can be grouped together, and whether it's really necessary to send two representatives to visit the same client. Some employees like to think of trips as indirect fringe benefits, and will not hesitate to make trips that are of little value to the company. Many unwarranted trips can be avoided by requiring employees to justify each one to a manager.
Budget, budget, budget
Managers should be required to plan all staff trips in advance and to include them in their budget forecasts. "Planning is the name of the game," explains Yvonne Kerns, Toronto-based director of global travel for the CIBC. "A regular return airfare for an economy ticket between Toronto and Vancouver costs more than $2,900. But a ticket purchased two weeks in advance, with a Saturday stay, costs about $500 or $600."
Other experts consulted for this article agree that requiring managers to include trips in their budget forecasts will allow the company to save, since it may be able to negotiate better rates or take advantage of seat sales and creative fares. (Hopefully, the recent sudden hike in fuel prices and a possible "Air Monopoly" attitude in the coming months will not make this guidance less relevant.) Often, planning ahead will also let managers redirect amounts earmarked for debatable trips toward more appropriate and perhaps more profitable - projects.
Travel guidelines
All business owners or managers have had to settle certain travel-related issues at one time or another. But that job is much easier if the company has in place an exhaustive, clearly written T&E policy that accurately reflects the financial needs and means of the company. Certain rules - like whether the company should pay for the mini-bar or for late-night video rentals - should be put in black and white. The Bank of Montreal, for example, has a travel policy that's quite specif is about acceptable travel expenses. For one thing, it refuses to pay for movie rentals. "We don't reimburse employees who go to the movies in their home city," says one representative, "so why should we do so for staff on business trips?"
The Canadian business community seems to at least be aware of the importance of managing travel arrangements. Among the companies that answered the Amex-Conference Board survey, 62% said they had an official written travel policy, compared with only 48% in 1994.
It's hard to argue with well-defined rules as a means of effectively controlling travel expenses. A policy can cover such things as use of business class on flights. Some companies allow only senior executives to fly business class, while others put all employees on the same footing: bosses and employees alike fly in comfort depending on the distance travelled. Staff at the Bank of Montreal, for example, can use business class on flights longer than six hours.
Use a travel agency
Only 56% of Canadian private companies consolidate their travel needs with a single agency, and just 31% of government organizations do so, according to the AmexConference Board survey. But calling on a responsible and professional travel agency can mean the difference between success and failure of your company's travel policy.
An agency allows consistent service for all travellers, and prepares reports setting out the travel patterns of all employees. But one of the biggest advantages of using only one agency is that, when a company concentrates all its business travel in one place, it will get maximum negotiating power for service and rates.
According to Lynne Gilligan, senior travel manager at Bank of Montreal a company that buys 45,000 plane tickets and 90,000 hotel nights per year - when the bank hired its current agency in 1997 to manage all its business travel, it started saving 15% on top of the 10% it had already been saving with its previous agency. "The Bank of Montreal Group includes Nesbitt Burns and Harris Bank in the United States," says Gilligan. "Each member of the group used to have its own travel policies, suppliers and guidelines, which sometimes conflicted. With the help of one agency, we've put our house in order."
Richard Butterworth, senior vice-president of operations at The Rider-BTI Travel Group, one of Canada's largest travel agencies (and the Bank of Montreal's agency), says the rules of the game have changed completely in recent years. "Travel agencies no longer work on commission," says Butterworth. "We now have to impose service charges on clients." These charges, he says, are easily identifiable, so clients want to be sure they're getting their money's worth. That's why, in his opinion, it has become necessary for agencies to develop a made-to-measure T&E expense-management program that allows companies to save money. The larger agencies can achieve this by systematically seeking out the best rates and helping clients negotiate with airline carriers and hotels. "Specialists are used to finding their way through the maze of airline rates;' says Butterworth.
When it comes to car rentals and hotel accommodations, which make up 30% of T&E budgets (of which 7% is car rental and 23% is hotel), your agency can achieve significant savings when it uses the business-rate programs set up by hotels and car-rental agencies (see "Join the clubs and more," p. 41). Using such programs also ensures more hotel-room availability.
Often, it's the smaller, sometimes-hidden savings and services offered by travel agencies that make them an attractive alternative for small-business enterprises. Most agencies offer personalized management-information reports, detailed statistics on reservations and suppliers, advice and support to enhance the effectiveness of travel-management programs, as well as the more traditional services: travel assistance, advice on passports and visas, and 24-hour assistance in the event of an emergency or last-minute changes. The cost of compiling statistics is so prohibitive that some smaller businesses entrust their travel budget to an agency for that reason alone.
One caveat: Make it part of your travel policy that all employees use the appointed agency. "Lack of communication or understanding of the corporate travel policy can be costly," explains CIBC's Yvonne Kerns. She estimates that when the bank first attempted to deal with a single agency, in 1994, only 35% of hotel reservations, 50% of car rentals and about 80% of air travel was handled through that agency. It's crucial that the travel polity be implemented in the entire company and that it has the support needed to communicate the plan, apply it consistently and monitor its guidelines - in all branches and divisions of the enterprise.
Consider a travel manager
Now that you have a travel agency working for you, the cost-control battle is won, right? Not so fast! It's surprising, but many companies that would never dream of programming their own computers or negotiating their own real-estate leases still try to manage their own T&E functions without expert help. Often, it is simply because they are unaware that consulting expertise in the domain is well-established. Many companies may also be looking at T&E expenditures as a necessary evil.
Appointing a travel manager ensures that special attention can be given to maximizing buying power and to the communication and implementation of the travel policy. The travel manager can also analyse data to identify opportunities and obtain superior service from all suppliers, including the travel agency. While many companies may find it's not practical to appoint a dedicated travel manager, they should, at the very least, always assign travel arrangements to the same person.
ALMOST INVARIABLY, IF A COMPANY IS NOT doing anything formal to control its travel and entertainment expenses, it has a problem. Remember, formulating a T&E policy that all employees follow is the cornerstone of any travel-expense reduction initiative. And companies that engage specialists to assist them uncover a tremendous opportunity to cut costs.
[Sidebar]
Join the clubs - and more
CORPORATE CREDIT CARDS A corporate credit card provides the company with a detailed monthly statement of each employee's travel expenditures, but it can also be useful for many other reasons. Many credit card companies have entered into agreements with airline carriers, hotel chains and car-rental agencies to offer good discounts to groups and individuals.
CAR RENTAL CLUBS Do you want to save yourself some time and frustration? Join a car rental club, in your name or the company's name. It's very easy and the next time you rent a car, it will be there waiting for you. At Hertz, for example, for an annual cost of $50, your name is written on a board telling you where the car is parked. You don't even need to register at the counter.
AIRPORT CLUBS Most airline carriers are now wooing frequent travellers with clubs like Empress Lounge (Canadian Airlines), Maple Leaf Lounge (Air Canada), Red Carpet Club (United Airlines), Admirals Club (American Airlines) and Crown Room Club (Delta Air Lines). These clubs offer much more comfortable lounges than the standard airport waiting rooms: you can work, rest and change your plane ticket without having to wait in line. Meeting rooms, fax machines and computers are also available. While membership fees don't come cheap - they cost between $300 and $500 a year - the thousands of dollars that could be saved through increased productivity easily make up for the expense. CALLING CARDS One travel expense that is rarely looked into but represents an important percentage of expense reports is telephone calls from hotel rooms. It's very expensive to take your messages and dial local and long-distance numbers directly from these phones. Always use your personal, or company, calling card.
ON-LINE TRAVEL AGENCIES The service charges levied by travel agencies can represent a significant amount on a small business's balance sheet. By visiting the web sites of agencies like Microsoft's Expedia (www.expedia.msn.com), Preview Travel (www.previewtravel.com), Biztravel (www.biztravel.com) and others, you will at least be able to compare current rates. And you can do so any time of the day or night. While you won't save much time, you may save money! - JGD
[Author Affiliation]
Jean-Guy Duguay is a freelance writer based in Montreal.
