November 2022, Virtual
21 November 2022, Hilton London Metropole
Is business travel worth managing?
‘Is business travel worth managing?' may seem a spurious question, like asking a religious person if it is worth praying or an athlete if it is worth training. But while it is one which in the industry will be met with a resounding ‘Yes', the data to convince outsiders is lacking.
There have been some attempts in the past to provide chapter and verse on the benefits of managed as opposed to unmanaged travel but none has become an industry standard or the Holy Grail to which all can be referred back.
This may be about to change. At the Crossroads Paris conference organised by the Paragon Partnership last week in the French capital, Ken McGill, executive vp and managing director of travel and tourism services for Global Insights, presented some of the initial findings of a study by his company, the National Business Travel Association (NBTA) and online agency Egencia into the value of business travel.
Two things to bear in mind is that that figures Mr McGill gave were limited - the more recent ones will be ready for when the full report is published later this year - and that the survey relates mainly to the US. But there is enough in the preliminary findings to suggest business travel, including managed business travel, has a powerful case with which to promote itself.
Mr McGill said the aim of the study was to try and measure not only the cost of business travel but also the contribution it makes to businesses and to national and local economies. It also aimed to resolve the question of whether managed travel was better than unmanaged travel.
He told delegates at the meeting that business travel was "faceless" and therefore easier to cut by 20-30% than laying people off. It contributed to a company's ability to generate revenue and meet customer demands but it was also the "ultimate controllable expenditure". By tradition, travel an early candidate for cuts in a downturn.
"But that is because we have no measure. We understand it as a cost but what is its value?" he said. This made it different for components of the industry as hotels could be measured by their occupancy and airlines by their seat capacity.
He said it was possible to extract figures for the level of business travel (again these are US only figures). Business travel was growing in 2005-2006 before it began to soften dramatically in 2007 and 2008.
In the US in 2007, there were 800.1m business trips with $263bn being spend on an array of services including hotels and car rentals. After adjustments, Mr McGill said this meant business travel contributed $208bn to the US GDP in that year.
In addition it meant that there were 3.33m people employed in the supply chain for these travellers. "That is significant," he said. There was also a growth of 7% of jobs in the supply chain, compared with 2.8% for the US national average.
These people earned $132bn in wages which meant they paid taxes of $81bn to the US authorities.
This meant that in 2007 business travel as a percentage of the US GDP was 2.4% and accounted for 1.5% of all jobs in the country. "This means that business travel can reserve itself a seat at the table and that it is larger than many significant sectors of the economy," he said.
The research has also looked into different jobs and professions to gauge their level of business travel. The highest level was for those in sales departments. In 2008 sales people went on 112m trips, spending a total of $55bn.
People at manager level took 62m trips, 13.3% of total travel, and spent $30m while those in finance spent about the same on 61m trips.
Companies with significant travel programmes were spending up to $3,400 per employee a year on travel.
In manufacturing industries, companies were spending $44bn a year on business travel, about 8% of their total spend.
"Looking at the figures, is there a correlation between growth and the decline of business travel and profitability? The findings so far are very encouraging," Mr McGill said. If there was a growth in business travel, it seemed, as a rule of thumb, there could be a growth in profitability.
On the thornier matter of whether managed travel was better than unmanaged travel, Mr McGill said of the former: "There are many benefits which have not been investigated and which almost defy monitoring."
But he identified two possible areas for assessment: cost containment/negotiated rates and enhanced employee productivity.
He said savings on negotiated rates varied from 7% to 25% depending on volume. But only about 80% of business travel went through a travel management programme with at most 65% of travel business going through a TMC.
But one example he gave was of $231bn of total spend with 6% - $7bn - saved through managed travel.
Another example was in sales. There were 14.m people working in sales and between them they made 112m trips in 2008. The average booking takes eight or nine minutes in managed travel; in unmanaged travel it takes 29 minutes. Therefore the savings among sales people from time saved making a booking through managed travel would be $131.4m.
Mr McGill said there were indications emerging that companies in manufacturing which had managed travel were adding three points to their profit levels.
"There is a correlation between managed travel and profit but it may not be cause and effect but more a reflection on the company's attitude to running its business.
"But the point is that if you have managed travel in the manufacturing industry, your profit levels are three points higher," he said.
These are early days and these are just incomplete findings. But they seem to point to strong arguments both for the benefits of business travel in general and for managed travel in particular.
The full results will be out in about seven weeks.