When you want to buy a drink — let's use the example of a can of coke — there are a number of different circumstances and questions that needs to be considered. Do you need the drink right away, or are you purchasing for the future? Is it going to upset you if the drink is ice-cold or room temperature, or that you need to go and collect it or it is delivered to your door? Are you buying enough for yourself, or stockpiling for a party?
Furthermore, all of these considerations influence how much you are happy to pay for the drinks. If you've just finished off a scorching summer-time commute, you won't be too concerned with picking up an ice-cold can of coke for a couple of pounds. On the other hand, if you are looking to bulk buy for an upcoming event, then a far superior cost-per-volume is going to be expected.
Forgive me for the long analogy, but this simple idea of buying a soft drink in its various forms seems the clearest way to showcase the similarities which exist in the corporate travel industry. The idea of a price against volume model is often used as the default barometer for travel managers looking to make purchases. Fundamentally, this means that they will look for the greatest amount of travel available for the smallest price — a barometer that I feel, may well work to the detriment of their organisation in the long term.
What a travel managers does vs what a cost-based model measures
To explore this purchasing trend and the other factors which need to be considered when booking business travel, it is important to remember the pressure which exists on travel managers. The role requires them to balance remaining within accepted parameters and budgetary constraints or risk sanctions against the level of service expected by the employee looking to travel.
Completing this set of influencers — something which we will touch on again later — is the time-sensitive nature of the work, with arrangements often needing to be made with very little notice for trips being deemed to have with a great deal of importance.
When a travel manager looks to make a purchase for one of their company's employees, there is a raft of different factors — echoed with the Coca-Cola analogy earlier — which can affect this price and start to cast doubt on the usefulness of a simply cost-based model.
Travel managers have to weigh up price against factors like value ©ChristianChan/iStock
Time and convenience are important factors. For instance, is the flight being booked for two days' time or two months? Is the previously booked flight being rearranged due to last minute changes? Will the traveller fly into the most convenient airport or are they looking to find a better price to one slightly further away, with ground transportation agreed to take them to the meeting or their accommodation?
Many different factors are in play for a travel manager and each of these will have a direct impact on the pricing of the flight being booked.
Is the 'best rate' even possible?
On the airlines' side there is a substantial amount of price elasticity in the market that, as distinct from the needs of the buyer, will also affect the price of the travel offerings that they have on the market. Airlines will take factors into consideration from the time of year for which the flight is being booked to the time of day that the traveller wishes to travel and the price will change accordingly.
The popularity of the flight — specifically the demand for seats — will also have an effect, not to mention the booking channel and whether the flight is to be sold through the carrier itself or the GDS/an approved booking partner. The GDS itself has price changes seven times a day, highlighting just how much fluctuation occurs in the travel industry - far more than a bottle of Coca-Cola.
The price updating methodology of the GDS calls into question the travel manager's quest for the best price possible — namely, is it even feasible? Sure, in an ideal world there could be a constant monitoring of the GDS in order to secure the best price possible, but the notion of time puts paid to this.
Is there any benefit to securing a lower price on the flight that you are booking if it's taken three working days of constant price monitoring? There is a significant argument to be had that by basing any bookings made solely on price, it may well result in a detrimental effect on your company.
It would certainly be cheaper for companies to buy their stationery from a local supermarket in bulk, but for time efficiency and being able to concentrate on more substantial tasks, the consensus is usually to purchase directly from an office supplies catalogue and have the goods delivered. From planes to pens, the same approach makes business sense.
Beyond price: time, service and ROI
There are, as previously mentioned, different factors which have to be carefully considered by a business travel manager. Price is still fundamentally important but must be considered alongside the crucial aspects of convenience/time and the level of service that is provided.
As with similar models, an optimum point between all three of these factors is practically impossible to reach; with one usually sacrificed to some degree in lieu of the other two. Want to book a flight this afternoon and find a cheap deal to make this happen? Chances are the quality of service is going to suffer as a result. Similarly, if you're looking for an exceptionally high service level and need to arrange this quickly, don't expect the resulting booking to come cheap.
The level of service is worth closer inspection. Again, this comes down to a case of what return on investment you are going to get with the booking. If the meetings are usually being attended by sales people that are crucial to securing new business for the company, then there is a strong argument to be made for ensuring that they have a high level of travel and accommodation arranged for the trip even if this costs more initially.
Similarly, frequent flyers may find that their journeys are streamlined through the use of a travel agent or dedicated booking company. Their access to previously recorded data and personalisation will go a long way to keeping the traveller happy and speeding up the time it takes to book flights each time.
In summary, price is one of a variety of factors that needs to be considered for the modern travel manager. From the fluctuation in prices from both buyer and seller side to the trade-off between service levels and the return on investment that these may well bring to your company, there is far more in play in modern business travel than simply the lowest price.
People don't get angry about the different prices for Coca-Cola, because they have an innate understanding of the factors and circumstances affecting it. Maybe it's time to pour ourselves a glass and take a wider view on the business travel landscape in the same way. Bottoms up.