Travel buyers are being advised to move their focus from managing suppliers to travellers. Betty Low finds out what the theory of behavioural economics means in practice
FOR YEARS TRAVEL MANAGERS have looked to suppliers for cost savings. The perceived wisdom is that managers accomplish this most effectively by reducing the prices – fares, rates and fees – of travel, accommodation, and associated tools and services.
This is not surprising given that many buyers – 47 per cent according to the ITM 2012 Salary Survey – report to procurement, where performance has traditionally been measured by supplier prices. The current thinking though is that most mature programmes can produce very little more in savings from leveraging suppliers.
Louise Kilgannon, travel buyer at Astrazeneca and board director of ITM, shares this view. “You can’t get real savings from suppliers unless new ones come onboard and there’s more competition. You’re often just protecting the rates you have.”
It is perhaps for this reason that the idea of managing the traveller rather than the travel is now gaining prominence. According to a white paper produced by BCD Travel, Traveller Management: How to influence your employees to plan, book and travel smarter (Click here for more details), this can be delivered by influencing behaviour so that travellers are not only happier but also more responsible and engaged – and that translates into more savings for the company.
PERSONAL CHOICES
Many travel managers and TMCs are looking at ways in which changing the behaviour of travellers can drive savings. Some call this ‘behavioural economics’, which examines what affects decision-making and works on the premise that consumers do not make rational decisions. In plain English, this means that travellers’ behaviour mimics wider consumer decision-making and is affected by experience.
Claudia Unger is director of research and intelligence at BCD, and author of its white paper. She says: “In travel, people will have another booking in their mind when they go to make a booking. They never go in with an empty mind and make a rational decision based on the screen. They always mix that with past experiences.”
Carlson Wagonlit Travel (CWT) director Nigel Turner is another senior industry figure who believes that executives do not leave what they do in their private lives behind when they enter the office. “People’s lives are changing and this is mirrored in their relationship to work,” he says. “The conundrum for many travel managers is the potential travellers have to go off-programme.”
ATPI group sales director Adam Knights believes that people will only go off-programme if it is easy and beneficial. “People will look for holidays online, but they would only spend an hour at it if they thought it worth it, not for the fun.”
People will also have other expectations that come from what they see as normal in their private lives, such as price comparison or traveller review sites.
The influence of social travel on traveller management is apparent. CWT Hotel Intel allows a closed user group of company travellers to post reviews of hotels booked for business. The reviews are used practically by other travellers, but also provide valuable feedback about the quality of the experience for negotiations with suppliers.
Claudia Unger also believes that internal social media platforms are vital because they give travellers a sense of ownership, which in turn drives compliance. “In my opinion, travel managers are judged on negotiated rates, but also on the overall travel spend,” she says. “By thinking more about the travellers, it might make it easier for them to follow policy by reminding them of it at the right time, thus driving down costs.”
REAL-TIME SAVINGS
Messages about travel disruption have been sent for years, but some companies are now experimenting with sending targeted messages to achieve savings. CWT has a programme that sends out either an email or text message to travellers at different stages of their itinerary on everything from which car park at the airport to use, to the recommended option for airport transfer. In theory, messages could give the respective times and costs of each alternative and, perhaps, mention if a colleague is also at the airport and able to share a taxi to reduce the cost of the transfers.
According to Unger, because technology now allows you to influence travellers on the go, there are new areas to drive savings. “For example, you can try to influence travellers to use internet protocol services, such as Skype or Truphone, which has multiple numbers on one SIM card,” she says.
But such innovation may not necessarily lead to reward. Travel managers can ‘measure’ savings against what was spent in the category the year before, the equivalent rate or the rate against the sector average. But behaviour management is in its infancy as a concept and no one has come up with a way of quantifying how success should be measured.
HARD EVIDENCE
Louise Kilgannon acknowledges the difficulty for most travel managers. She says ITM members “often have the challenge of how to demonstrate to their managers the value of moving away from a traditional commodity procurement approach to look at the bigger picture. What a procurement manager wants to see is a hard dollar saving that is tangible – but so many of these savings are intangible.”
Kilgannon adds that ITM members are keen to find a way of measuring the value of a trip. “The return on investment of travel is discussed frequently at our buyer forum sessions,” she says.
It’s not just travel managers whose performance is being judged. The paradox many TMCs face is that many are remunerated on the basis of volume of transactions processed rather than on improvements to the travel programme.
As travel management begins to focus more on the internal element of travel rather than the suppliers for savings, the phenomenon of demand management – is the trip actually necessary? – comes into play.
At NEC Europe (see case study below), shared service centre manager John Dickens has seen the use of videoconferencing facilities escalate sharply, but that has not translated to greater income for his TMC.
CWT’s Turner says: “With some customers the remuneration is based on managing the travel rather than on the transaction fee. It’s good to have a joint relationship on travel management, not necessarily on getting down to the cheapest fare. The ideal scenario for a travel programme is to buy the same or similar product better.”
There are many other examples of how changing traveller behaviour can drive savings without impairing the traveller experience, one such being increasing the time between booking and travelling.
Turner says that thinking needs to change to link travel automatically with a meeting if booking is to be earlier (“On average travel gets 2 per cent more expensive every day you leave it”) and recommends scheduling meetings at times that do not necessitate travel at peak times. He also points out the folly of automatically booking flexible tickets for the return journey. “In reality not many people overrun a meeting and use all that additional cost of a flexible ticket. We need to have a different mind-set,” he says.
BUYING AND SELLING
In some ways that change in thinking can be quite fundamental. In its white paper, BCD says: “Travel managers are often called travel buyers. Yet when it comes to traveller management, they are effectively sellers: selling the company’s travel programme to its travellers. You should, therefore, introduce sales and marketing techniques which will achieve this goal.”
Kilgannon agrees. “The travel manager’s role is like a PR role,” she says. “We need to sell the programme we’ve created.”
CWT’s Turner adds: “Most people want to want to do right thing. We need to find ways of communicating to make people realise they can buy more effectively and it’s a good thing not only for them but for the company.”
The examples of saving costs by traveller management are numerous but, ultimately, no one size fits all, and which ideas can be implemented will very much depend on company culture.
Claudia Unger says: “The blueprint will work for every company, but you have to pick and choose which parts will work with your company culture.”
As ATPI’s Knights puts it: “Some companies are just more cost conscious than others, and it comes from the top and leading by example.”
CASE STUDY: NEC EUROPE
WHEN JOHN DICKENS ARRIVED at multinational IT firm NEC Europe in 2008 to consolidate and streamline its €7 million European travel programme, travellers booked their own trips, which they paid for with their personal credit cards, and used manual processes which left them frustrated by the amount of time it took to gain trip approval and get expenses reimbursed.
Over an 18-month period Dickens introduced Concur as both booking tool provider and expense management company, the Airplus lodge card, and BCD as the single travel management company for NEC’s locations in nine European countries.
The travel policy was modified from “cheapest option” to “cheapest option within reason” and it became mandatory for travellers to use the online tool – whether from desktop, tablet or smartphone – to book all trips. They were free to choose from the content available, although there are thresholds (£400 for European return flight, £1,100 for the US) above which approval is required. Despite this freedom, “in year one our average ticket price dropped 43 per cent. By human nature people are inclined to buy in line with what the company expects,” says Dickens.
Dickens believes good content is critical for happy travellers. “It’s no good forcing them on to a system that has limited content,” he says.
Travellers are also booking earlier – the average time between booking and travelling has gone from one or two days to “weeks”. A pre-trip process presents any internal meetings request with a videoconference solution, and to decline this option in favour of travel would require approval from the chief financial officer.
NEC also wants its people to do more same-day travel. To encourage this, it offers a higher daily allowance than for trips that include an overnight stay. “The compliance is driving savings but we couldn’t do that without the content – people need to enjoy going to the tool and the key was content,” says Dickens. “We woke up to that.”
ONLINE BOOKING: AN ALTERNATIVE VIEW
ONE COMMON EXAMPLE of behaviour-driven savings is increased adoption rates of online booking tools. There is no doubt that an online transaction fee will be lower than an offline fee because less labour time is involved. But, according to ATPI group sales director Adam Knights, to assume this leads to lower trip costs means one has to take as a given the idea that the lowest fares and room rates are those contained within the online tool. He says: “You can save money on fees, but what are you doing to prevent your travellers booking at the last minute and paying a lower transaction fee but purchasing a higher fare?”
Knights, who concedes that his view is not the industry norm, points out that online content will be devoid of opportunities for lower fares from special offers, consolidated fares or fares obtained by booking in other countries. “Most ATPI studies show that average ticket prices tend to rise with the use of an online booking tool,” Knights says. “If a low fee is seen as the goal, then that is achieved, but touchless online transactions that are automatically fulfilled stifle the opportunity for the agent to lower the overall cost of travel.”