It's not just the big things in life...Mark Frary examines the potential for savings in areas of secondary spend
The air programme is under control. Hotels are pretty well organised. So where do the next wave of savings come from? A session at this summer’s Global Business Travel Association (GBTA) Convention, entitled Eating Your Way to Prosperity, may have revealed the answer.
The session, with Ken Augustine and Claudia Unger of BCD Travel, Pascal de Hesselle of Truphone and Chris Froelich of Dinova, highlighted the potential of savings in “secondary” spend, covering lightly managed or unmanaged areas of expenditure, such as dining, mobile and smartphone bills, and “getting around” – taxis and the like.
Ken Augustine, senior director at BCD, said that in order to tackle this secondary spend, there were four key points for travel buyers to bear in mind. They needed to:
• Determine “large opportunity” markets
• Keep the scope small and easy to measure
• Identify relevant data
• Create and execute the plan
So how substantial is secondary spend? A survey last year by expense management company Concur showed that while air fares and hotels accounted for 55.4 per cent of the average expense claim in the UK, there were some other significant contributors. Ground transport (excludingpersonal car use) was the next biggest category, eating up around 9.1 per cent of total spend, boosted by the cost of expensive black cabs in London.
Dining was the next biggest category, representing 8.4 per cent of total spend. The survey also found Tokyo to be the most expensive city from the top 25 business locations for dining, at an average cost of US$77.58 per head, closely followed by Copenhagen at US$76.07 and Sydney at US$76.05. This compares to US$56.46 inLondon and US$67.04 in New York. Spend in the category had declined by 1 per cent on the previous year. Telecoms represented 2.5 per cent of total spend.
Concur’s general manager and senior-vice president for EMEA, Isabel Montesdeoca, says that an expense management system is the logical tool to help capture those second-tier savings. “It gives people 360-degree visibility about where all of that spend is going and allows them to do the trend analysis and make intelligent decisions about it,” she says. “We have standard reports that allow companies to do an analysis on different categories and they can do that analysis on a geographical spread as well.”
The company is also getting more interest from its clients for industry benchmarking – what people are spending in the world’s top cities.Concur has also integrated third-party providers of extras into its online booking tool, making it easier for companies to track their expenditure. It works with Groundscope, Groundspan, Limos.com and Taxi Magic, integrating taxi and chauffeur car booking into the travel booking process. Other online tool providers have struck similar deals to access third-party content within a controlled environment.
CHEAPER EATS
Ground transport is not theonly area of extras that are being introduced into online booking tools. American Express’ Axiom online booking platform integrates with Open Table, which lets bookers make restaurant reservations in 37,000 establishments in the UK, US and Canada. Because the system shows reviews, average costs and highlights preferred restaurants,this can help keep meal bills within reason.
Traditional methods used by travel managers to save money with suppliers have typically been harder to use in the dining sector. It is much easier to track spend on a particular route on an airline network than to see how many black cods a company’s workforce has eaten in Nobus around the world.
That could be changing. In the US, the Dinova network is putting together corporations and restaurants in order to help save money for the former and bring business to the latter through preferred restaurant deals.
On the subject of dining, it is worth noting that HM Revenue and Customs (HMRC) agreed in 2008 that employers could use benchmark rates for overseassubsistence rather than requiring employees to produce receipts. HMRC includes every major city worldwide, and the information is available at www.hmrc.gov.uk/employers/emp-income-scale-rates.htm. Adding this to your company travel policy, saying that rates are capped at this level because of HMRC rules, can help you save money.
RIGHT TO ROAM
Companies have been able tosave a bit more since July 2012, when the European Commission (EC) introduced new caps on the costs that mobile networks could levy on data roaming within Europe. Good news for any company whose travellers are armed with corporateBlackberrys – or with personal iPhones and are putting their bills through on expenses.
The EC reckons that it will save a typical business traveller more than €1,000 (£800-plus) a year and Europeans a total of €15 billion (£12 billion) on roaming services compared to 2007 prices. In 2014, the EC will also deregulate the market so that travellers will be free to choose the cheapest roaming provider.
EC vice-president Neelie Kroes said at the time: “By putting price caps on data we have created a roaming market for the smartphone generation. More than that, we have ended the rip-offs familiar to anyone who has used a mobile phone while travelling abroad.”
Pascal de Hesselle, executive director of Truphone, told delegates at the GBTA Convention this summer that his company’s multiple identity SIM card could give travellers a multitude of international numbers on a single phone, enabling people in those countries to call a local number, as well as giving access to lower local tariffs when making outbound calls. He claimed that the Truphone solution could generate savings of between 30 and 60 per cent.
Negotiating cross-border deals with mobile networks is another option, one that has been taken up by the international forwarding and logistics company Panalpina. With a presence in more than 80 countries, it previouslyhandled mobile communications on a country-by-country basis but now has signed a master services agreement (MSA) with Vodafone Global Enterprise for services in 28 countries.
The MSA includes commitments to keep roaming costs between countries transparent and consistent with global data plans and there is a standard portfolio of devices, which has simplified procurement.
The agreement is handled by a dedicated global account manager, providing a single point of contact. Hugues Brokhes, head of telephony and telecommunications at Panalpina, says: “We know that overall our spend has been reduced by 20 to 30 per cent, depending on the territory, which represents a significant saving.”
THE BUYER VIEW
Tom McAra, head of procurement at the University of Glasgow, says: “With taxis we have a local account with the Glasgow Taxi Owners Association [TOA]. That association spreads around to other cities and it is possible to
book taxis in advance, and therefore be invoiced rather than pay cash. This doesn’t reduce the cost as such but, in theory, reduces the admin.”
However, official carriers like the TOA tend to be an association for self-employed members who own the asset of the taxi, which can be an impediment to reducing fares.
McAra adds: “On subsistence, different sectors and organisations do it differently. Some have a daily rate and, therefore, there is no need to submit receipts. We are a receipted organisation and although there is no policy as such, it is driven by reasonableness. The drive for savings tends to be in process and we have just gone online with scanned receipts and electronic claims, which are paid quickly into bank accounts.”
Andrew Solum of Travel Industry Associates, who works as travel manager for a number of companies, says: “Companies are looking at all aspects of travel. A few SMEs are using a per diem system, based on actual spend, too. Even a large luxury goods firm limits food and beverage spending to £40 per meal or equivalent, with no ability to fuse the amounts for a more lavish spend on one meal.”
Technology isalso being brought to bear on the cost savings issue. “Skype calls are being used now that wifi and/or web access is more readily available,” says Solum. “Phone messages via Whats App or similar systems are being used, which can save 40p per SMS from some countries.”
One firm is even offering an incentive and reimbursement for travellers who use London’s ‘Boris’ hire-bikes instead of cabs. “It is amazing how much money can be saved with a bit of focus, some common sense and a slight culture change,” he says.
THE TMC VIEW
An increased focus on the total costs of a business trip means that the costs of dining and mobile phone roaming are coming under more scrutiny, according to Susan Lancaster, HRG’s director for UK and international, client management.
Lancaster says that the combination of its expense management system, Spendvision, and its new visual data reporting tool, Insight, is helping travel managers keen an eye on costs. The system allows travel managers to see a “super PNR” [passenger name record] that records every change to a booking as well as those ancillary cost associated with it. The Insight engine then does some fancy data crunching to show total forecast expenditure to the travel manager.
“Spendvision provides a bridge,” says Lancaster. “When the traveller is using cash or a corporate card for ancillary services, airport parking or their mobile phone charges, that is now visible. We can bring that together to see the total trip cost and that is where our customers are seeing the value.”
However, Lancaster says that cutting costs is not just about creating a stricter policy to include those extras. “For my customers, the feeling is that just changing the policy isn’t going to effect the change they want,” she says.
“They can make more savings by negotiating more smartly with suppliers. The information from Insight is also enabling our customers to educate their travellers better. Good corporate citizens want to do the right thing.”
Lancaster says that taxi expenditure is potentially a big area for savings. “Some companies have contracts with black cabs and have had for some time, and are managing and leveraging that. They also felt they had control of additional ad hoc taxis, yet the bulk of customers have never looked at that because they don’t have black cab contracts.”
Food and beverage costs are another big area, says Lancaster. “A lot of our pharma customers are interested in restaurant spend,” she says. “Some have already started to look at it and tried to streamline it to get some leverage in some of the bigger cities. The visibility of that total spend coming through Spendvision has enabled them to pinpoint areas which otherwise they would have not thought worthwhile pursuing.
“Food and beverage in hotels has been at the top of their list for a long time. They want recognition of the total volume of spend rather than just room-nights. What they haven’t been able to do in the past is back up that expectation of being recognised with their own data, and have had to rely on the hotels themselves.”