Special feature: Impress for less – slashing travel budgets is not always the best cost-saving measure

One of the most difficult dynamics to balance is the desire
to cut costs, while ensuring your company maintains its presence in front of
clients and prospects. Slashing budgets by reducing travel may look good on
paper, but it can also damage relationships. Equally, insisting that everyone
flies at the back of the plane and uses budget hotels can be a false economy:
travellers must arrive in a fit state to do business.

However, it is possible to be frugal while maintaining the standards crucial
to nurturing relationships. Often, simply putting the word out about a policy of
voluntary downgrading on flights and accommodation is as effective as mandating
it. Instead of telling people what to do, it can garner a more positive and
constructive response, as Geoff Allwright, travel and expenses manager for
Airbus, knows. He has been managing the company’s programme to reduce travel
spend over the past three years with the task of getting staff from various
departments ­ from those selling or maintaining aircraft to procurement and
finance ­ to various meetings, internal and with clients. “One size does not fit
all,” says Allwright of his approach.

Long and short of it
Airbus has a policy of economy class travel for journeys up to six hours and
business class for anything longer. “Recently, we called for people to move
voluntarily from business class to premium economy and a lot of people booked at
least one leg on their return trip in premium economy, so our business message
is getting out there,” he says. “The feedback from travellers is positive,
whether it is a voluntary decision to downgrade or because their managers have
told them to. They can put a number on the amount saved and can maybe go on a
second trip because they have saved money on the first.”

Allwright explains how Airbus helps the workforce to travel cheaply and
effectively. “We provide travellers with information on our online booking tool
about how to make money go further. The first option you see when you go to book
a trip is: ‘Could you do this by video conferencing?’ If yes, they get taken to
the video conferencing tool. If they choose to book a trip, they get another
message which might say: ‘This is going to cost you £800, could you do it by
video conference?’ ­ effectively giving them a second reminder.

Additionally, when someone needs a hotel it shows the cheapest rate first ­
and the same for car rental and air fares,” he explains.

And it works. “We have saved between 15% and 20% over the past three years.
That amounts to millions of pounds,” says Allwright.

Allwright is pragmatic in his approach and tries to get clients to come to
the Airbus offices rather than sending Airbus employees out. “A lot of people
visit suppliers, but we would rather they come to us,” he says. Though he
recognises this is not a panacea. “A lot of our suppliers are global, so it is
not like getting on a train from Bristol to London. We audit all our suppliers
and if someone is making bolts, we make sure they are making them properly ­ we
cannot do that without seeing them. But if we are negotiating a contract, that
could be done anywhere.”

There are several ways of skinning that particular cat, according to the
Institute of Travel Management, a trade body for business travel buyers,
managers and suppliers in the UK and Ireland, whose members include the John
Lewis Partnership, JP Morgan and The Wellcome Trust.

“We may send three instead of four people on a trip, and either reduce the
duration by a couple of days or, if there is more than one trip a year to the
same destination, increase the first trip by a few days to fit in more work and
then cancel the second trip,” ITM’s press panel says. “Downgrading accommodation
or finding an alternative has been a successful culture change for us, moving a
significant percentage of bookings to the more reliable budget brands, which
offer efficient business account facilities.”

Early bookers
Until recently, planning ahead has typically been strongly resisted by business
travellers, who have enjoyed the luxury of booking several flights and choosing
the most convenient at the last minute. Mark Avery, head of business services at
PricewaterhouseCoopers, has moved any trip under three hours into economy as
well as asking travellers to book early. “We now issue restricted tickets, which
we thought was going to be a significant challenge, but has gone through
quietly,” says Avery.

“People are having slightly different conversations with clients about how
they engage, rather than being entirely at their beck and call,” he says.
“Clients want to see we are making an effort. We question up front what we are
trying to achieve, asking: ‘Do you need a meeting every time?’ Once you have a
relationship, you can cut down. We introduced the policy in January and saved
£300,000 to March,” Avery says.

Mike Andrews, cost management consultant for purchase management advisory
Auditel, thinks it may be more cost-effective to fly economy class to a
destination the day before a meeting and spend the night in a hotel, because
hotel rates are not as high as air fares.

But no amount of cost-cutting, strategic or otherwise, will produce
worthwhile savings if companies’ internal systems are poor and if compliance
with travel policy is not monitored. If, for example, your hotel programme
specifies three hotel groups, but 50% of your travellers are booking
non-preferred hotels, you don’t benefit from discounts earned through volume of
business.

“We have a model that will tell clients the strength of their policy,” says
consultant Ian Flint, managing director of expense management consultancy Inform
Logistics. “It is one thing telling people what class they will fly, but another
to have a policy that enforces it. And when it comes to hotels, it is not just
the booking of the programme, it is tracking it and getting management
information, which is not easy if some people are booking direct, some through a
travel agent and some through a venue finder or hotel booking agency.”

As you might expect, the discipline comes from the top. If senior people are
seen to be doing it, most others fall into line ­ and those that don’t are
easily visible. Booking tools also aid adherence to policy because they can be
configured to offer only preferred suppliers.

“Checking for mistakes and billing errors is often not given the attention it
should,” says Andrews. “There may be a variation in tariffs or in the way they
are applied ­ a company may be billed for more use than it has had, bills may be
duplicated, or perhaps suppliers are not giving the agreed rate.”

The key is to ask as many questions as possible at the outset. “What are you
hoping to achieve? What is your reason for travel? Who has to be there? What is
the message you are conveying?” says Stewart Harvey, client management director
at travel and expenses management advisory, HRG. “Clients are not just spending
less, they are spending differently,” says Harvey.

Reducing the amount of internal travel is the first goal. “That has been the
focus for clients for more than a year and they are using WebEx, webinars, video
conferencing or conference calls,” he adds. “In the good old days we were just
reporting to clients the type of fare we offered, but now we are reporting
whether we have given a choice of webinar or video conferencing,” says Harvey.
This shows that cost-saving measures are becoming part of policy.”

Face the facts
However, he is emphatic about face-to-face contact. “Companies do not want to
stop going to see clients. After internal travel, their second target is to look
at whether they can see clients electronically rather than physically.” And
these cutbacks are well received. “We get anecdotal feedback that in the current
climate, there is an atmosphere of recognition of like-minded behaviour. But
there is still no substitute for face-to-face contact for negotiations or
dealing with emotive topics.”

American Express is also focusing on how to cut costs and has taken measures
to do so in its commercial cards division. “We want to ensure travel is targeted
at the most essential and critical levels and to be doing it cheaper,” says
Mimi Kung, vice president and general manager for commercial cards in American
Express’s UK & Benelux business.

“We have implemented a more stringent policy, limiting internal meetings. We
don’t want to compromise exposure we get with clients. We want to maintain the
relationship, but we continue to allocate lower budgets than in previous years ­
my travel and expense budget is 40% lower than last year. We looked at expense
data from prior years ­ what don’t we really need to do? And that is mostly
internal. We utilise more audio and video conferencing with our headquarters in
the US ­ the technology is amazing.” Instead of seeing people who work for her
on a quarterly basis face-to-face, she speaks to them monthly. “I don’t go on
location and stay in a hotel,” she says.

Looking at relationships with clients, American Express is relaunching its
Corporate Savings Plus (CSP) service, which partners local and global service
providers to leverage quarterly rebates ­ American Express monitors these and
sends the rebate to the client at the close of each quarter. “If you are an
American Express commercial card customer, you can purchase at certain
suppliers through CSP and get an upfront discount you would not normally get,”
says Kung, naming DHL and Apple as two examples of participating providers. “In
other years, there was not such a focus on cost-cutting because people were
happy to trade savings for convenience, but now they are prepared to go the
additional mile to get savings.

“We advise customers on how to manage expenses and cut costs without
sacrificing levels of servicing. It does work, but it takes discipline and
rigour in how you spend your money,” Kung says.

However, she also still believes in the value of meeting in person. “We want
our sales people and client managers to continue to go out and visit clients and
prospects,” says Kung. “But we are asking them to think long term and plan trips
in advance to leverage cheaper fares and to lock into non-refundable fares if
they know meetings are not going to be changed. You don’t have to sacrifice
face-to-face, you just have to plan ahead more structurally and be more
organised and proactive in negotiating upfront discounts, so you can maintain
activity at a lower cost.”