Ways to make savings

Ranked as the second largest expenditure after salaries, corporate travel and entertainment expense has long been a hot topic for large corporations. PRUDENCE LUI asks the experts for tips on trimming excessive spending through the use of technology, corporate card, low-cost carriers and other areas.

By leveraging on advanced technology in the spending cycle – planning, spending, reconciling and reporting – travel managers can effectively manage travel expenditure.

Carlson Wagonit Travel (CWT) general manager for Hong Kong and Greater China, Mr Greg Treasure, points out technology can help capture, analyse and provide data. It also helps improve and manage behaviour. “The key element of controlling travel and entertainment (T&E) expense is data. Without data, we can’t measure or manage at all,” Mr Treasure said.

Using Internet technology, corporates can get support from various business travel portals, online self-booking tools and even track traveller security. Driven by customer demand, CWT launched the Connect portal two years ago. It encompasses all these functions and helps data collection.

The secured site allows travellers to access their customised travel centre for versatile online services such as searching for flights and fare prices, online booking, hotel programmes, rail schedules, pre-trip/on-trip/post-trip reporting, itinerary checking, travel policy access and traveller security alerts.

Mr Treasure explained the online booking solutions were equipped with an inbuilt internal approval process and the ability to load and access preferred rate programmes and generate broadcast reports.

“This makes sure staff buying tickets or booking rooms remain in compliance with company policy with options clearly identified. When staff book online before the trip, an online pre-trip report will have all reservation records sent to a central server that allows interrogation on more than 400 data fields. An email alert on programme breaches is available. It helps manage out-of-policy travel prior to ticketing.”

He said the overall cost of travel is dominated by air fare (58 per cent), hotels (27 per cent) and car rental (12 per cent). Fees for travel management companies are only three per cent.

“Our fees are peanuts and it won’t save much by discounting off transaction prices. The way to save is to trim that 97 per cent.

“In Hong Kong, there is a trend that corporates slowly switch to one agency and save by keeping better travel policy compliance and by consolidating airline and hotel programmes. Our role is obviously changing to a solution provider and integrater that works alongside corporates on all aspects of their travel programme with an objective to lower their overall net cost of travel.

“When a company spends US$1 million or US$2 million in travel annually, staff security is a vital issue in addition to making sure the fare is right. A small company may look for fundamental tools other than developing a customised portal,” Mr Treasure said.

The power of plastic

A corporate card is a good method of tracking, consolidating and managing expenses. It records what travellers buy and the transaction can be processed while they are on the road. Corporate card companies usually offer tailored reporting and analysis; this turns information into valuable knowledge.

Diners Club International head of corporate products Asia-Pacific, Mr John McCann, said using credit cards to settle T&E could substantially improve budgeting, forecasting and analysis. He said: “Credit card data can offer a detailed picture on employee spending, for example, where the money is spent, by which cost centre and in which countries, and with our Global Vision product, at a few clicks. It is a web-based solution for clients and is used to analyse and report detailed spend data and can consolidate the data at a global, regional and local level. Likewise, it can be accessed anytime, anywhere via the Internet.”

Using a credit card puts the travel manager in a great bargaining position. For instance, Diner’s regular vendor reports indicate the volume of spending with particular vendors, for example, hotel chains or airlines. Travel managers can then negotiate for better rates.

Another advantage is monitoring policy compliance.

“Our system can send an email alert to cardholders or travel managers to check employees comply with company policy. Clients can also choose how frequently they receive reports,” Mr McCann said.

Diners Club also has a 90-day delinquent cardholder report which records and reports travellers who have not settled their monthly bills. This would minimise late-payment fees.

A good travel policy

A travel programme will never work if there is no clear and workable travel policy. National Business Travel Association (NBTA) vice-president of domestic and global operations, Mr Hank Roeder, emphasises travel is a “cost centre” rather than profit.

He said: “When putting together a travel policy, one has to identify purpose and need of travel. Additional considerations such as company goals and culture are also vital. For instance, whether a corporate card is restricted to just travel purchase or if the individual can charge anything they want. In the US, it’s common to see corporate cards viewed as a personal card, which is quite dangerous.

“Policies must be fair to everyone. Don’t expect travellers to comply if their supervisors or colleagues ‘get away’ with non-compliance. It is important to emphasise continuous education and encouragement as well as incentives for those who follow procedures.”

According to CWT, an ideal global programme can save seven to 10 per cent of the overall budget because of better policy compliance.

Marriott International vice-president Asia-Pacific Global Sales Organisation, Ms Bernadette Dennis, concurred, saying: “A good travel policy is win-win for both company and travellers who understand the importance of T&E and the critical bottomline of profitability. The travel policy should be documented so that all employees are aware of it.”

Use hotel programmes

A good hotel programme may enhance T&E control. According to Ms Dennis, a successful and effective programme ensures productive and profitable business travel for every traveller.

She said: “Cost is not always number one and should not be the main determining factor. If a company has developed a hotel programme, it has researched the needs of executives who have to travel and has contracted with hotels that will make every business trip successful. They will also have control of the amount that will be spent and will be able to adjust profit and loss accordingly.”

Instead of choosing either a travel management or a hotel company, she recommends negotiations with both parties.

“It is because when all three participate in the negotiations, the relationship is even. The funding is transparent and the basic goal of developing good travel policies will be achieved. As a result, the best deal should be made.”

A long-term price value relationship with a hotel company also counts. “Volume production ensures the best price and this is very much part of the hotel industry. A company that changes its hotel company preferences every year doesn’t provide consistent volume and so will not get the best deal.” On the other hand, Ms Dennis also points out the flipside of prepaid vouchers.

“If a traveller wants to extend his stay, change the schedule or leave the hotel early, the prepaid voucher does not allow for this and the process of getting a rebate is long and costly. What’s more, they do not allow for additions, changes, upgrades, early check-in or late check-out, let alone any f&b options.

“Travel managers can learn more from the industry associations by sharing best practices.”

She recommends attending seminars run by NBTA and the Association of Corporate Travel Executives, which have activities in the Asia-Pacific region.

“There is no doubt that electronic distribution reduces human error in the hotel reservation request and it allows for the collection of accurate stay data. Security is a big issue these days and therefore a mandated travel policy is now more important than ever. A company must be able to locate their executives at all times.”

Private jet or LCC?

Travelling by private jet could be a cost and time-saving option. Hong Kong Aviation Group director of sales and corporate development, Mr Chris Buchholz, explains if many employees are travelling together at the same time, for example, for multi-stop roadshows or meetings in a limited time frame, a private charter service may be more economical. He said: “This is especially true if the destinations are in remote locations served by a limited schedule or the airports are not served by (major) airlines.”

According to FCm Travel Solutions national leader, Mr Jonathan Kao, low-cost carriers (LCCs) have just taken off in Asia and no single LCC offers a comprehensive network. Most of them are small operators with fewer than six aircraft.

He said: “Although the fare is competitive, LCCs have limitations. For instance, they cannot be booked on a GDS and it’s difficult to access and collect data as there is no centralised data system. Most importantly, it’s difficult to track a traveller’s location.”

In short, lack of flexibility undermines its popularity. Regardless, LCCs are interested in the corporate travel market and are improving their offers with user-pay lounges, business-class seats, increased leg room, flying into primary hubs in major cities, on-board entertainment, corporate deals with limousine service and booking via travel agents.