Spend management

It’s all different now. Business travel. Travel managers’ roles. Traveler experiences. All changed. Your approach must change, too.

New ways of thinking

New ways of thinking can help transform travel programs. Review supplier partnerships; examine air, hotel, ground and rail programs with a fresh eye; and don’t ignore the data. Map the changes that will affect your footprint and factor in other organizational changes that will affect your travel policy. Other business units — ­­from HR to IT — now have a vested interest in travel.

Engage with your internal stakeholders to build a recovery path scenario since travel footprint is always related to company activity. These might include shifting from air to rail travel, and focusing on reducing CO2 emissions, to name a few. A great approach is to use “what if” scenario modeling tools to forecast spend and map out a range of scenarios from conservative to aggressive. That way, you’re ready to activate your program as soon as the business need arises.

A gradual return to air travel

After decreasing by more than 60% in 2020, global demand for air travel expanded by 24% in 2021. Despite this rebound, passenger numbers were still 53% below pre-pandemic levels. Global airline capacity is back at 50% of 2019 level. Domestic markets are already on a steady recovery path. While domestic travel was 39% lower than in 2019, international traffic is still highly impacted with a 70% drop versus early 2020.

Timeline for recovery

The International Air Transport Association (IATA) expects air travel to make a full recovery by 2024, with domestic travel achieving this milestone in 2023, and international following in 2025. Recovery will not be globally synchronized, with a more cautionary stance towards easing travel restrictions likely to delay recovery in some Asian markets.

The chart (left) demonstrates how long it will take global passenger numbers to return to 2019 levels (100).

How can you prepare for the new air industry landscape?

Preferred suppliers may no longer have the capacity to fully cover travel needs in certain markets. You’ll need to adapt your travel program and potentially seek alternative suppliers. Using a tool like Advito’s Air Fare Predictor will enable you to monitor the evolution of bookable flights, seat capacity changes, and future pricing points on a daily basis.

Align your global travel footprint with the changed industry landscape to secure optimal coverage and competitive pricing as the program is gradually rebuilt. This will require ongoing negotiation with suppliers to protect your top routes from volatile or uncompetitive pricing. Most importantly, do not use the traditional air RFP process. Instead, use Dynamic Performance Management to constantly and proactively adjust your program for your needs and market fluctuation. You’ll be able to use fresh and predictive data technology to increase your leverage. DPM helps you better engage with your suppliers and your travelers. Communicating with travelers and influencing their behavior can deliver savings that are on par with your carrier negotiated deals.

Beyond savings, you can negotiate with airline partners for refunds, credits and vouchers – and advocate for fuel surcharge and distribution surcharge termination. Agility will be a key factor to success for travel programs moving forward.

Hotel industry signs point to stability

Towards the end of 2021, we saw some regions hit the occupancy and average daily rate (ADR) levels of 2019. While Omicron disrupted that trend in early 2022, traveler sentiment quickly recovered in the wake of the less severe variant. Signs are pointing towards stabilization, and for many travel managers that haven’t looked at their hotel programs since 2020, now is the perfect time to take action.

Take a proactive approach to hotels

First, make sure you have a pulse on projected travel. As travel comes back, having insight on future travel demand from stakeholders across the organization will be crucial.

Second, get a pulse on the dynamics in your top travel destinations. Use those insights from your internal business leaders and cross reference it with what your top destinations were pre-COVID. That list may need some updates – and you’ll need to research the dynamics going on in those markets to stay ahead of emerging trends. For example, you’ll need to book meetings/event room blocks in advance as demand and prices will be higher than normal.

Last, focus on your preferred hotel program. If you haven't taken any action in the last two years and you've just been rolling over, now is the time to re-examine those rates and your preferred program’s size.

Take back the wheel

Get ready to jump back in the driver’s seat of your hotel program. Here are three things you can do to set yourself up for success as you think about your 2023 program strategy.

Right-size your program

Diversify your rate types

Implement rate targets

Savings achieved through the traditional labor-intensive sourcing process have continued to diminish every year. Reducing your preferred program size and the time spent on annual hotel sourcing frees resources to focus on other ways to optimize your hotel strategy. Our data shows that by sourcing 10% of the hotels used, travel managers can still cover 65% of the spend and room nights. This is a smart trade-off because travel managers don’t spend time on the least competitive rates and focus instead on those that offer the best value.

Diversify your hotel program, starting with your rate mix. Only negotiate static rates where you have the most leverage and can achieve real value. Otherwise, negotiate dynamic rates with a solid discount off BAR, and utilize rate caps to ensure you’ll never pay over a certain amount. You can also further supplement your program by leveraging BCD’s Global Hotel Program for the properties you are no longer sourcing.

Supplement your preferred hotels with rate targets and review and maintain them on a monthly basis. Rate targets are competitive values and are closely aligned to the average booked rate in the market, versus a rate cap that is typically set at the highest negotiated rate in a market and anchors travelers to a higher price. They will help your travelers make the best decisions and drive down your average booked rate in markets where you don’t have as much coverage.

As always, putting the appropriate duty-of-care structure in place and empowering your travelers to make the right choices will round out your approach. Educate and influence travelers to book through their approved channels. If they don’t, you won’t know where they are when they need help. To bring travelers into the program, use modern merchandising tactics to make booking channels easy to use. Fill the channels with the great content they expect to see.

Optimize your hotel program

Hotel category management currently faces challenges, but one thing is clear: you can’t just do what you've always done. Advito hotel expert Shelly Fletcher Bryant has these recommendations for what you can do:

  • Reset your program and adopt new and innovative techniques
  • Leverage behavioral economics to create rate targets, OBT configuration and merchandising to influence travelers
  • Drive savings and increase traveler satisfaction with dynamic program management

Anticipate ongoing shortages for ground transportation in 2022

Ground transportation is expected to play a bigger role in most travel programs beyond the pandemic. Even if your car rental volume is lower in 2022, it’s imperative to consider how your travel footprint and booking behavior might shift over the next 2-3 years. You can still negotiate successful deals by forecasting your demand instead of relying on current or historical data. This means more planning and preparation will be necessary to meet the growing demand. Revisit your travel policy and encourage your travelers to reserve cars far in advance. Adding a second supplier to your ground program can also ensure you have the coverage you need in key locations.

High-speed rail and distribution challenges

Considering the expanding corporate sustainability initiatives, and the rapid growth of rail networks globally, we expect high-speed rail (HSR) to continually play a larger role in business travel programs. Efforts must be made to alleviate some of the challenges of rail distribution for business travel.

While booking and paying for a seat on an airplane is globally standardized, with most flights available on the Global Distribution Systems (GDSs), buying rail is much more fragmented. Each country has adopted different rail distribution and booking systems. It adds complexity in the booking process especially when combining rail segments in multiple countries.

Poor availability of real-time train data has several important dimensions that impact the rail customer experience. Additional effort needs to be made to ensure all rail schedules and fares are displayed in OBTs, so travelers can easily compare their options.

What you can do

Spend management checklist

What BCD Travel is doing

Seamless T&E spend management experience for travelers, travel management and finance alike

Offering flexible rates on hotel bookings to accommodate trip changes

Optimize your travel program with innovative sourcing strategies

Increasing cashflow with various reclaim and refund options

Consolidating information into clear actionable insights

It’s high time companies start thinking about how to future fit their travel programs. Crucial tasks for travel managers include measuring the value of travel, demonstrating the quality of its outcome, and proving to internal stakeholders that it’s worthwhile. The key is not to simply reduce travel spend, but to increase the effectiveness of that travel towards meeting the company’s goals.

—Jorge Cruz

Executive Vice President, Global Sales and Marketing, BCD Travel


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