Guide to cutting travel costs

The simple but oft-neglected step of writing a travel policy is the single most important step to managing a corporation's travel expenses and cutting costs. Eddy Mok, corporate sales manager for Lotus Tours Ltd, gave essential tips on cutting travel costs at a seminar during the Business Travel Expo in Hong Kong.

26 April 2002

  1. Set travel management goals
    Companies need to lay out their goals, taking into account cost containment, traveller safety, employee needs and administrative efficiency.
  2. Appoint travel manager/coordinator
    It is vital that someone be responsible for developing and/or monitoring travel policy, negotiating with vendors, analysing travel management reports and controlling travel budgets. This person should have a senior corporate position to have real clout.
  3. Write a travel policy
    A travel policy is the foundation of company travel management. It should contain procedures and controls for travel activities, set out guidelines on class of travel, grades of hotels and rental cars. It is vital that both staff and the travel agent understand this.
  4. Consolidate travel purchasing through one or two (maximum) travel agencies
    The travel agent should share responsibility for monitoring and enforcing travel policy. Choose agents based on who is giving you the best deal in terms of discounts, transaction fees and management fees, taking into account their bargaining power with airlines, ability to offer a large variety of special tickets and their IT support. Two is better than one - introduce some competition by appointing two travel agents to battle over price and service and review them annually.
  5. Negotiate a corporate airlines programme
    Given that airfares represent the highest percentage of most travel budgets, controlling costs here is key. Identify your key routes and high-volume city pairs and use your documented travel volumes to negotiate deals. Make use of route deals, bulk air purchases and incentive schemes. Limit the number of preferred vendors, who will increase discounts in return for a large portion of your company's travel dollars.
  6. Negotiate hotel rates
    Analyse hotel usage and identify savings opportunities. Also identify key destinations, volumes and other lodging patterns to prepare for rate negotiations. Leverage your travel volume by limiting negotiations to a small number of hotels in key destinations and inform the travel agent of your negotiated rates.
  7. Use corporate cards
    Minimise cash advances through the use of a corporate charge card. These not only provide detailed management info on T&E but provide insurance coverage, itemised statements, emergency cash and often 24-emergency assistance. Relying on cash can rob you of T&E data and increase the risk of expense over-reporting by staff.
  8. Get agent to prepare monthly management reports
    Get the agent to prepare a monthly management report: this could be broken down into travellers, destinations and types of service and can show how much the agent has saved you.

    Finally, keep all the above in mind and remember: squeezing the travel agent alone is not the best single method to reduce cost.

    A recent survey by AMEX has revealed that just 54 percent of companies in Singapore have a written travel policy. Another study by VISA has shown that it's getting staff to adhere to it that counts. Companies with 99 percent compliance had the highest estimated savings at 35 percent, while those with the lowest compliance - just 60 percent - made savings of just 10 percent. Given that T&Eexpenses are widely accepted as most companies' second largest controllable expense, the difference between 10 percent and 35 percent is nothing to be sniffed at.

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