For the typical road warrior, who spends about $1,045 on airfare, hotel accommodations and car rental per trip, the cost of business travel is a necessary expense.
After all, a global economy requires traveling far to pitch clients and deliver presentations. But the cost of representing a company off-site is expected to increase. The average domestic trip this year will cost 6% more than in 2007, or $1,110, while the average international trip will rise 7% to $3,171, according to the American Express 2008 business travel forecast.
What’s more, as the American economy weakens, companies are beginning to scrutinize travel expenses, and business travelers will be enlisted to help control spending.
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The good news: Firms and employees alike can trim costs by taking advantage of negotiated discounts, considering competitively priced options and comparing short-term prices with overall value. These strategies can be particularly useful when trying to combat the sticker shock experienced by business travelers expecting to pay the quoted price for a hotel room, flight or rental car.
Running The Numbers
An upscale hotel, for example, may charge a minimum $200 for one night’s stay but add $15 per day for Internet service. A two-day car rental may cost $125 at booking but increase to $140 once local taxes are included. An airline might advertise an unrestricted round-trip flight for $300 but later add $30 in fuel surcharges. Altogether, a two-day trip estimated to cost $825 can cost unexpectedly more.
In addition to these so-called hidden fees, companies have to contend with rising prices. From 2000 to 2006, according to American Express data, the average domestic airfare decreased 11%, hotel rates increased 8% and car rental rates increased roughly 13%.
But price hikes are not solely responsible for rising costs, says Steve Broback, a contributor to the business travel blog InFlightHQ. Wasted productivity due to time lost at the airport clearing security or dealing with delayed or canceled flights and missed connections are a considerable expense. In 2007, only 72% of domestic flights departed on time, according to statistics from the U.S. Department of Transportation.
“The travelers themselves” says Broback, “have been hit with significant additional costs that don’t necessarily get recorded in an expense account. These take a heavy productivity toll when you multiply that by millions of travelers.”
While there is no definitive way to improve productivity on the road, companies and business travelers can reduce concrete costs like hotel rooms, car rentals, and airfare.
If an in-person meeting is essential, and cannot be conducted using technologically advanced Web or video conferencing systems, then companies can try controlling costs by relying on a travel manager. This person, or team of people, negotiates discounted deals with hotels, airlines and car rental companies for traveling employees.
“You’re leaving a lot of money on the table if people book their own travel,” says Bill Connors, executive director and chief operating officer of the National Business Travel Association.
A travel manager, for example, can save money by locking in a hotel room rate while the general public might pay 20% more as prices increase. When an employee takes advantage of this discount, instead of booking other accommodations, it adds to the savings.
Henry Harteveldt, vice president and principal analyst of travel industry at Forrester Research, believes that travel managers are useful, but says that costs can be cut simply by looking at competitively priced options.
This might include a mid-scale hotel that offers a room price inclusive of amenities like wireless Internet or faxes instead of a luxury hotel that charges for such perks. While more expensive, nonstop flights or even private jet travel can also decrease the time lost to delays.
In all cases, though, Harteveldt says companies and employees should consider the overall cost of the business travel, not just the sticker price.
“What’s the value of your people’s time?” he asks. For weary road warriors, this commodity is priceless, and travel arrangements that maximize productivity can save more over the long haul.