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.”