The friction effect: How prioritizing savings can backfire

December 15, 2017

Why do your staff travel? Is it because they love being away from their families? Because they can’t get enough of airline food? Or perhaps because they love sleeping in an unfamiliar bed?

It’s none of the above, of course. They travel because the job demands it. While getting away on company time sounds glamorous to people who don’t do it very often, the reality of life on the road can be entirely different. And that is especially the case when the whole experience has been organized with the emphasis on doing it as cheaply as possible.

Balancing cost and effectiveness

Travel management companies have long sold their services on the basis of savings. Even before the current fee-based model of engagement – when TMCs earned their money from commission, they would still talk up how much cash they could save clients.

Understandably, ensuring travel is managed to a budget remains the primary concern for businesses. TMCs continue – as they should – to compete for the best prices for items such as airline fares, hotel rooms, and car hire through their buying power and supplier relationships.

But the narrative has started to change. Since 2012, US business travel organization GBTA has been monitoring the elusive concept of “traveler satisfaction” as a new metric for the effectiveness of a managed travel program.

The reasons seem pretty obvious. There’s no doubt business folks need to travel – Oxford Economics calculates companies see a return-on-investment of 12:1 for every dollar spent on it – yet there is a huge hidden cost that doesn’t feature in these sums: the price of an unhappy workforce.

While budget hotels in out-of-the-way locations and cheaper flights with layovers and connections look like a win on paper, their knock-on effect on productivity can be all too real. According to a 2017 survey of travelers by Airlines Reporting Company (ARC), those with a ‘cost-conscious’ travel policy estimated they took effective business trips just 60% of the time, compared to 82% for those who were treated better.

The traveler-centric approach

As well as being physically tired by the grind of their cheaper trips – and therefore less likely to perform at their peak – these travelers are more likely to fall ill through tiredness or stress, feel undervalued and become less engaged with their work, and ultimately even quit in search of a more considerate employer. All of these factors can have a severe impact on your bottom line.

Instead, modern thinking is for businesses to take a more ‘traveler-centric’ approach to their spending, with good TMCs designing programs around the issue. The key to the process is to find out what motivates employees – why and how they travel, what is important to them, and what they dislike.

Increasingly, designing a travel program involves a process of listening, since the needs of employees can vary greatly depending on their age. For example, younger staff are far more likely to want to combine work trips with free time, while older team members with children may want to get home to their families quickly or work from home the day after a long journey.

Research by the Association of Corporate Travel Executives showed that companies with a younger average employees – technology giants and large consulting firms, for example – lead the way when it comes to inserting wellness into travel policies, with almost one-third of businesses considered recruitment and retention as part of the travel strategy.

Putting it into practice

In practical terms, what are some of the things to bear in mind?

  1. First up, if your business is intent on savings, it is vital to keep travelers engaged. You should continually benchmark satisfaction, so your policy evolves with feedback. If employees complain about a hotel provider, for example, ditch the brand.
  2. Another option is the use of “gamification.” Companies such as Rocketrip turn the travel buying process into a contest, allowing staff to try to ‘save’ by building their own trip. Do it successfully and they grab a share of the saving as a bonus in gift vouchers.
  3. For a more personalized traveler-centric policy, work with your TMC to weight preferences and set rules around suppliers and travel durations. This could mean avoiding certain airports, for example, or integrating supplier loyalty programs so travelers can take advantage of upgrades and priority boarding. Address the admin too, by making sure simple things like expense reimbursement is managed efficiently.
  4. Allowing for trips to be “personalized” is another favorite tactic. At its most basic, this could be allowing travelers to choose from a hotel’s pillow menu or add on a city tour. Take it a step further, and they could add a day or two either side of a trip for sightseeing, or even invite a partner along.

By investing in traveler safety, health and productivity, travel managers can improve satisfaction, boost productivity and keep their best workers. In other words: don’t just look at travel costs. Look at overall travel ROI.

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