What a new industry means for companies looking to minimise their business travel costs.
Credit Capital business finance states, “global business travel spending topped a record-breaking $1.2 trillion in 2015, and was projected to reach $1.6 trillion this year, until the fatal coronavirus outbreak”.
That’s a boat-load of money (approximately similar to Australia’s GDP).
Is it much, you ask? Well, there are several hundred billion reasons you might think it is.
Essentially, the business travel industry entails so much more than just a trillion dollars of ‘other people’s money’ getting spent. Any moment the individual making the purchase isn’t paying; then there’s an issue of misaligned incentives.
A classic example is business travel. It’s not like employees try spending loads of cash while on their business trips, it’s just that there’s no reason not to. If somebody is going to get reimbursed, chances are they are unlikely to strain themselves to save some money. Even when the travelling employee is compliant with the travel policy of the company, chances are they will spend on the upper stratum of their allowance: Nobody in their senses would volunteer to fly on coach whereas they could be flying business class.
These missed opportunities for saving really add up. Hardly any small potatoes here. At an average organisation, employee overspending takes up 1/5 to a 1/3 of budget for total travel and expense (T&E). But it increasingly appears like it can be solved. If you are a business owner you really make it to a point to secure your business against financial loss and that’s normal.
Carrots vs Sticks Approach
Companies had two conventional options of responding to high travel costs. As the price of conducting business, they could turn a shoulder to employee overspending. Or they could try cutting down on costs with restrictive travel policies and tight spending limits. The first decision hurts the bottom line, while the second alternative increased turnover and employee dissatisfaction.
However, there’s a new emerging pattern in corporate travel management, one that’s based on carrots rather than sticks. Instead of punishing employees who tend to overspend while on their business trips, most establishments are opting to reward those who save.
It sounds unrealistic and attractive cutting down on costs without employees getting upset. In fact, products that allowed the business to get their cake and have a bite of it too turned out to be half-assed.
The majority of these attempts fall under the enterprise gamification umbrella, which is the application of game playing aspects to business operations to help in influencing employee decision-making. Badges, points and other forms of recognition act as rewards, which theoretically motivates employees in undertaking a desirable action like booking an affordable hotel or flight.
However, this theory has come up against human nature realities. An employee taking a business trip is nothing if not just human. Like any other person, they will act out of their own self-interest and understandably prioritise their convenience and comfort when booking a trip. The digital perks provided by gamification don’t sufficiently reimburse employees travelling to be inclined on saving.
Employer and Employee Interests Alignment
Finance experts at Wizard Finance say, “business travel savings might be challenging – especially if you have lots of employees flying to different locations at different times.”They suggest,”to minimise on spending, the rewards-based solution should be based on a practical recognition of what employees really value.”
Practically, this entails giving employees an incentive which directly affects him or her to spend less. Customary wisdom suggests that you shouldn’t have to be paying employees to assist in saving company money – anyway, they ought to be doing it, right? Maybe this is why it’s not a surprise that among the first organisations to question this wisdom is the most innovative of all time
Using Its Trips program, Google made a modern travel management template. Employees in Google receive a budget before each of their trips, and in the event they return under budget, they get credits they can redeem for future travel upgrades. This has seen the employees more committed at saving today so they can splurge later on.
The system functions well for a variety of reasons. It’s equalitarian because the employees get to take home part of what they are saving the company. It’s actually pretty empowering because Google provides travellers with the flexibility to consider a wide selection of options and select the one that best fits their budget. And finally, it’s quantitative because employees get a clear-cut approximation of what is deemed reasonable to spend on a particular trip.
Travel and Expense Management: The New Normal
This is not the first Google has been onto something. Giving them sufficient grounds to take into consideration the cost of their trip can lead to more reason-minded spending. For corporate travel management, it’s the most radical or most obvious concept.
Anyhow, that main recognition has created a lot of traction in travel incentive programs for big and small organisations. There are an array of solutions that are sure to motivate employees to save on their trips.
Some, like TravelPerk and TripActions, are meant for medium and small businesses that don’t have a travel management system. A startup that provides travellers with gift cards in turn for flight and hotel flexibility uses a direct-to-consumer model.
Here are some reasons why travel incentives are where they are.
Technology. For the employee to be motivated on saving for a trip, they require a baseline of what the trip is going to cost which will need huge quantities of data to get analysed on the available prices. With technology, a business traveller can accurately plan his/her trip.
Changing Travel habits. Years of online booking, coupled together with low-cost airlines, Uber and Airbnb mean that travellers are more adept at finding cost-effective options that suit their needs. That's true for both business travel and leisure travel.