Added values

Why chasing small-spend travel expenses could produce big savings

BCD Travel In Motion, March 2008

A business traveler flies into Amsterdam and a message from their company's travel department beeps on their mobile phone. “Don't take a taxi into the city,” it says. “Take the airport train.” Once at the hotel, the phone beeps again. This time the message says: “We have a great deal with the restaurant next door, which 94 percent of your colleagues rated highly in a survey. Why not visit it tonight?”

Technology is helping to bring ancillary travel expenses like airport parking, taxis and dining under the microscope of travel management.

With mobile technology accelerating rapidly, these two examples cited by Torsten Kriedt, vice-president of intelligence for Advito , the consultancy division of BCD Travel, could soon become reality. Kriedt believes the technology may help travel buyers to take more control of ancillary spend – the items such as ground transportation, dining and airport parking which account for a substantial but hidden slice of corporate travel costs .

According to Citibank, only nine percent of business travel transactions are for airline tickets or hotel rooms. Although car rental and rail account for much of the remaining 91 percent, many others are the ancillary items which rarely receive management attention. There is of course a good reason for this, which is that the average price of ancillary transactions tends to be much lower. Citibank's figures show that air and hotel account for 65 percent of business travel costs.

Even so, there is some evidence that management of ancillary travel is increasing and has potential for even greater growth. According to the Guild of Travel Management Companies, whose member are responsible for 80 percent of managed travel expenditure in the UK, the total number of transactions handled by its members in the last quarter of 2007 was 14 percent higher than the previous year. However, ancillary transactions were up 35 percent.

Vendors such as airport parking operators also say they are experiencing an upturn in deal-making with corporate clients. The sums involved can be significant, with the largest companies spending 400,000€ and more annually on airport parking.

There are several reasons why this may be, including the fact that buyers are looking for new savings after completing good work on their air and hotel programs . Duty of care also has an influence. Companies want to know where their travelers are at all times, including where they have parked their vehicles.

Furthermore, improved management information may be helping buyers realize their ancillary spend is bigger than they originally thought. “Credit card information has gotten much better,” says Kriedt. “You could use it to negotiate with a chain of restaurants, for example.”

The final contributing factor is technology. “Mobile technology can steer travelers towards discounts,” says Kriedt. In addition, online booking is emerging for ancillary items. Parking operators have launched tools for corporate clients, and in the U.S. reservations systems have appeared that combine booking for every stage of a trip, from air and hotel to restaurants and taxis. 

Yet although there are signs corporations will take firmer control of ancillary spend, Kriedt warns that the increased attention should not be overestimated. “We have had a few clients talk about it but so far we have seen little concrete action, such as negotiations with restaurants,” he says.
 
One reason is that procurement departments are not always incentivized to chase ancillary spend because the savings may not be credited to them but to local offices instead. Even the response from travelers has not been overwhelming. The providers of "total trip" booking tools in the U.S. admit it is traditional items like air and hotel which they are overwhelmingly selling rather than extras like dining.

Kriedt thinks the next big area of expansion in travel management is more likely to be meetings and events. Even so, he believes ancillary spend will gain more attention as companies become increasingly interested in understanding their total cost of travel. At the moment, he says, that is being reflected in broader negotiations with existing suppliers, such as attaching a value to limo transfers provided by airlines or including breakfast and high-speed Internet access in hotel deals – but expect to see the net widen over the next couple of years.