Wednesday, August 10, 2011

OK - So its not technology, but it is in some senses a system

I have been puzzled by the way that corporate travel works. It seems to be a classic case of sub-optimization and I have never had a convincing story from corporate travel managers. I'll use some examples from my past to illustrate.
First comes from when I ran a consulting business. I figured that since my employees would often have to travel to the customer sites, I would quote rates to the customer that were inclusive of travel and then manage the travel down. I'd make some assumptions and then quote an all-in daily rate. Of course our rates looked higher than some of the competitions' rates, but the TCO was better. And then as a bonus to my employees, I would reward them at the end of the year with some percentage of the "saved" travel costs - assuming that they would normally have to pay $0.50 per mile on a trip for the airfare portion. Some of the more creative consultants were getting $0.20 or less, so there was lots to share.  I typically bumped the hourly rate factoring in about $0.35 per mile. So all were happy. Except they weren't! This was very difficult for the bean counters at some of our customers. They needed to see expenses accounted for differently.
Fast forward a few years. I was walking with a large travel agency on some modernization projects. This involved some of us commuting to the customer site, and staying the week.  Of course, since the customer was a travel agency, we had to use them for booking. Round trip airfare + 4 nights in hotel = $1300. We could book on Travelocity (and did a couple of times) getting the same flights, same hotel, same durations for about $700. We offered that to the customer - no deal. And then they had the gall to not renew the contract because "our expenses were out of control".
Fast forward to now. Texas education is in a budget crunch. There are important conferences that people need to go to - especially the people in Industry Studies kinds of programs. People have travel budgets to do these. How these budgets are calculated, I have no idea. What I do know is that accommodation and transportation have to be itemized. That's the policy, there's a travel department that does this. So, again, it is impossible to use the low cost mechanisms (like Travelocity) to book trips. Travelocity bundles airfare and hotels into a package, and is often a whole lot cheaper than booking the parts separately.
In corporations that I have worked for, it has almost never been acceptable to book the cheapest options - even when that is more convenient as well as cheaper. As a traveler would I prefer a package allowing a cheap non-stop flight or paying more and having to change planes in order to apply with (misguided) travel policy.
So given that there has to be some benefit to the current expensive, nonsensical approaches we have to ask where the benefits accrue. There are several candidates:
  • Corporate travel can look like heroes because they have negotiated special airfares with preferred carriers. Except of course that's a false economy.
  • Corporate travel gets all sorts of perks and inducements for the deals it does. Hmm, that doesn't look too helpful either.
  • Travel policy can more easily be enforced up front. Well, that;s probably true, but employees who make unauthorized trips should not have the cost of those trips reimbursed.
  • Fraudulent refunds - using an employee's own credit card, getting the trip changed, refund comes to employee and the employee makes some extra. That's really bad news and the employee should be fired for fraud.
  • Being able to track travel independently of the travelers' own reporting. yes that might make a difference.
  • No business class/first class generally available on packages booked on Travelocity. Well maybe there's a cheaper way around that.
The bottom line for me is that I don't see how corporate travel agents can really be justified - unless they facilitate the booking of all inclusive bundled packages. That surely has to be the way to save $$$$$


  1. Chris,

    I feel your pain on this subject. I would agree in most cases which are simple round trip airfares. But for complicated trips with a lot of dependencies, or for international travel, they can be helpful in booking and managing the trips.

    At my company, we don't use the corporate travel agency for simple itineraries, we just book using Concur to consolidate the billing and skirt the agency.

    But I agree that most travel policies increase the average cost of travel. Not being able to book "name your price" on Priceline has ended with much higher travel costs for sure.

    I did speak at an ACTE conference this spring and a few travel managers did talk about the ability to know where everyone is during an emergency/disruption (think 9/11 or the Ash Cloud), and the ability to support those travelers to get them back home quickly as a main premise of consolidating corporate travel. I never thought about it in those terms before it was mentioned to me. A corner case for sure, but I understand the intent at least.

  2. Good points, all Glenn. And absolutely I agree that complex trips and "when the stuff hits the fan" kinds of outages they provide useful insurance.

    I wonder if there is some better model. We too use Concur, but I still can't book the cheapest way. I think it would be a great opportunity for someone to create a solution that allows for a simple (this looks like a straightforward trip, so I'll divert you to Travelocity/Orbitz, etc.) to get a package deal.
    I have yet to do (and probably won't) the kind of analysis that supports my inclinations. But it just feels wrong the way it is. Partly because of idiotic accounting practices.