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travel tech insights

How a Travel Management Company controls Business Travel Costs (Part 1)

Business managers often find the challenges of controlling business travel costs to stay top of mind for two reasons: 1) travel costs often appear deceptively easy to manage and control – only to turn out to be quite the opposite; 2) travel is expensive, meaning these costs can quickly become significant if not controlled.  Travel costs appear easy to control because the amounts almost always require a formal approval mechanism. However, travel approval procedures in most companies tend to stumble in two ways.


Businesses use travel management companies to control corporate travel costs

One is that travel requests are often tied to customer sales and revenue opportunities, both of which hard to anticipate and many of which have priorities that trump an approval criteria. 

The second is even approved travel is not necessarily booked at the lowest possible cost – or in compliance with the business’s travel policy. This doesn’t mean employees are deliberately trying to gouge the company with inflated airfare and hotel prices. However, most employees have travel preferences, particularly employees who travel a great deal. Preferential travel choices may not seem to be serious policy violations. Often the cost differential is only marginally more than policy alternatives, but cumulative impact across the organization is much more expensive story.   

Such serious issues are among the reasons corporate management often turns to travel management companies (TMC) to handle the booking of their business travel. These travel service companies function as a travel procurement agent for the business - with roles, responsibilities and clear expectations in three areas. 

Business Travel: The travel management company brings value to corporate travel in two ways. The first value is procurement:  the TMC has the expertise to negotiate favorable pricing, terms and conditions from travel suppliers. The second value is technology: its B2B software supports the negotiated services with highly intuitive, user-friendly, interfaces which combine with innovative features to deliver easy and fast employee travel planning and booking.

Cost Control: the TMC is expected to drive cost reductions by applying economies of scale – economies provided by the client’s travel volumes and leveraged by TMC economies as well – then optimized by negotiation skills and supplier relationships. Further, procurement best practices should insure sustainability of these lowered costs.

Policy Compliance: the travel management company is also required to maximize traveler compliance with corporate travel policies by using technology to provide two types of functionality: real-time management of travel policy compliance (e.g. challenging a submitted reservation that violates the policy, and/or requiring specific approvals prior to booking); management of travel expenses and savings by means of real-time dashboard KPI reporting.


Coming next in Part 2: Travel Management Company Best Practices



Topics: Travel Management Company Business Travel TMC Travel Policy Travel Costs Corporate Travel