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When you take a business trip for the Global Concepts financial consulting firm, your first stop is Anne Sullivan's office.
Sullivan is finance officer at the 12-employee company in Atlanta, and she keeps a vigilant eye on its travel costs and practices. The eight employees who travel regularly are required to make all arrangements through her.
She books through one travel agency, which provides rebates in the form of free airline tickets. She may ask employees to spend a Saturday night at their destination or to use a less convenient airport if doing so means a deep discount on an air fare. She may reserve their rental car with a lesser-known company or put them in a less costly motel--all for the purpose of keeping the company's travel expenses in check.
And when Global Concepts sponsors one of its forums--on banking issues, for example, or financial uses of the Internet--and brings in guest speakers, Sullivan asks them to let her arrange their travel to reduce costs that she says can be "phenomenal."
Indeed, small companies everywhere--even those with only a handful of regular travelers--are adopting methods like Sullivan's to cope with steeply rising travel costs. According to the American Express Domestic Airfare Index, the typical amount spent for a round-trip air fare for business travel (described as the lowest economy fare available with a three-day advance purchase) was $358 in June, up from $335 in June 1995, a 7 percent increase in 12 months. Hotel room rates are also rising. Between 1990 and 1995, the average published, or standard, rate--known in the industry as the rack rate--in the U.S. increased by 33 percent, according to the Travel Industry Association of America.
In its own survey of lodging costs, Runzheimer International, a travel-management firm in Rochester, Wis., found that room rates on average went up 21.3 percent from June 1995 to this past June, and the company forecasts an additional 7.5 percent increase next year.
Runzheimer's surveys of car-rental rates also show sharp increase--15.7 percent from June 1995 to June 1996, and a forecast of an 8.5 percent jump next year. Car-rental increases appear to have tapered off since 1995, when Runzheimer's survey of rates charged by the four largest rental companies at 100 selected airports showed an average 32.8 increase for the year.
Big Costs, But Trimmable
At many companies, travel costs represent a major chunk of total expenditures. Typically, "T&E [travel and entertainment] represents the third-largest controllable bottom-line expense, after labor and facilities," says Ed Barewich, vice president of sales at Aquarius Travel, a travel agency in Cambridge, Mass.
Small firms are particularly vulnerable to travel-cost increases because they usually don't generate the volume of travel needed to negotiate deep discounts with airlines hotels, or car-rental companies.
Nonetheless, even small firms can save on their expenses by planning properly and taking certain steps. They include establishing company-travel guidelines, assigning a coordinator to authorize company travel, working with a single travel agency, and tracking travel expenses.
At Global Concepts, travel guidelines are informal. Sullivan keeps tabs on expenses mainly by overseeing travel arrangements herself and talking with employees about her money-saving procedures. These include booking advance-purchase airline tickets if possible.
And she has found that having employees stay over for a Saturday night to get a lower air fare can reduce a trip's cost significantly, even when the meal and lodging expenses of an extra day are subtracted from the air-fare savings.
Using secondary or less convenient airports to get a lower air fare may mean employees fly to and from Dulles International Airport, which is farther out in Washington's Virginia suburbs than close-in National Airport. Or they may use new Jersey's Newark International Airport, which is farther from Manhattan than New York's LaGuardia Airport.
In booking company travelers in moderately priced hotels, Sullivan simply avoids properties in prime areas such as San Francisco's financial district. And although Global Concepts has negotiated a preferred rate with a major car-rental company, she often gets lower rates at rental companies operating in less costly facilities off the airport premises. She also may ask employees to take taxis in some instances rather than rent cars.
Sullivan also keeps close watch on expenses even after a trip is over: When she received a bill for an exorbitantly costly phone call made during a flight, she told the traveler such extravagances are not allowed.
Track And Manage
When companies manage their travel expenses assertively, they can achieve savings of as much as 45 percent, according to estimates by Gerard Smith, a senior partner at The T&E Group, a travel management consulting firm in Newport Beach, Calif.
Evidence that travel costs can decrease when vigilance in the experience of Harris Laboratories, a clinical-research organization based in Lincoln, Neb. About 70 of the company's 458 employees travel, and five years ago Harris decided to manage its travel costs in-house.
Charlotte Ballard, a corporate executive assistant, was assigned to get a handle on the firm's travel costs, so she attended a seminar hosted by a university on putting together a travel policy. She also asked many people for their suggestions on how to submit requests for proposals to travel agencies, and she negotiated with vendors herself.
After tracking her company's travel expenses for a year, she selected an agency to book the company's travel and implemented a three-page travel policy. Because employees were booking their travel through their secretaries, Ballard arranged a seminar to introduce the secretaries in a positive way to the new policy and to the travel agent.
Ballard flew to Phoenix, where Harris Laboratories maintains an office, chose a preferred hotel for employees who go there on business, and negotiated a special rate for them. "We probably do 250 nights at one hotel," she says. Ballard also has negotiated rates with a second hotel there and with a car-rental company for rentals in Phoenix.
Today, Harris' employees are instructed to have their travel arrangements made through the four travel coordinators Ballard manages; they in turn deal directly with the agency. She has saved by booking advance-purchase air fares--sometimes as far as a year ahead.
If an airline fare war occurs, the coordinators notify employees so that they can reschedule their travel to take advantage of the cut rates. All employees must fly coach regardless of the length of the flight.
The results have been substantial: Last year, Harris Laboratories paid $176 on average for a domestic round-trip ticket and $872 for an international ticket. Those are about half the average prices paid by Harris in 1990--$393 for a domestic ticket and $1,616 for international travel.
The savings are particularly significant considering that the volume of travel at Harris remained about the same: The company spent $227,000 for 742 tickets last year, or about 30 percent less than the $331,432 that the company spent on 737 airline tickets five years earlier.
Pointers For A Travel Policy
With its level of travel expenses and its three-page travel policy, Harris Laboratories bears out a recommendation by travel agent Barewich: A company that spends $250,000 or more a year on travel should have a formal, written travel policy. It can serve two important functions:
* It can help consolidate a company's travel by directing employees to book through one agency and to use one car-rental company and hotel chain, thus building a basis for possible future negotiations with vendors.
* It can reduce unnecessary costs by educating employees and making it clear that the company intends to manage its travel costs.
A written policy need not be more than three pages, and it can be flexible. Basic guidelines include the classes of air travel that employees are to use. For example, is coach the only permissible class, or are higher-priced tickets such as business class acceptable for flights of a certain minimum duration?
Policies should also note the type of hotel and daily meal expense allowed and the preferred travel agency and car-rental vendor.
Many travel agencies will work with companies to help them fashion a policy and to obtain discounts for them. The first step is to establish a record of the company's travel expenditures.
With smaller businesses, "the biggest gap is obtaining good information on travel expenses," says Troy Haas, president of Brownell Destinations, a travel agency in Birmingham, Ala. "Getting control of that information is key" to limiting future expenses, he says.
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