Feature

Tools of the Trade

Corporations across all sectors are looking for ways to trim and manage costs. Tricia Holly Davis reports on what's out there to help get the job done

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In the business travel field there is a host of technology applications - from self-booking tools (SBTs) to back-office, expense management systems - that promise to help managers trim their travel and expense (T&E) budgets. And if you're in the market for a new travel management application - be it a SBT or expense management solution - the current profusion of technology on the market will ensure that you'll be spoiled for choice.

Of course, the flip side is that the plethora of choice can be overwhelming and just because you can buy certain products does not necessarily mean that you should.

Having the right tool for the job can make all the difference. It's fairly straightforward when choosing something for a bit of DIY around the house, but when it comes to SBTs and all the other items that travel buyers and arrangers need in the corporate travel toolkit, selection becomes a more complex process.

"It's easy to forget just why these tools need to be so complex, and this is because corporations' policies, processes and demands are so diverse," says Paul Tilstone, executive director of the Institute of Travel Management (ITM). To complicate matters further, he points out that SBTs connect to no end of other complex systems to aggregate and present data in the format the client requires. "I really don't think there are either realistic expectations by clients or, indeed, realistic selling of these tools in many instances," says Tilstone.

Or to put it another way, he believes the core functions required by companies are maximum inventory levels, policy control and ease of interface with the end user.

"The tools on the surface look quite similar but if you dig deep and ask all the right questions, such as methods for payment processing and data capture of low-cost carriers, then you really start to see the differences."

Frank Palapies, head of global commercial operations for Amadeus, observes: "Web tools have come on in leaps and bounds in recent years, both for users and administrators." In this sense, he says the biggest challenge is not so much the actual technology, but the fact that the marketplace itself has become more crowded.

"The sheer amount of content that is included, the number of options available and the amount of features on offer have all increased hugely. But we feel that the tools themselves are actually still fundamentally simple to use.

"For companies to make sure that they choose the right technology for their business, I think they need to be very clear about what they actually want when they are starting out and, in effect, to rationalise what their agenda is and then tailoring a system to their needs."

Of course, companies' needs vary hugely depending on the size and type of their business. Small or local corporations will be most concerned by ease of implementation and direct cost savings and so will frequently choose an 'off the shelf' package. As the size of business becomes larger, the focus shifts to factors like efficiency and indirect savings. Palapies says Amadeus's global clients are looking for a tool that will integrate with all of their different systems and offer an end-to-end service, though the rate of interest is paramount for any client in today's economic climate.

Companies are also increasingly sceptical about whether investing in technology that will help them better manage their travel expenses delivers broader financial benefits. On this point, Palapies concedes there is a view that travel cost management has not made a major contribution to overall cost management.

He points to the findings from a recent Amadeus/CFO Europe Research Services study. "The headline statistic is that less than 40 per cent of the companies we've spoken to believe they manage travel costs well, with only 10 per cent performing very well. Clearly, there is a level of dissatisfaction here and substantial scope for improvement," he suggests. The consensus seems to be that far more attention and effort has been paid to managing general expenditure.

However, it is important to remember that travel is one of the largest cost centres for any business (and one which will never entirely disappear), so it is well worth them looking at how they manage their programmes.

"One of the most interesting things we've found talking to the finance teams of our customers and other businesses is their belief that if they were able to control travel costs more effectively, they would take up a greater proportion of the overall cost control programme," says Palapies.

"Ultimately our message is that technology is a key method of delivering savings, both in terms of driving down headline costs but also in improving less tangible areas, such as productivity and efficiency."

Key elements

Chris Reynolds, senior partner at technology consultancy 3SIXTY Sourcing, says there are three critical elements to consider when selecting a travel toolkit: understand your travel programme; identify key requirements/outputs; and ensure you are aware of what options are available in the market place.

Establishing a working party of key stakeholders to review those elements is also critical to the successful selection and implementation of an automated travel management strategy.

"Web tools have assisted greatly in managing and reducing the cost of travel," says Reynolds. For one thing, he maintains that by implementing a web-based booking tool, there will be immediate savings as a result of a reduction in the agency fees. This is likely to be relatively small compared to the savings that are achieved at the booking stage, but can be significant for larger corporations with complex travel needs that often require the use of an agent. For point-to-point bookings, however, web-based tools give the booker or traveller a greater choice in a much faster time than could be given by an agent over the phone.

"We generally see average ticket prices reduce by 10 to 15 per cent when a tool is implemented," says Reynolds. However, he points out that this saving is only a "true saving" if the budget holder does not use the savings achieved to fund additional flights.

Expense management provider KDS reports that corporations spend billions annually on T&E with the average business spend representing two to five per cent of annual turnover.

Nevertheless, many companies still fail to capture a significant portion of their T&E budget. The "missing" data translates into substantial annual losses, estimated at about 25 per cent of a company's operating costs. And that estimate does not include losses from non-core travel-related expenditure, such as meetings, mobile phone bills and taxis.

The potential for cost savings and for more accurate data are the main reasons companies invest in T&E management solutions. With manual processing of invoices broadly ranging between €15 (£13) and €50 (£44) per transaction, automation alone can deliver substantial savings.

Companies also save through improved monitoring and compliance to travel policy. A variety of tools on the market today help managers to maintain the integrity of a corporate travel policy by automatically fl agging up policy violations and providing real-time access to expenses and in-depth reports on total spend, which cross-references various payment methods, from corporate and lodge cards to pre-booked hotel data and cash expenditures, and analyses that spend to limit errors and prevent fraud.

A 2008 KDS survey of 360 business travellers across 18 countries found that 17 per cent of UK-based travellers admitted to overstating their expense accounts by more than €500 (£438). More alarming is that nearly half - 49 per cent - of global respondents admitted that they know how to cheat.

Of course, cheating the company is a lot easier if the travel policy allows the frequent use of personal credit cards or cash in the first instance, but this is increasingly a rarity in many firms, particularly publicly traded companies, which must abide by all sorts of fiscal regulations. A well-configured accounting system should flag up irregular spending patterns as well as enable managers to interrogate travellers' spend accurately.

KDS Corporate offers its clients' accounting departments the ability to configure workflow data to match corporate processes at various levels of complexity. Approval workflows can be based on expense report type, while reporting analyses highlight savings opportunities and show up non-compliant behaviour. The system can also be programmed to randomly select expenses for auditing, thus further helping to discourage fraudulent activity.

Web tools also help companies save money by improving productivity. The same KDS survey found that using a dedicated expense system can double productivity.

Where 20 per cent of respondents previously took one hour to file expenses using a spreadsheet, it takes just 10 per cent the same time with a dedicated system. In addition, of the 37 per cent of travellers that enter their expenses on a spreadsheet in less than 15 minutes, just under half do it in the same time using a dedicated expense system.

Monitoring spend

Where technology plays a vital role in travel cost management is helping businesses to monitor their travel patterns and spend before a business trip has taken place, according to Mark Bull, IT director for Hillgate Travel, which claims to be the UK's largest independent travel management company (TMC). He says it is the pre-trip authorisation that is key to the success of any web-based booking and expense solution.

"Adoption rates for self-booking tools are considerably hyped and in reality are often a lot lower than the 40 to 50 per cent claims. You can achieve high adoption rates, but only if your system can be truly tailored to the business and only if you can rise to the biggest challenge in corporate travel - 100 per cent pre-trip approval," says Bull.

Vanessa Hendler, travel manager for online gaming firm Betfair, a Hillgate client, agrees that a pre-trip approval solution is paramount to the success of an online booking tool. Betfair reports an 85 per cent online adoption with 100 per cent pre-trip approval through the use of Hillgate's online booking programme, FreeWay.

"Without this, our adoption rate would be in the 20 per cent range rather than the 90 per cent we regularly achieve," says Hendler. "Most importantly in the current climate, the fact that every booking generates a message to the line manager prior to the invoice being raised ensures only authorised travel takes place."

Concur's Cliqbook/Travel & Expense solution is also designed to improve pre-trip authorisation levels. It links the SBT with an expense tool, providing detailed itinerary data and then reconciling the information with corporate card and direct supplier charges that have been incurred on the trip.

The Travel Watch data reporting tool from HRG (Hogg Robinson Group) is also billed as a pre-trip solution to manage policy compliance and identify out-of-policy bookings prior to travel. It identifies travellers with the same destination points, enabling managers to make an informed decision on the number of travellers required for a particular trip and to consolidate ground transportation to reduce spend - for example, arranging an airport pick-up for a group of travellers rather than just individuals. Identifying travel patterns and volumes, the data can also be used to leverage spend and improve supplier-specific deals.

The firm's newest product, the HRG i-Suite web-based portal, features a personalised electronic travel assistant, which includes a combination of tools, such as self-service bookings, trip and destination information, data consolidation and management reporting, expense management and traveller tracking capabilities in a single package.

HRG i-Suite can be individually tailored to the needs of each client, for example by programming the system to highlight only available fares that comply with a company's corporate policy. The tool can work as a stand-alone product, or as part of the client intranet, and can integrate with other online booking tools, which ultimately can decrease a company's IT spend.

Extra benefits

Web tools bring more than just cost-related benefits. For instance, managers increasingly rely on T&E reporting kits to keep tabs on travellers' whereabouts, helping their employers to comply with new legislation such as the UK duty of care law, which requires companies doing business in Britain to look after travellers' welfare. Managing the entire travel-related process within the corporate T&E system helps secure employee well-being by enabling managers to provide travellers with vital updates on everything from country-specific visa requirements to health and security-related information, and real-time tracking. More often, these systems are used as a first point of contact in the event of a security incident or emergency, such as terrorist threats or natural disasters.

One of the latest products on the market with this function comes from Sabre. Its Travel Security and Data Suite enables travel managers to track travellers' whereabouts and tap into individual traveller profiles. The tool can also be implemented with the GetThere booking tool.

Corporations are also increasingly relying on web-based T&E solutions to help them measure the environmental impacts of their operations. Toolkits such as GetThere Green integrate the air, car and hotel booking function with a company's carbon calculator, allowing travel managers to recommend a lower-carbon rail trip over an air journey, for example. The tool also alerts travellers to which hotels have passed the 'green' test, while a dynamic messaging capability lets them know where to take public transport rather than hire a car - or even where to hire a bike. Results for rail also show up alongside air in the booking process.

Another recent rail tool to hit the market is Evolvi, an internet-based self-booking tool created specifically for TMCs. It gives agents the ability to book rail reservations online and generate tickets and is fully customisable, allowing TMCs to reflect their individual customers' travel policies, and provides online MI on each transaction, 24 hours a day, seven days a week.

Another increasingly important factor in choosing a web-based tool is finding one that can work across multiple markets, overcoming barriers to different languages, currencies and technological capabilities.

Of course, different parts of the business are going to be motivated by different factors, but Amadeus's Frank Palapies says, three main objectives influence companies' choice of technology providers and applications - cost, productivity and efficiency

"Considerations of cost will, of course, always be fundamental to any business but we are seeing more and more who are looking at other areas, such as productivity and efficiency.

Our research has shown that they are placing growing emphasis on these at every stage of the process, and not just during the trip itself, but beforehand with things like booking, and after with expense reporting and accounting," he says.

Some companies are also looking more seriously at value-added services. "While the benefit of feedback tools has traditionally been seen in terms of traveller experience, there is also a realisation that they can have a cost impact as well," maintains Palapies. "That said, cost remains king."

But ITM's Tilstone reminds companies that major changes must occur for major cost reductions to have an impact.

"If you negotiate hard with your TMC, you are talking about negotiating with about four per cent of your total travel management cost. If you change from Business Class to Economy flights, you are talking much bigger savings," he says.

"These types of savings are difficult, though, and require dramatic changes by management. But now is the time to look at policy changes like this."