The first suggestion of Travel 3.0 is to base your travel policy around dynamic budgets rather than preferred suppliers. Create unique budget algorithms for different departments and then let travelers choose their preferred flights, hotels and vehicles within their personalized budgets. Flag preferred suppliers but don’t mandate them. This approach gives employees more flexibility and lets you better manage your company’s travel spend.
1. Why mandating preferred suppliers isn’t effective
Early online booking tools were designed to push employees to the flights that the system deemed as “lowest logical airfare” (LLA) and hotels that were hand-selected as “preferred.” While these rules eliminated the most frivolous options, they often missed savings and frustrated travelers.
For hotel searches, on any given date range, a non-preferred hotel may offer lower rates and more value. Likewise, the rules behind LLA are overly simplistic, neglecting travelers’ status, total commute time including traffic to the airports and layover times, and the differences between the airlines and classes. A 45 minute layover may be worth saving $300 while a 3 hour layover is never worth saving $45.
Additionally, contrary to popular belief, mandating preferred suppliers is not necessary to obtain preferred savings. A travel manager need only show data that travelers are not choosing a certain airline or hotel because it is not competitive to negotiate deeper discounts.
What is needed is a system that guides employees to price-points that are reasonable and appropriate for their rank.
2. How to set up a dynamic budget
There are two ways of setting up a dynamic budget, depending on whether you’re ready to replace your online booking tool.
First, if you can replace your legacy platform, WhereTo enables you to fine-tune the trip budgets to suit your company’s culture and structure. Tuning the algorithm is simple. The travel manager can bias their “preferred” hotels or airlines as much or as little as they like. The C-suite can be guided to closer, more luxurious hotels while junior employees may be guided to a hotel a few miles away or a flight with a short layover that saves a certain amount of money.
Second, if you want to keep your current online booking tool, several companies offer plug-ins that overlay a budget over the flight and hotel results. The advantage of this approach is that it is fast. The disadvantage is less integrated into the rest of the booking experience and is minimally customizable to your company’s specific needs.
Whichever approach you take, remember that these budgets are based on live prices rather than the old per diem approach that are seldom reliable as prices and availability change.
3. ENFORCEMENT
To enforce a budget-centric policy, companies must choose between the “carrot or the stick.”
The carrot means that the employer gives gift cards to employees who choose options that beat the flight or hotel budget. WhereTo and the other platforms offer this gift card program. But it’s not for everyone. Though popular at startups, incentivized travel has not taken hold at larger companies, which worry that employees can game the system and actually raise the overall costs of travel (on top of HR and tax complications).
The stick--recommended for larger companies--means that employees are asked to stay within the budget and must provide a reason at checkout if they overspend. There are no financial incentives. Although overspend can require approval, WhereTo found this is not always necessary since most travelers do the right thing when they know their manager will see the overspend and their explanation. You can try out either.
4. SETUP UP A PILOT
Generally, the best way to introduce a new concept like the dynamic budget into a corporate program is with a pilot. We’ll set up a small group of travelers free of charge on a quick version of WhereTo to produce savings and satisfaction data to share with your executives. To schedule an appointment, click on the button in the right-hand corner of the screen or email us at sales@whereto.com.
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Note: Louise Miller, the Managing Partner of the Americas at Areka Consulting, contributed to this article. She has more than 30 years in the travel industry including airline, car rental, buyer and travel management company roles. As an Executive team member of a top 3 global TMC for over 20 years, she reported to President / CEO. Her areas of experience include: P&L management, finance, pricing, marketing, sales, account management, operations, product portfolio management, IT infrastructure and innovation.