Travel expense management tends to focus on the management of business travel expenses. What some leaders now understand is that business travel also is a key driver of revenue growth. Face-to-face meetings are where deals get done. When employees travel to meet prospects, they’re more likely to convert them into customers in person rather than over the phone. Making indiscriminate cuts to travel budgets aren’t in the best interest of the business. The challenge is understanding what travel is the most revenue enhancing, and that takes data and analytics.
The connection between travel and revenue
Cutting travel is an understandable reflex in a business, especially if there’s an earnings slowdown. On one level, it can seem sensible to cut back on travel and expense (T&E) because a business can still function without people hitting the road. But many Chief Financial Officers (CFOs) and Chief Procurement Officers (CPOs) also know that T&E cutbacks aren’t always what’s best for the business. Think for a minute if you’ve ever seen a customer glancing at their watch or stifling a yawn over the phone. That’s not so easy, is it? If you’re meeting in person, you’d know something was wrong with the way the conversation was going. If your job is to generate revenue, then you understand there are many situations where showing up in person is critical. Besides being able to pick up on subtle cues, an in-person meeting or conference affirms that you take enough interest in the client to show up. Customer-facing employees often rely on T&E budgets to close and grow sales. The data supports this. U.S. corporate travel spending was $317 billion in 2017 and corporate profits more than $6.8 trillion, showing that investment in travel can result in high earnings. Previous studies by the U.S. Travel Association also confirm this. Or, consider the case of the hospitality industry. Hotel owners worried that increases in web-based meetings would reduce the need for in-person meetings and events. But despite improvements in virtual technology, businesses still placed a significant value on events. This makes sense, because conversion rates are significantly higher for in-person prospect meetings.
How intelligent travel expense management drives growth
CFOs and CPOs know revenue-generating travel is not random. There’s no law of “book the trip and the money will come” in business. Growth and effective strategic execution occur when intelligent travel expense management is in place. Understanding where travel is contributing to profitable deals will help you spend your T&E dollars and help the business. Travel and business growth also connect when it comes to physical, geographic expansion. An Egencia client at an education startup found that travel expense management allowed the company to cost effectively open new locations. When a company opens new locations, travel costs can unexpectedly climb. This occurs partly because employees have to travel back and forth to the new site while they’re setting it up and hiring staff. Also, travel booking at the new site may occur outside the control of a centralized, policy-driven travel management office. Working with the Egencia platform, the company was able to track travel expenses and program compliance, which allowed them to open new offices without exceeding their travel budgets. Revenue growth must align with cost controls for it to increase the bottom line. Increasing sales and expenses doesn’t help earnings much and is a reason why businesses need efficient travel management processes. Travel is a company’s second largest controllable expense. The challenge is to cut costs as needed without diminishing returns to the business. This is where travel management partners and technologies emerge as solutions. Travel management contributes up to 20 percent savings in direct travel costs and 65 percent savings for indirect costs. Nasdaq, an Egencia client, used a travel management platform to realize savings of $500,000 in six months. You, too, could enjoy such savings. Consider the following potential savings opportunity: Lodging accounts for 14 percent of T&E expenses but, on average, the rate of hotel attach (the number of overnight stays with hotels booked) lingers around 40 percent. That means 60 percent of lodging costs occur outside of company policy. If your company has $14 million in gross lodging spend, you are leaving more than $8 million in spend on the table. Partnering with the right travel management company (TMC) can help increase hotel attach year-over-year and bring visibility to program bookings. For example, a TMC that’s built on technology can offer automated, real-time notifications that alerts the travel owner when lodging accommodations are booked out of policy.
The role of data
Data is essential to achieving the revenue potential inherent in travel expense management. Efficiency is one factor and with detailed, automated reporting of travel data, the procurement department will have a firmer grasp on T&E spend without causing employees to spend hours manually tracking down information. Details are also important. The Egencia Analytics Studio offers a consolidated view of travel spend and program compliance across an organization. The tool brings a travel program’s story to life. It allows travel managers to explore data visually, discover hidden insights, and identify new sources of savings. This way, they can optimize spend across the travel categories of air, hotel, train, and car. Analytics Studio allows users to visualize the impact of advance purchase in correlation with policy and travel type (e.g., international, domestic, transborder). Travel expense management sets the stage for revenue growth. Partnering with a TMC and leveraging a travel management technology platform gives you the tools and processes to keep T&E within budget and in compliance, letting you focus on travel spend that builds revenue at the same time. To learn more about Egencia and the future of procurement and travel, download our white paper here.