Cost-Efficient Business Travel Strategies During Times of High Inflation
Inflationary periods pose a significant challenge for travel procurement leaders, often increasing business travel costs. And despite some recent news about inflation cooling down, it is still impacting travel prices.
According to one analysis, airfares increased by as much as 45% in 2023 while other types of travel costs, such as car and hotel fees, also increased. Although travel service providers have stopped some of their price increases, inflation is still keeping travel costs relatively high.
Developing cost-efficient strategies can mitigate these effects, enabling companies to maintain operational efficiency without compromising financial stability. This article explores several practical strategies to help leaders navigate high inflation periods, ensuring business travel remains a valuable and economically viable aspect of their operations.
Leveraging Advanced Booking Techniques and Dynamic Pricing
Advanced booking techniques, backed by software and automation, can significantly reduce overhead costs associated with business travel. Procurement leaders can also take advantage of dynamic pricing to access better deals. Here's how these two strategies work together.
Advanced Booking Through Automation
Advanced booking techniques involve using automated tools to book travel needs well in advance, which can lead to significant savings.
The logic behind it is straightforward: as demand for flights, hotels, and rental cars increases closer to the travel date, prices tend to go up. Thus, by planning and booking in advance, organizations can lock in lower rates before they rise, potentially saving a considerable amount of money.
Automated booking systems allow companies to streamline their travel booking process, reducing the time and resources needed to secure travel arrangements. They leverage real-time data to identify when rates are at their lowest and automatically book travel needs at these optimal times.
This ensures companies take advantage of the best rates available and avoid price hikes due to last-minute bookings.
Leveraging Dynamic Pricing
Dynamic pricing is a sales strategy where the price of a product or service is flexible and changes based on market conditions. In the context of travel, factors such as demand, competition, time of booking, and seasonality can impact the price of flights, hotel rooms, and rental cars.
For instance, a flight may be more expensive during peak times when demand is high but becomes cheaper during off-peak periods when demand wanes.
By understanding and exploiting dynamic pricing, travel procurement leaders can make more cost-effective decisions.
For example, they could opt to book travel during off-peak times when prices are lower or leverage competitive pricing by choosing service providers who offer the best value for money. This calls for a robust understanding of the market dynamics and trends, as well as the use of advanced analytics tools to track and predict price changes.
Utilizing Corporate Discounts and Reward Programs
Corporate discounts and reward programs are potent tools in a travel procurement leader's arsenal for managing business travel costs. These incentives, often provided by airlines, hotels, and car rental companies, can significantly reduce overall travel expenses.
Here's how this strategy works.
Corporate Discounts
Travel service providers frequently offer corporate discounts to businesses. These discounts can lower the cost of flights, hotel stays, and car rentals, making business travel more affordable. Travel procurement leaders should negotiate with these providers to secure the best deals for their organization. They should also aim to build long-term relationships with these providers, as this can lead to better discounts over time.
Reward Programs
Many travel service providers offer reward programs, where businesses earn points or miles for every dollar they spend. These points can then be redeemed for free or discounted flights, hotel stays, car rentals, and other travel-related services. By enrolling their organization in these programs, travel procurement leaders can essentially earn 'free' travel for their organization over time.
Combining Discounts with Rewards
The best part about these two strategies is that they can often be combined. A company can take advantage of a corporate discount while still earning points through a reward program. This 'double-dipping' approach can result in even greater savings, making business travel highly cost-effective.
By leveraging corporate discounts and reward programs, travel procurement leaders can substantially reduce business travel costs, particularly during periods of high inflation.
Adjust Travel Policies for Inflationary Periods
During times of high inflation, an effective strategy for controlling business travel costs is adjusting the company's travel policies. Inflation demands a more thoughtful and strategic approach to managing travel expenses, which can be achieved by revising policies to align with the current economic climate.
Here are some tactics that travel procurement leaders and business travel managers can implement:
- Prioritize Essential Travel: Consider restricting travel to only essential trips. This minimizes unnecessary expenditure and ensures that resources are allocated where they are needed most.
- Promote Virtual Meetings: Encourage the use of virtual meetings where possible. This can reduce the need for long-distance travel, saving money on transportation and accommodation.
- Limit Luxury Accommodations: Set a cap on accommodation costs to encourage travelers to choose budget-friendly hotels.
- Encourage Public Transportation: Update the travel policy to promote the use of public transportation over car rentals where feasible.
- Review Meal Allowances: Adjust meal per diems based on current inflation rates to control meal expenses without compromising the comfort of the traveler.
- Streamline Expense Reporting: Implement an efficient expense reporting system to quickly identify and address any inefficiencies or overspending.
By adjusting their travel policies to combat inflation, procurement leaders can ensure that business travel remains productive, cost-effective, and beneficial even during challenging economic conditions.
Harnessing the Power of Travel Management Software
Travel management tools offer a centralized platform for managing all aspects of travel procurement, thus ensuring better oversight and control over spending.
For example, many travel management platforms provide real-time insights and analytics on travel expenses, enabling procurement leaders to identify cost-saving opportunities and make informed decisions. They can alert businesses to price changes, help managers identify the most cost-effective travel options, and automate booking processes to secure the best deals.
Some platforms also offer built-in expense management modules. These systems can track, manage, and report on travel expenses, providing transparency and enabling companies to spot and address overspending trends quickly.
Furthermore, these software solutions can integrate with the company's existing systems, such as HR and finance, ensuring a seamless flow of data and facilitating efficient reporting.
Promoting Cost-Conscious Travel Behavior
Finally, travel procurement leaders and business travel managers can encourage cost-conscious travel behavior among employees to control expenses. This involves instilling a culture of fiscal responsibility and educating employees on how their actions impact the organization's bottom line.
There are also ways that technology can help. For example, when travelers are empowered with apps that track their spending, they are more aware of the costs they are generating for the company, making it easier to stay within budget.
These tools can be combined with clear guidelines and policies for managing travel expenses and training on how to adhere to those guidelines effectively. Communicating the importance of cost-consciousness is crucial in achieving a reduction in business travel costs during periods of high inflation.
Get Business Travel Costs Under Control
Inflation creates some significant challenges from a cost management perspective, but there are steps businesses can take to reign in their travel costs, even when inflation is still high. By following these strategies, procurement leaders can play a positive role in reshaping the organization's travel program for cost-consciousness and fiscal responsibility.
To learn more about how you can employ cost-efficient business travel strategies, don't miss ProcureCon Travel 2024. It’s happening at the Marriott Tech Center in Denver, Colorado from June 3rd to June 4th.
Download the agenda and register for the event today.