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Ask the experts: Focusing on secondary spend

Pile of money

WITH FEW EXCEPTIONS, companies and organisations spend most of their travel budgets on air travel and accommodation. It is no surprise, therefore, that procurement departments and travel buyers dedicate a great deal of effort to analysing air and hotel programmes.

For many procurement professionals, travel may only be a small segment of their overall remit. Finding time to drill down on smaller areas may be challenging, but unmanaged spend on dining, ground transportation and supplier ancillaries can be significant.  Gaining visibility and control of these outgoings could lead to a significant reduction in travel and expenses (T&E) and more money to spend on travelling to visit clients and prospects.

CHRIS POUNEY, managing director,  Severnside Consulting

THERE ARE RICH PICKINGS to be had by effecting change in previously unmanaged areas. It will vary by organisation, but car transfers, restaurants, mini bar, small meetings, in-flight wifi or even hotel laundry can be examined to great success.

Even the smallest changes can drive positive behaviour and reduce cost. The ‘Hawthorne effect’ describes how people are more likely to perform and comply when they know they’re being watched. You can’t manage what you can’t measure. Pull spend data from your expense system and corporate card, then prioritise your objectives. Implementing spend caps can be an effective way of controlling spend, although care must be taken to position it as a maximum, and not an allowance, or else spend could increase. Rather than managing a huge number of suppliers, have one act as a conduit to the rest. Car booking platforms, such as One Transport or Groundscope, are a great example of this approach.  For dining, schemes such as Gourmet Society offer corporate membership for dining discounts.

PETER BROWNE, head of marketing,  CTI Corporate Travel International

Clients often struggle to identify hidden costs; but by combining data from a number of sources, such as credit card statements, expense claims and departmental budgets, a picture starts to evolve.

Usually ground transportation makes up the largest portion of unaccounted spend, followed by subsistence and mobile costs.

When tackling non-air transportation costs, look to consolidate taxi spend with one company. If this is not possible, then pre-booking taxis can help control spend. With car hire, one quick and easy saving can be achieved by making sure all travellers know which types of insurance they must have. Make use of free airline limos and don’t worry about the maximum pick-up distance – often, any excess fee can still be less than the alternative.

For managing subsistence costs, look at the travel policy. Does it have a recommended amount for the top destinations? For UK F&B [food and beverage] spend, can it be consolidated to a chain of restaurants and a discount negotiated? One CTI client issued all travellers with a discount dining card that offers up to 50 per cent off meals at thousands of restaurants, including those in hotels.

Mobile phone and data costs can be overlooked, as they are often allocated to the IT budget. Europe’s plans to abolish roaming costs should help, but using data can still be prohibitively expensive. Look at combining a global SIM card with a mobile wifi device to create a data hotspot.

JON WEST, managing director, HRS

Hotels offer a higher category room for a lower price to business travellers who typically return to the same hotel ten times in a year, rather than to leisure travellers who may return once or twice over a decade. Yet bookers often wrongly believe they will find the lowest rate on the internet – resulting in lost productivity.  According to Google, it takes two hours nine minutes to search for and book a hotel online, compared to eight minutes using a booking tool. Apply this to the £3.3 billion in unleveraged hotel spend in the UK during 2012, according to the Guild of Travel Management Companies, and that’s a huge amount of time wasted – roughly £592 million of lost productivity. Add to this roughly 10 per cent of hotel savings lost, or £330 million, by booking out of policy, and it’s little wonder compliance to policy is a key objective for travel managers.

Choose websites with no transaction fees to access the best corporate prices, and watch out for US-based sites which may only show net prices without the VAT.

One-in-six hotel rooms are either cancelled or changed the day before arrival. By prepaying, you may think you‘re making a 10 per cent saving versus the pay on departure rate, but the true cost could be higher if your traveller cancels last minute, meaning you have to pay for the stay. Cancellation policies ensure you’re covered if plans suddenly change. Booking hotels near to public transport hubs is another great way of keeping costs down.

DOUG ANTHONY, director, Taxeo

VAT is one of those hidden-from-view costs – so much so that, when quoted a price, we ask: “Does that include VAT?” What we should be asking is: “How can I get that VAT back?” In Europe, €5.5 billion is unclaimed every year. A lot of it is generated by spend on hotels, car rental and MICE [meetings, incentives, conventions and exhibitions] activity by inbound travellers. Their companies are eligible to claim it back. Most travel managers are disconnected from VAT recovery activity, so are unaware of the role they can play to address this hidden opportunity.

With VAT rates as high as 27 per cent in some countries, depending on travel patterns, the average could be 12 per cent. It would seem ridiculous to ask travel managers to find 12 per cent savings on these expenses without a material impact on the services, but that is exactly what is available.

Traditionally, 40 per cent of T&E invoices are ineligible for VAT recovery, leading to costly and inefficient manual processing. However, collecting data directly from the supplier to produce 100 per cent tax-compliant e-invoices optimises VAT recovery while minimising cost.

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