Reporting from the Association of Corporate Travel Executives (ACTE) Global Conference and Corporate Travel World (CTW) in Washington, D.C., American Express Business Travel today released the findings of the second annual Strategic Sourcery procurement practices survey completed with Business Travel News. Along with respondents’ forecasts for future travel spending and program strategies, the results detail convergence of procurement and travel departments as companies search for smarter and more cost-effective ways to keep travelers on the road given the current economic environment.
“Given today’s industry and economic dynamics, companies are seeking out strategies to take advantage of savings opportunities without sacrificing the effectiveness or scope of their travel programs,” said Frank Schnur, Vice President of Consulting for American Express Business Travel’s Advisory Services. “Travel is increasingly viewed as an investment, rather than a commodity to procure, and the partnerships and shared strategies created between procurement and travel departments are instrumental in maximizing the value of corporate travel and entertainment budgets.”
Despite softness in the economy, the companies surveyed reported that travel is a crucial element for their business. Planning for the coming year, 83 percent of respondents expect their travelers to take the same or increase the number of trips this year as compared to last year. However, in the face of rising costs for both domestic and international trips, 62 percent of companies are looking to procurement activities to produce savings of five to 15 percent this year with another 19 percent expecting even greater savings. Over the past year, 67 percent of the companies surveyed credited procurement activities with creating savings for their travel budgets.
When asked about the use of selected travel procurement practices, 53 percent of respondents indicated they are mandating the use of preferred suppliers and 51 percent are applying demand management principles.
“The combination of escalating prices and the pressure on travel budgets caused by the economic downturn creates a need for companies to explore a variety of strategies to drive savings,” continued Schnur. “Through change management strategies and utilizing compliance tools companies are better equipped to influence traveler behavior and encourage the use of preferred suppliers. Depending on the methods used, we estimate that incremental cost savings can range between 11 percent and 33 percent of a company's total air spend.”
According to the survey, the number of companies that view travel as a commodity decreased by eight percentage points over the last year. As companies increasingly see the investment value of travel, they are seeking out ways to measure the ROI. This desire to quantify the performance and service levels of suppliers explains the growing use of metrics to evaluate the effectiveness of travel spend. Of companies that measure key performance indicators (KPIs), the majority track between one and five specific areas of service success (airline 73 percent, hotel 59 percent and car rental 75 percent).
Along with measuring supplier performance with these metrics, companies continue to focus on procurement practices for savings during various stages of the travel process. The majority of companies involve both the procurement and travel departments in the selection of suppliers and more than half (53 percent) mandate the use of these preferred travel suppliers by travelers. Another 51 percent are actively managing demand of travel services.
According to the survey data, meetings management continues to be a focus for savings opportunities. Nearly half of the surveyed companies reported the use of procurement practices in meeting planning with a four percentage point increase over last year’s results.
“Along with the traditional areas of travel spend – air, hotel and car – companies are also scrutinizing their meetings programs for potential new areas for cost savings. Applying many of the same practices and strategies, companies are achieving meeting savings through strategic sourcing and other procurement best practices,” concluded Schnur.
The second annual Strategic Sourcery survey was completed by Business Travel News with sponsorship and data analysis by American Express Business Travel. This year, data was collected from 215 survey respondents who identified themselves as responsible for travel, procurement or a combination of the two for their company.
About American Express Business Travel
American Express Business Travel (www.americanexpress.com/businesstravel), a division of the American Express Company, is dedicated to helping its clients realize the greatest possible value from their investment in travel through increased cost savings, outstanding customer service and greater spend control. For small businesses, medium-sized enterprises and multinational corporations, American Express Business Travel provides a combination of industry-leading booking technology, travel management consulting expertise, strategic sourcing and supplier negotiation support, and customer service available online and offline, around the world.
American Express operates one of the world's largest travel agency networks. The Company processed $26.41 billion in global travel sales in 2007.
American Express Company (www.americanexpress.com) is a diversified worldwide travel, financial and network services company founded in 1850. It is a world leader in charge and credit cards, Travelers Cheques, travel, and business services.
1 $ 26.4B represents 2007 American Express total travel volume including volume processed though non-consolidated JVs and partner network