Cost Management in Travel: Insights Into The Resilience And Evolution Of The Travel Industry

The return from the dead

The travel industry has endured unparalleled devastation due to COVID-19, perhaps more than any other sector. To illustrate, data from the Business Travel Network, reveals a staggering 94% decline in the industry’s activity during the pandemic. This means we were left in 2022 with merely 6% of our previous capacity. Consequently, airlines were forced to ground planes, a process that isn’t easily reversible.

Traditionally, Travel Management Companies (TMCs) have operated supporting business travelers and/or bookers. They have done this by handling various tasks such as bookings, payments, and ticket arrangements. In the years preceding COVID-19, the trend had been for Clients to use the Internet or online booking tools to replicate the actions of TMCs. Many TMCs have shifted towards fully automated systems. These platforms, like Booking.com or Expedia, offer limited human support. Post-COVID, it was very apparent that this self-service-driven travel booking was not what travelers or bookers wanted or needed. TMCs have had to strike a balance between technology. Manual assistance has been key to providing the best of both worlds.

From the embers

Since COVID-19, there has been a noticeable trend towards TMCs focusing more on providing comprehensive support to customers navigating uncertainties in travel. While some large TMCs prioritise automation over customer support, smaller to medium-sized ones emphasise personalised assistance.

This level of support remains crucial. It is especially crucial amid ongoing global challenges like conflicts, natural disasters, and public health concerns.

Travel providers (airlines, hotels and car hire companies) have gradually increased capacity and recommissioned planes and hotels. This has led to big fluctuations in costs, particularly compared with pre-Covid. In 2024, Flights are now settling down. However, Hotel prices remain high and increasing beyond inflation.

Many have considered their approach to booking travel. The presumption that online, self-service platforms are the right choice has been challenged. The perception had been that it is always cheaper to book directly with the Provider. However, this is invariably not the case, particularly if there is some choice in provider and consideration is given to the whole procure-to-pay process for travel. This highlights the importance of choosing the right TMC tailored to the specific needs of the business. TMC services may incur additional fees. However, the expertise they offer often leads to significant savings in the long run by securing the best fares and providing invaluable support.

The importance of good data in cost management

Most clients will have a Travel Policy. This is basis of a bible for travelers and bookers, and a key point of control when reviewing actual spend versus expected expenditure. Many however, are revisiting their travel policies that fall out of date over time, impacting travel activities and compliance monitoring. For instance, outdated allowances for hotel rates can lead to discrepancies when booking accommodations. Advising clients on updating their policies is crucial, not just for cost-effectiveness but also for sustainability considerations.

Many companies are now reevaluating their travel policies, encouraging environmentally friendly travel options such as train travel over short-haul flights. It’s essential to align policies with both business needs and sustainability goals. However, implementing and enforcing these policies effectively remains a challenge for many organizations.

Cost Management in the world of Travel has always been perceived as somewhat complicated due to the constantly fluctuating prices. When you visit booking sites like Skyscanner, you’ll notice how prices change by the minute. This complexity stems from the sophisticated algorithms used by hotels, airlines, and car rental companies to adjust prices across various channels.

To effectively manage these costs and calculate savings, a different approach is required, one that involves navigating through benchmarks and complex calculations. Despite this complexity, the savings we achieve for our clients typically exceed 20%.

Understanding and tracking travel costs is something that cannot be easily achieved by clients as the level of ‘rich’ data that can be gleaned from travel invoices or Expense Claims is sub-optimal.

There has been a concerted change in the Industry for Providers to bypass traditional booking methods and force users to book directly. PremierInn.com, RyanAir.com and even BA.com are examples of this.

However, the reality is that corporate travelers, especially those from larger companies, prefer centralised booking processes to ensure consistency and streamlined support. While direct bookings are making strides, their impact on pricing and industry dynamics remains uncertain.

There are emerging solutions, but the key lies in establishing strong foundational support for travelers, implementing appropriate policies and practices, and understanding that the cheapest ticket doesn’t necessarily equate to the lowest overall cost. It’s about taking a holistic approach.

Interestingly, in my previous corporate experience spanning over two decades at Reuters, we had dedicated travel management specialists within procurement responsible for overseeing supplier relationships. However, this practice seems increasingly rare today.

This is where ERA can play a pivotal role, acting as a mediator, enforcing controls, and driving continuous improvement. The leading companies are challenging the status quo, not only with us but with similar entities, in their quest for excellence.

In essence, it’s about staying informed and proactive in an industry that has been severely disrupted. Some of the largest players, once thought infallible, have faced significant challenges and setbacks due to their complacency and arrogance, believing their size alone would safeguard them.

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