Procurement Strategies Continue to Increase Savings and Deliver Measureable Return on Business Travel Investments
Third Annual Survey Sponsored by American Express Business Travel with Business Travel News Reveals Critical Role Procurement Practices Play in Gaining Greater Control over T&E Spend
More than Half of Respondents View Service as Equally Important to Cost in Supplier Selections
Washington, DC.- Reporting from the Association of Corporate Travel Executives (ACTE) Global Conference in Washington, D.C., American Express Business Travel today released the findings of the 2009 Procurement Practices Survey completed with Business Travel News. In the face of economic uncertainty, procurement strategies are playing an important role for respondents’ travel programs as companies seek opportunities to increase savings and cut costs without sacrificing the value created by business travel. In fact, 55 percent of surveyed companies reported that they use procurement practices to measure the return and impact of travel on revenue objectives.
“Business Travel News appreciates the successful partnership we have with American Express Business Travel that enables us to do the research and the reporting to generate such meaningful benchmarks and present best practices,” said Business Travel News publisher John DeJesu.
Key findings include:
* 68 percent saved between 5 percent and 15 percent of their annual travel spending by applying procurement techniques and nearly 80 percent expect savings between 5 percent and 20 percent in 2009
* 75 percent of respondents believe procurement helped tighten their travel policy during 2008
* 55 percent value service as an equally important element to cost and 11 percent believe service is more important
* 50 percent of respondents consider travel a commodity, down from 58 percent and 66 percent in respective previous surveys
“While the survey shows that respondents expect to spend less on fewer trips in 2009, we’ve found that travel managers are also seeking more sophisticated advice, tools and tactics to strategically cut costs while protecting the value of their travel program,” said Frank Schnur, vice president, Global Advisory Services, American Express Business Travel. “Procurement practices, which now include compliance and demand management, are an effective complement to traditional savings efforts. The survey results underscore the continued success of these tactics at maximizing the return generated by travel investments.”
As pressure to cut costs continues, 68 percent of companies report saving between 5 percent and 15 percent of their annual travel spending in 2008 through strategic procurement activities and another 19 percent saw even greater savings. Nearly 80 percent expect savings between 5 percent and 20 percent next year despite the cloudy economic outlook.
Importantly, while savings is one of the paramount concerns for travel managers, 55 percent still value service as an equally important element to cost and 11 percent believe service is more important. As companies increasingly recognize the return on investment in travel, the number of companies viewing travel as a commodity steadily declined from 66 percent of respondents in 2007 and 58 percent in 2008 to only 50 percent this year.
The report also revealed that savings opportunities for travel purchasing continue to be significantly enhanced by stronger ties between corporate travel and procurement professionals.
Procurement Strategies and Tactics
Schnur continued, “Travel managers are turning to a wide variety of strategies including influencing traveler behavior and managing relationships with suppliers. Record numbers of companies are using real-time and regularly updated data to help make quick and precise decisions based on a wider range of key performance indicators and benchmarking categories.”
Demonstrating the need for increased control and proactive adjustments to travel guidelines, 75 percent of respondents believe procurement helped tighten their travel policy in 2008 (up from 64 percent). The most popular tactics include managing demand for travel services (73 percent) and mandating the use of preferred suppliers (65 percent). Companies are also actively employing pre-trip notification and approval programs, with 37 percent reporting putting more restrictive pre-trip approval processes in place during the last 12 months.
According to the survey, companies are increasing their efforts to quantify the performance and service levels of an expanded set of supplier categories. Use of service-level agreements has increased almost across the board, with the greatest increases in hotel (51 percent from 30 percent), car rentals (47 percent from 33 percent) and chauffeured cars (20 percent from 13 percent).
Making an investment in outside support for travel procurement efforts can also drive savings, with 46 percent of companies reporting that they currently use a third party and another 5 percent confirming plans to begin using a vendor (compared to 31 percent and 9 percent previously). In fact, the number one reason for selecting a travel management company is its ability to identify air, hotel and other program savings, the survey showed.
Companies are also seeking opportunities for savings by outsourcing tasks related to hotels (65 percent, up from 45 percent), car rentals (51 percent, up from 31 percent), air (63 percent, up from 61 percent) and meetings (46 percent, not previously surveyed).
According to the survey data, meetings management remains a significant area of savings opportunity. While half of respondents plan to increase their use of videoconferencing this year, more than half (60%) are not applying strategic sourcing practices to the meetings arena currently.
The third 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 241 survey respondents who identified themselves as responsible for travel, procurement or a combination of the two for their company.
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