Second only to employee salary and benefits, the T&E category is an area of cost control that should be analyzed and evaluated each year to determine opportunities for further cost reduction. It is important to keep in mind the need for balancing the culture of your company with the safety and comfort of your travelers. To assist you with your approach to cost recovery and control, we have taken data from the most recent Corporate Travel Index and compared it with a recently published report from the expense company Certify, based on $3.3 billion in travel spend. We have broken down a few key observations based on average increase/decrease by category, shifts in spend, and some new technology impacting the expenses your travelers are likely to incur.
Your Biggest Controllable Costs May No Longer Be Found in the Air
In 2018, the daily combined cost for meals, hotel, and ground transportation averaged $325 per day. Due to many travel programs encouraging a minimum seven-day advance ticket purchase, the average cost of airfare has decreased by $40 to $278. With air being roughly 25% of the average 2.5 day trip cost, you are investing $1,091.50 per itinerary, and it is likely time to consider additional areas for cost recovery.
Cost Shifts by Category
The data from both reports indicate an increase in cost per category in Hotels ($50 increase per average stay), and Meals (increase of $5/meal), while ground transportation, parking, and airfare have decreased. The reasons are not all that surprising:
Hotel providers have invested heavily in their technology infrastructure, enabling real-time availability and dynamic pricing to ensure as many rooms are occupied as possible. Due to the increased occupancy in major business cities such as New York, Chicago, San Francisco, and Seattle, many of the hotel properties are seeing an increase in rates by as much as $100 a day higher than just three years ago.
The average aggregated meal expense for 2018 was $32.08, and was also the highest in number of receipts submitted at 17.2%. Most companies have a per person cap on any single meal (unless entertaining a client), but there are few companies with restrictions on how many meal receipts can be expensed per day. For example, Starbucks was the second most expensed vendor in 2018, with 4.1% of all receipts (second only to Uber with 11%). This is attributed to lifestyle of the Millennial generation, with reports (“Money Matters”) confirming the average Millennial spends more on coffee than on their retirement portfolio.
Due to the dramatic growth of ride sharing companies, including Uber and Lyft, ride hailing and rental car expenses have declined over the past two years. More companies are allowing ride hailing, and rental car companies are being creative in their price competitiveness to continue to provide strong value, giving the traveler more choice in vehicle type, upgrade options, and overall convenience.
Technology is playing a bigger part in how travelers are making their purchases. As indicated in the chart above, the top five most expensed brands cater to digital purchases, including Starbucks with their new call-ahead ordering service.
Travel Incorporated Recommendations:
Just because the cost of air has declined doesn’t mean you should relax your policy. Continue to encourage no less than seven day advance purchases, with an emphasis on 14-day advance.
A revised policy program around hotels will deliver significant cost avoidance and improve your Duty of Care program.
• Use the TripInsights graphical dashboard to identify which travelers are NOT including hotel with their air bookings.
• During your business reviews, discuss your top cities and how your rates are benchmarking against the average hotel in that location.
• Develop a communication plan that encourages booking hotels through the online booking tool or via a travel consultant – this will ensure travelers are selecting the properties you recommend, and will help leverage additional negotiated rate savings.
• Know that you are getting the lowest rate possible through TI’s HotelRate Check technology, which continuously searches for a lower rate for the same property, room, and rate type up until cancellation deadlines.
This is an area that lends itself to a sensitive balance of corporate culture with cost avoidance. Instead of curtailing or adding language to your policy that puts rigid restrictions on meal spend, we recommend a logic-based messaging/communications initiative bringing some facts to the table that may give your travelers sensible “food for thought” (excuse the author, we just couldn’t help ourselves).
Consider including ride share in your program for your larger metropolitan locations. TI has a preferred partnership with Lyft, which will be an opportunity for future expense integration into your reporting.
Understanding your travelers’ buying behaviors against an average will easily direct you toward additional areas of continued cost savings. TI is here to help – contact your Account Manager today for a free consultation.