In the last 6 months, you’ve won 10 new clients, employed 20 new staff and boosted the bottom line by 30%. All of a sudden, corporate travel is an absolute necessity and you’re scrambling to organise it.
This is a common scenario for many Australian small-to-medium enterprises, who enjoy positive growth only to find themselves with fresh challenges (like corporate travel management) to overcome. When researching the fundamentals of organising business travel, they may come across two divergent schools of thought: managed travel and unmanaged travel.
It can be difficult to know what approach to corporate travel management is right for your business. Below we weigh up the pros and cons of managed and unmanaged travel, and discuss why finding a middle ground may be the answer for the modern business.
What Is Managed Corporate Travel?
Managed corporate travel is a business travel program that is handled by an external travel management company, who manage the booking, budgeting, analysis and insight into travel policy performance. Travel management companies leverage their existing relationships with suppliers to negotiate supplier rates, and assist your business in ensuring compliance.
According to a survey of US business travellers, 67% of businesses employing 5000 or more staff used managed travel programs. A significant volume of smaller companies also reported using a managed travel program.
What Are The Benefits Of Managed Business Travel?
A managed business travel program has a number of benefits, including:
Implementing a managed corporate travel program allows the organisation of business trips to be systemised, efficient and consistent. Travelling employees arrange their travel on an online booking system, using a set process within defined parameters. Not only does this process drive efficiency, it allows businesses to have full visibility into management information and data, which can be used to make targeted policy improvements.
2. EXPERTISE OF TRAVEL MANAGEMENT COMPANIES
Travel management companies are in the business of business travel, and as such they bring a wealth of industry knowledge and experience to the table. While it costs money to hire the services of a travel management company, their expertise can often pay for itself in the form of end-to-end savings.
3. EXISTING RELATIONSHIP WITH SUPPLIERS
Just like travel management companies have invaluable experience in the industry, they also possess a treasure trove of supplier relationships. A business who embarks on organising its own business travel would struggle to secure the same rates as a travel management company with existing partnerships and contracts in place.
4. CONSISTENT POLICY IMPROVEMENT
Using a managed travel program with consistent systems and processes, businesses have access to consolidated data on the performance of their travel policy. This data can be used to locate areas of weakness in your policy, and implement improvements. This information can be on everything from individual travel spend and traveller location to the carbon footprint of your business.
5. RISK MANAGEMENT AND EMERGENCY ASSISTANCE
The data gathered by your travel management company can save you money, but it can also ensure the safety of your employees (and compliance of your business). Travel management companies have access to risk management information and emergency communication tools, so the wellbeing of business travellers is monitored.
What Are The Drawbacks Of Managed Business Travel?
While a managed corporate travel program can offer a lot to businesses, there are a few things to consider before engaging the services of a travel management company:
A lot goes into the organisation and implementation of corporate travel policies, and as such managed travel programs can be expensive to operate.
Without the services of a travel management company, your business’ travel spend is limited to individual traveller’s bookings and travel spend. However, as mentioned above, the significant cost savings a travel management company can offer in the form of discounted supplier rates and strategic policy improvements can mean their service pays for itself.
2. POTENTIAL RESISTANCE FROM EMPLOYEES
It’s often said that rules are made to be broken, and in the case of corporate travel policy, this is somewhat true. A survey published in Business Travel News revealed that 40% of managed business travellers said they did not always comply with booking channel policies, and 55% said they did not always comply with hotel policies.
These statistics are in line with the fact that employee overspending can make up as much as a third of a business’ travel and expense budget.
So while your business may be paying for the services of a travel management company in a managed travel program, it’s up to your employees to comply with travel policy.
What Is Unmanaged Corporate Travel?
On the other side of the corporate travel conversation is the idea of unmanaged travel. Unmanaged travel, often referred to as ‘open booking’ or ‘self-booking’ programs, give employees far more freedom in selecting their preferred suppliers and booking channels. However, unmanaged booking programs still rely on data and insight in order to make policy improvements, which is often captured through expense management providers like Expensify.
According to Nick Vivion of Tnooz, unmanaged travel is a contemporary approach that puts the employee above expense:
“The groups fully in favour of unmanaged travel are generally those who see the importance of empowerment and independence both wrought by the Internet’s transparency and digital natives now entering the workforce out of college.”
What Are The Benefits Of Unmanaged Business Travel?
An unmanaged corporate travel program has a few benefits, including;
1. EMPLOYEE INDEPENDENCE
The importance of employee satisfaction and morale while travelling on business is well documented. Especially considering the fact that stressed and frustrated employees are more likely to overspend while overseas. An unmanaged travel program allows employees to book through their preferred channels and shape their itinerary to their personal preference, which can go a long way in alleviating the many stresses associated with international travel.
2. COMMUNICATE WITH SUPPLIERS
Unlike in a managed travel program where a travel management company is responsible for communicating with suppliers, an unmanaged or self-booking program leaves this responsibility to individual employees. As Nick Vivion in Tnooz says, this is less of an issue for tech savvy, digital native employees - a growing demographic of corporate travellers. Leaving the booking process to these travellers can offer the benefit of selecting preferred suppliers, while competing with a managed program on price.
What Are The Drawbacks Of Unmanaged Corporate Travel?
An unmanaged travel program gives your employees the freedom to craft their business travel to their personal preferences, although this freedom presents some complications, including;
1. POTENTIAL FOR NONCOMPLIANCE
Unmanaged travel programs still rely on a travel policy to dictate employee spending, however with the freedom to select preferred channels and suppliers, there is the potential for noncompliance. As Andrew Menkes writes in Business Travel News, this can contribute to higher travel costs.
“I challenge any company to let me know if they allow employees to buy their own office furniture based on their likes or dislikes,” he says.
2. DATA DIFFICULTIES
One of the attractions of using a travel management company to manage your travel program is the ability to use diverse data sets to make continual improvements to travel policy. While unmanaged programs may use expense reporting systems to gather information, there is a large volume of other data beyond employee spending that is needed to make effective improvements. Consolidating this data in an unmanaged program can be difficult.
3. EXERCISING DUTY OF CARE
As mentioned, travel management companies use risk management information and emergency communication tools to ensure travelling employees are kept safe. Under an unmanaged corporate travel program where businesses have little visibility into the whereabouts of their travelling employees, ensuring their health and safety is complex. According to Andrew Menkes, the September 11 terror attacks in the USA brought this worrying fact to the attention of businesses around the world, urging them to move toward managed programs.
Furthermore, failure to comply with jurisdictional health and safety laws around duty of care for travelling employees can result in fines and jail time for employers and relevant officers and employees.
Finding A Middle Ground Between Unmanaged And Managed Travel
It’s clear that both managed and unmanaged approaches to corporate travel have their pros and cons. On one hand, managed programs offer superior analytics capability and visibility into policy performance.
However, in implementing a managed program, businesses sacrifice some employee independence.
What is our solution to the unmanaged vs. managed travel debate? Find a middle ground that harnesses the benefits of both.
Travel management companies like Locomote arm travellers with the flexibility to personalise their journeys, however also put the power in the hands of businesses and travel managers.
With the Locomote management system, businesses have the power to set parameters unique to each employee, load their preferred suppliers and negotiated rates, manage booking approvals and ensure compliance.
Furthermore, Locomote arms businesses with risk management and emergency communication tools and a suite of analytics data to implement strategic policy improvements.
To see why some of the largest and fastest-growing companies in the world are choosing Locomote as their travel management solution, view a product demonstration by clicking below: