Business travel is a significant expense for companies of all shapes and sizes. Indeed, business observers cite travel costs as one of the largest expenditure areas for many companies, along with payroll, data processing, and a few others. Given this reality, business surveys often cite cost containment as the single most important element of travel management.
Certainly, several American industries rely on business travelers for their continued existence (business travelers account for more than 50 percent of airline revenues in the U.S., for example). But while business travel is commonly associated with huge corporations, many small businesses rely on the practice as well to make sales, keep in contact with vendors, market their products or services, and keep up with industry trends (via trade shows, conventions, etc.). Indeed, intelligent choices in the realm of business travel can be a major boon to small businesses hoping to curb spending without sacrificing in other business areas.
With this in mind, business consultants urge companies to implement written policies on all aspects of business travel, including spending limits on lodging, meals, entertainment, transportation, etc. Businesses are also urged to establish a person or department responsible for coordination of travel needs and to consolidate their travel needs with one agency. By implementing such steps, companies can register savings in a number of realms while still attending to their basic business needs.
Several factors are typically taken into account when a hotel is selected for business travel. Convenience of location (proximity to client, field office, or airport), quality of room, and quality of service are all major considerations. But price is often the paramount consideration, especially if other elements of the hotel—location, etc.—are acceptable.
Small businesses can pursue a couple different strategies to cut down on lodging expenses. Writing in Nation's Business, Peter Weaver noted that "you can sometimes cut one-half off quoted room rates by getting your reservations through a hotel broker. Hotels often designate 10 to 15 percent of their rooms to be sold by brokers at deeply discounted rates because these specialized travel companies can guarantee the hotels business in the low season and can bring in new customers all year…. Hotel brokers generally find the biggest discounts among the largest chains in major metropolitan areas and resort spots. But you can often get even lower rates by staying at budget hotels." In addition, surveys and studies indicate that small business owners are often able to cut their lodging expenses by negotiating discounts of as much as 30 percent if they provide a large volume of business to a particular hotel. Finally, business travelers should keep in mind that many airlines will pay for overnight lodging in the event of a cancellation or major delay (more than four hours) if they receive a request for such assistance.
Small businesses can save huge amounts of money on air fare if they are able to plan trips in advance. This is not always possible, of course, and there may be instances in which the company may simply have to bite the bullet and pay full price for a short-notice trip. As one travel expert admitted to Nation's Business, "You always pay top dollar to the airlines by making your plans, or changing them, at the last minute." But experts claim that companies can cut as much as 50 percent of their airline expenses through judicious timing of out-of-town meeting dates. Tuesdays and Wednesdays are cited as particularly good travel days for obtaining discount fares. Savings can also be realized by choosing mid-day or evening flights rather than morning flights. However, statistics indicate that morning flights are less likely to be delayed or canceled than afternoon or evening flights.
Other tactics that can be used by small business to cut their air travel expenses include the following: 1) If a company's business requires regular travel (a minimum of 40 flights a month on the same airline) between the same two cities, it may be able to secure a "city-pair" discount of up to 10 percent; 2) Business travelers who choose flights that include stops in a carrier's "hub city" can sometimes secure discounts; 3) Some airports have greater levels of competition—and hence, a greater likelihood of discounted fares—than others. Some metropolitan areas of the eastern United States support two airports within an hour's drive of one another, which gives business travelers an opportunity to explore this possibility; 4) Smaller, budget airlines may offer better fares (and service) than the giants of the industry; 5) Frequent-flier points can sometimes be utilized to register significant savings.
In addition to cost considerations, convenience is another important factor to consider when planning a business flight. To this end, usage of electronic ticketing increased dramatically in the late 1990s. "E-ticketing" is popular with airlines because it enables them to register savings in ticket distribution and handling and simplifies their accounting procedures. It is popular with travelers because it enables them to go straight to the boarding gate, bypassing long lines at the ticket counter. Electronic tickets are identical to paper tickets in practical terms, as it provides each user with a reservation and a seat assignment. But airlines require photo ID before they will hand over a boarding pass, so make sure you have one on hand when going the e-ticket route.
Finally, savvy business travelers can take easy steps to increase their chances for a comfortable and successful flight. For example, early check-ins enable travelers to ask for seats in emergency exit rows, which have considerably higher volume of leg room than do the rows in the rest of the cabin. And frequent-flier status generally confers preferential treatment in several areas, including likelihood of receiving upgrades or new flights in the event of cancellation.
As with other aspects of business travel, advance planning in securing car rentals can help reduce costs, sometimes by significant amounts. In addition to making advance reservations, business travelers should use discount coupons from travel agents, membership organizations, or airline frequent-flyer clubs when securing a rental car.
As is the case with larger corporations, many smaller businesses choose to handle their travel needs by securing a travel agent. Travel agencies can be invaluable to a small business, for they are able to provide savings to the company while simultaneously freeing up company resources to attend to the operations of the business itself. Indeed, travel agencies have become an integral part of the American business landscape. They sell more than 80 percent of all domestic airline tickets, and more than 90 percent of all international airline tickets.
Many travel agencies belong to larger groups that commonly pool their reservations together so that their smaller clients can enjoy the same discounts and upgrades as their larger corporate customers. These discounts and upgrades are likely to be more sizable with lodging and car rentals than with air travel. A less visible benefit of securing an outside travel agency for your company's business travel needs is that these firms are often equipped to manage a company's entire travel-related billing and accounting systems. Ancillary services offered by some travel agencies include weekly billing analysis, spreadsheets indicating expenses and itineraries, and "frequent traveler worksheets" that provide basic preference information (class of service, seat location, special meals) on all people that travel on behalf of the company. But industry analysts note that the cost of obtaining these extra services has increased considerably in recent years, and that some agencies have become imposing fees for services that they used to provide for free, such as ticket delivery.
Experts recommend that small businesses weigh the following factors when deciding on a travel agency:
Rates. Are the agency's rates comparable with those of competitors offering similar services? What are its policies regarding travel cancellations, etc.? What services are included in their packages?
Competence. A travel agency that is less expensive than others may actually cost your business large sums of money if its level of service is lacking. Experts counsel small businesses to shop around and find out who other successful businesses in the community depend on for their travel needs. "The best way is for clients to ask other business associates," one industry executive told Business Journal-Milwaukee. "There are many companies that excel in presentations and landing new accounts only to fail miserably at providing the service they claimed. This is a common frustration, and, once a company is switched over to a new travel agency, it is a major pain to switch again when things just are not working out." Analysts also note that agencies often have varying levels of involvement with corporate clients. Agencies that secure more than 40 to 50 percent of their business from corporate clients may be better equipped to serve your company's needs than one that receives most of its business from vacationers.
Technological investment. Automated reservations and ticketing systems are essential in today's business travel environment. An agency that is not adequately equipped in this area will not be able to give its clients the best possible service.
Dependability. While duration of existence is not always a true indicator of reliability or competence, it can be generally said that operations that have established a track record of dependable service in the community are preferable to those that have not done so. In addition, agencies should be able to regularly provide clients with the travel deals that best meet their needs and limitations. Your agency should be able to offer informed advice on current promotions and their suitability for your company.
Continuous service. Does the agency have the ability to provide service to company representatives on an "around-the-clock" basis? Travel agencies maintain the same operating hours as most other businesses do, but some also provide clients with the ability to contact them at other times to provide help with hotel or airline arrangements in the event of a missed connection, etc.
Comprehensive service. When selecting a travel agency to coordinate their business travel needs, business owners and managers should make sure that they are competent in all pertinent areas. "Like a personal shopper, agents can provide one-stop shopping for travelers who require air arrangements, rental cars, cruise accommodations and hotel stays—with suggestions that are in the best interest of the client, not the supplier," advised Canadian Business.
Provided that the representative of the firm incurs his or her costs while engaged in "company business," many costs of business travel can be deducted. Travel deductions are permitted for the cost of transportation, whether by automobile, train, bus, or plane; lodging; meals; and other miscellaneous costs such as baggage fees, facsimile calls, dry cleaning, tips, and public transportation (bus service, taxicab service). Business travelers should note, however, that these miscellaneous deductions are only permitted if the person in question stays overnight.
Deduction rules for travel to foreign countries is somewhat more complicated, especially for self-employed business owners and major shareholders of small corporation. While many deductions still apply, the Internal Revenue Service (IRS) does have some additional stipulations; contact the agency for more information.
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Cohen, Amon. "How to Ease the Burden." The Financial Times. June 23, 1997.
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Jordan, Archie. "Family Considerations While on the Road." American Salesman. February 1997.
"Managing on the Move." Canadian Business. October 29,1999.
Miller, Lisa. "Why Business Travel is Such Hard Work." Wall Street Journal. October 30, 1996.
Morris, Hal. "It Pays to Review Travel Coverage." Nation's Business. September 1997.
"Select a Travel Agency." Business Journal-Milwaukee. February 11, 2000.
Ward, Angela. "Planes, Trains, and Automobiles …" Acquisitions Monthly. November 1996.
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SEE ALSO: Expense Accounts ; Standard Mileage Rate
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