Your Travel Management Program is Leaking

By | 2018-11-04T18:05:43+00:00 October 30th, 2018|Business Travel, Research and Statistics|

Travel management leakage occurs when employees book their business travel on consumer websites, outside of a company’s designated travel management system. Business travel bookings made on consumer travel sites are essentially invisible to the company and/or travel management company (TMC) until the employee reports details of the itinerary to their travel manager or submits their expenses for reimbursement after the trip is completed. For companies seeking to control their travel spend and effectively manage duty of care responsibilities, this behavior is not merely frustrating—it can have serious financial consequences.

Managers struggling to promote their travel programs within their company should know that the problem of off-channel bookings is widespread. Many travelers routinely go outside of prescribed channels to arrange their business travel. According to a 2016 report by Phocuswright, “Travelers…book just about everywhere. Their company’s online booking tool is the top booking method used but only 35% of travelers used it for their business travel…booking methods run the gamut from hotel websites (34%), online travel agency (OTA) sites (33%), airline websites (31%) all the way to calling travel suppliers directly and buying on-premise (19% each).”

Research released in August 2018 by the Global Travel Business Association confirms this: “Out of policy bookings are still fairly common with 37 percent of hotel bookings and 15 percent of air bookings on average made outside of a TMC or online booking tool.” Other research has these estimates even higher; IDC claims that their study found 40-50% of hotels and 28% of air is booking “off-channel.”  Understanding why business travel leakage happens and the potential impact it can have on a business can help suggest ways to effectively address it.

Why Booking Leakage Happens

Generally speaking, travelers do not book outside of their company’s travel booking tool because they’re looking for a way to get around set spending limits. As Phocuswright notes, “many travelers who book outside of their policy believe they are saving their company money by shopping for better deals.” (“The Business Traveler,” 2016) A report from the Expedia Affiliate Network focused on hotel booking leakage found that “68 percent of business traveler respondents booked more than half their corporate trips using non-approved consumer channels. Most did so in order to get better direct rates (47 percent), or to get better online travel agency rates (38 percent), or to book at a specific hotel property (36 percent).

Rather than being driven by a motivation to get around cost controls, travelers who shun their prescribed booking tools tend to do so because they are limiting and difficult to use. A 2017 survey of managed travelers by Business Travel News revealed that travelers’ concerns with typical business travel management tools centered around “the lack of quality shopping and booking tools for business travel, the desire for more convenient travel choices, an easier expense process and a nagging desire for better work-life balance.

In this era of readily available online travel booking options, employees are used to arranging their own leisure travel from a variety of sites, either booking directly with airlines and hotels or going through online travel agencies (OTAs). They tend to show a great deal of flexibility, booking through whatever channel gives them the best deal or the most advantageous option for that particular trip, rather than latching onto any single source. By contrast, managed travel plans tend to restrict users’ choices to select airlines or hotel properties. Corporate booking platforms are also notorious for not being user-friendly, which can serve as an additional deterrent for employees. In short, “[t]he demand for a better user experience, combined with the demand for more flexibility in the options they’re being offered, has led many travelers to abandon the properties and booking channels outlined by their company’s travel policies and opt for alternative booking pathways.” (Skift)

Travelers used to having a plethora of easily accessible choices when they book for leisure travel are unlikely to want to stay in a hotel ten miles from their meeting when they can book one across the street, or take a flight with a four-hour layover in another city if they can find a direct flight for the same price. They also want to have the option of building up frequent flier miles or hotel loyalty points with their preferred vendors or their credit cards, instead of being locked into providers chosen by their company. The bottom line is that business travelers go rogue when their company’s plan doesn’t offer sufficient convenience and flexibility.

Why Is It a Problem?

To understand why travel leakage is a problem, it helps to think about the purpose of having a managed travel program in the first place. The primary reasons companies engage with a TMC is to control costs and to access booking data that is traditionally only available from online booking tools.

The extent of the budget problem caused by off-channel bookings can vary with the size of the company and the structure of their travel policy. For larger companies that negotiate rates directly with a limited number of specific airlines or hotels, “unaccounted-for travel bookings mean the company won’t be able to take advantage of its full buying power when negotiating with suppliers, which could affect the company’s performance regarding contractual share or volume commitments,” (Travel Weekly). Even if this is not the case, having to compile complete records of travel spend after the fact from expense reports makes it difficult for companies to get an accurate picture of their overall expenditures or budget accurately for the future without investing significant time to pull accurate information together. Having a large number of off-channel bookings may also contribute to misperceptions of a company’s business travel patterns, which is problematic for decision-makers attempting to guide overall travel policy and practices.

travel management program leakage

For every company, travel leakage poses a serious problem to meeting duty of care requirements. At a minimum, a company should have current information on the location of all business travelers so they can be prepared to render assistance in the case of emergency. Off-channel bookings mean this information is not automatically made available, “elevat[ing] traveler risk when it comes to duty of care. When booking data is spread across channels that don’t automatically align, it takes time for travel managers to consolidate the data and makes it more difficult for them to provide assistance to travelers during a crisis.” (Skift) If a company is unable to respond effectively on behalf of a traveling employee because they lack critical duty of care information, they could face staggering liability in the event of an unfortunate outcome.

As prominent business travel thinker, blogger, and consultant, Scott Gillespie, says about untracked bookings, “How is failing to address this well-known and persistent problem not a dereliction of duty of care? Travel managers must find a way to turn bright lights on to this problem.  It’s a question of how, not why.”

What Can Companies Do?

How companies respond to travel leakage may depend on their corporate culture. At one extreme, companies may clamp down on off-channel bookings in a punitive manner; “[p]articularly in older-guard industries like finance and insurance, corporate policies generally aren’t suggestions; they’re expected to be followed, with consequences for noncompliance ranging to as dire as nonreimbursement of travel expenses.” (Travel Weekly)

In reality, most companies shy away from penalizing employees for rogue bookings. Of the companies Phocuswright studied, “Twenty-eight percent…impose penalties when a traveler books flights outside of policy as against 57% who do not enforce their policy…For hotels and lodging, over six in 10 (61%) allow non-compliance to go unpunished and less than two in 10 (16%) have penalties in place. In fact, across segments and booking channel, very few mandated policies take the ‘stick’ approach to compliance.” In industries that particularly value employee creativity and innovative thinking, draconian enforcement of travel policy is unlikely to go down well with either management or business travelers.

One possible strategy to reduce leakage is for travel managers to better educate business travelers about the purpose and benefits of corporate travel programs. This only works as part of a comprehensive strategy regarding travel policy, because “the effectiveness of the communication and education efforts is frequently diminished by a lack of senior leadership support, especially in enforcing travel policies.” (Sabre, “Tips for TMCs to prevent travel policy leakage in the self-booking era”) It’s also not likely to have much of an impact if the options available to travelers don’t change to address shortcomings in choice or convenience.

Other companies have tried to reward travelers for consistently following travel policy. In these cases, “companies have set up internal incentive programs that award points for compliant in-channel bookings; those points can be accumulated and cashed in for rewards like airline class upgrades” (Travel Weekly). It’s hard to know if this type of approach provides sufficient motivation to combat the temptation to find a more convenient option online. For companies who are reluctant to concede that their existing program isn’t working as well as they’d hoped, though, it does offer a route to encourage compliance through rewards.

Increasingly, however, companies are realizing that attempting to fight the natural behavior that leads employees to prefer open booking solutions is futile. Rather than battling the tide, more companies are looking at systems that make it possible to incorporate open booking as part of a company’s managed travel plan.

travel management program leakage

Enabling Open Booking

Companies that already have a travel management program in place, may be hesitant to consider allowing open booking (as opposed to “closed” online booking tools), worried about losing control over their travel policy. However, the numbers show that in most cases off-channel booking is already a persistent problem. The answer lies in channeling travelers’ natural booking behavior in a way that guides them to book in-policy while making their travel visible to management and finance.

Shep is a solution such companies can use to fill in the gap left by their existing travel management strategy. Shep’s browser extension is easily installed and intuitively designed for ease of use. Companies do not need to invest significant time or money to add it as a supplement to the system they already have in place. Shep’s open booking platform is designed to let employees book the same way they would for their own vacation travel, on the same consumer sites they’re used to using. Spending limits are clear but applied flexibly over the myriad sites the extension works with. The important difference is that Shep captures all traveler booking data that management and finance need for duty of care and budget requirements at the moment of booking, keeping open booking travel spend as visible as that arranged through the primary corporate booking tool.

This offers companies the possibility of a hybridized travel management strategy that promotes the use of a primary travel management tool or system while pragmatically acknowledging that even under the best of circumstances, not all travel will be booked that way. Shep would offer an alternative pathway to keep travel spend and duty of care information visible in real time for travel booked outside of primary channels, acting as a “business travel insurance policy.” Data gathered through the extension could offer valuable insight into the characteristics of a company’s off-channel bookings share and point the way to useful policy adjustments. Shep can also serve as a test case for travel managers interested in piloting an open booking option to increase employee satisfaction.

travel management program leakage

Of course, for companies that do not already have a travel management program in place, Shep offers an easy way to introduce flexible control to business travel. Giving business travelers clear guidelines is associated with improved satisfaction; Business Travel News indicated that among their 2017 survey respondents“[t]he least happy travelers…were the ones who had the least support. This group indicated they had few or no policy guidelines. They painted a picture in which they were casting about for the tools and processes needed to book and execute a business trip.” Shep offers an intuitive, cost-effective way to provide travelers with the necessary guidance to book their own travel with confidence.

Maintaining control over budget, gathering the data to make informed policy decisions, and looking after employee safety will always be critical for companies seeking to manage business travel well. Technology that enables open booking while keeping travel spend visible will allow them to meet these goals and keep their travelers happy as well.

Interested in seeing how Shep can help you monitor and track bookings? 

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