The New York Business Journal recently claimed that companies are spending the equivalent of 10 percent or more of their annual spend on employee travel expenses. This is a number to make any finance professional stand up and take note. In fact, the wider business should take interest too as it’s contributing to a business travel industry that is growing at an exponential rate and is expected to reach $1.7 trillion in annual spend by 2022 (GBTA).
As this direct spend on corporate travel continues to increase, so does investment from the market with businesses seeing venture capital funding to the tune of $7.5 billion of investment in 2018 alone. So with such high-growth potential, what does the current business travel and expense landscape look like, and why should it matter to finance execs?
The current landscape
For the majority of organisations around the world, travel and expense management is largely complex and often inefficient. Outside of flights and accommodation, expenses incurred span food, taxis, client dinners, and more – and with the volume and frequency of global business travellers set to grow, this complexity will only rise.
At present, 30% of European corporate travellers fly at least once per month and 62% travel once per year. The most frequent travellers are the 5% who take between 21 and 40 trips per year – that’s a lot of miles for the business traveller, and a significant cost for businesses if no return is seen on that spend.
While the global business travel industry is obviously experiencing a boom – and at a magnitude never before realised – the processes and systems which have traditionally been used to manage this are failing under the weight of increased complexity. In some cases, finance leaders are even struggling to track overall spend as basic travel data is stored on disparate systems.
And so as business spend gradually moves towards the $2 trillion mark, the ability to track and manage corporate travel spend will become increasingly difficult unless finance teams can access comprehensive and accurate data insights.
What’s not working?
Further evidence of the need for change is that 94% of corporate travel managers still rely on a TMC or travel agency for reporting. That’s a lot of valuable data that is essentially being held hostage, and it renders real-time reporting impossible. Because of this, more than two-thirds (68%) of business travellers are side-stepping TMCs altogether, instead relying only on their own intuition when it comes to booking business trips. Resorting to this ‘gut feel’ approach is less than ideal and far from scientific: how can an organisation’s expense forecast possibly be accurate if it is informed by instinct rather than data intelligence? In short, it can’t.
It is not only free-willed employees who can derail travel and expense management processes, though. 40% of organisations don’t have a formal travel policy in place, meaning that any employee who needs to travel for business must research, book and pay for their travel without the support of dedicated processes and systems. And then of the 60% of businesses that do have a formal travel policy, 50% of business travellers don’t always follow them. For these individuals, the top reasons for acting out of policy include convenience (37%) and price (35%). Clearly, the disparate processes and systems that have traditionally been used to manage corporate travel and expenses are no longer meeting the evolving needs of businesses in an increasingly global marketplace.
A smarter future
This is where intelligent travel and expense management systems that harness the most advanced AI and data-led technologies are garnering the attention of business leaders. Optimising efficiencies and delivering a strong employee experience for all parties is top of the agenda. In fact, according to the Aberdeen Group, up to 70% of companies are seeking to adopt a technology solution such as this.
Despite this however, and although research suggests 57% of organisations already have access to a single application for all their planning, booking and travel needs, existing apps are still falling short. Why? They do not provide insight into the exact ROI brought in by specific business travel spend. In fact, a majority of these apps cannot feed live data into the bigger business picture by integrating it with the information held within other company systems such as a Customer Relationship Management (CRM) system. For this reason, many finance departments continue to perceive corporate travel expenses as an ongoing cost centre instead of a mechanism for business growth. They simply do not have the data at hand to enable the latter.
So what does this mean for the future of business travel?
With the global business travel boom showing no signs of abating, the time for organisations to turn their attention to optimising business travel expense management for the benefit of the bottom line has arrived. This is about more than just saving costs. If done optimally, the adoption of a smart, integrated travel and expense management system will act as a mechanism for business growth. And in addition to reducing cost and maximising profitability, it will go a long way to preventing blanket travel bans – a knee-jerk reaction that only serves to restrict growth at a time when revenue is needed the most (research from Oxford Economics USA suggests that an estimated 28% of current business would be lost if business travel was suddenly cut off).
So if you’re a finance leader struggling to justify the cost of your employees’ travel spend to the board, start your journey with our online ROI calculator to transform business travel from a cost to a profit centre.