Cos. Move Travel Bookings In-House, Eye Private Aircraft
Corporate America Sizes Up Cost of Business Travel
BY DAVID LALLY
Special to the Business Journal
Companies are streamlining, merging and cutting costs. Recent economic developments are putting pressure on businesses nationwide to reduce expenses. Among the top controllable outgoings for a company is corporate travel. Dollars spent annually in this sector are staggering. The National Business Travel Association quotes $185 billion as the figure American companies will spend on business travel this year alone.
Executives, often summoned to meetings with only a few days notice, pay high prices for travel and accommodation. The traditional method of organizing this has been to out-source travel needs to agencies.
Huge travel budgets have been the norm with the added expense of lost work hours due to delays, connecting flights and now the extra security at commercial airports. With falling profits, however, many companies are looking closely at ways to save money.
But the reality is that business still gets done the old fashioned way , face-to-face. While there are contracts and paperwork to take care of the details, it seems that nothing beats a handshake to close a deal.
– Business Travelers
If widespread travel is to continue, companies need to be at least aware of how much they are spending and the ways in which they could save. The New York Consumer Affairs Bureau conducted a survey that concluded there was a 53 percent gap between the highest and lowest fares quoted by agencies for identical itineraries. These figures are not surprising to those who fly often.
Mike Concannon is an executive with Oceanside-based Hydranautics and a frequent flyer. He travels for both business and pleasure and so can clearly see the difference in costs.
“For personal travel, we schedule well ahead, fly evenings or weekends and stay over on Saturday , all of which result in preferential prices. Business travel, however, is often short notice, with travel on weekdays at a cost of 4-10 times that of personal travel. For the privilege of paying the highest price, we get the middle seat on the plane, and the hotel gives us either the noisy room close to the street, or the room next to the elevator,” Concannon said.
Late bookings mean high prices and the traveler is at the mercy of the airline or agency. But is there a way to claw back some of those costs?
Michael Baker Corp. of Coraopolis, Pa. is an engineering and operations services company with an annual travel budget of $5 million. They have recently formed an in-house travel agency to take over the needs of their employees. A team of six people work full time to oversee travel and lodging requirements.
Since its inception in August, the strategy has saved the company 30 to 40 percent, according to Pat Meyers, manager of support services. Baker found that employees sometimes spent too much money.
– In-House Travel
Agency Cuts Costs
With an in-house agency, all of the details can be taken care of by someone who knows and understands the needs of those traveling, while at the same time having an interest in keeping costs to a minimum. To set up the agency, Baker had to be certified by Airlines Reporting Corporation, an Arlington, Va.-based group. Other companies such as 20th Century Fox and Home Depot have also been accredited.
On the plus side of in-house travel agencies, there are savings and a greater control over spending added to the fact that employees whereabouts are known and controlled. Car rentals, hotel rooms and flights can all be finely tuned to the needs of employees. Outside travel agencies are often affiliated with a particular airline. This can mean the agency does not necessarily look for the cheapest ticket. With an in-house agency, research into economical flights and rentals can result in savings for the corporation and plus a more streamlined itinerary for the business traveler.
– Business Turns to
Charter Air Travel
If the outright purchase of an aircraft is beyond budget, charter companies offer a welcome alternative. With delays across the country in the current environment, these companies have reported a surge in business.
Schubach Aviation is a charter company based in Carlsbad with 10 aircraft in their fleet. They have seen an increase in revenue in 2001 and in particular after Sept. 11. Henry Schubach, president of the North County company is optimistic.
“This year was shaping up to be a nice year,” Schubach said. “Our retail business base has increased nicely and while we were on the ground for a period post-Sept. 11, overall our business is up double on last year at this time. September was a record month. October was a record month and we are now in a position to add more airplanes to our fleet.”
Schubach cites increased security demands and subsequent delays as a major factor in his growth.
He also believes the terrorist attack on the United States is having a dramatic effect because business travelers are reluctant to go through the difficulties involved in commercial flying.
Travel has changed in the U.S. in many ways and we may be seeing the beginning of a shift in the way business is done. Corporations are increasingly taking matters into their own hands in an effort to cut costs and remain competitive. The trickle-down effect of this will, no doubt, result in larger airline companies reassessing their own practices. Falling gas prices haven’t been reflected in ticket pricing so far, but may well turn out to be another factor in the hoped for “about-face” for corporate travel.
Lally is a freelance writer based in Carlsbad.