Every business trip an employee goes on creates a huge amount of data, which is both a blessing and a curse. On the one hand, this information - on trip cost, vendors used, itinerary details, booking method, and more - is critical for analyzing exactly how your company is spending on travel.
But on the other hand, the sheer volume of data can be overwhelming, especially when employee travel is just one of the things competing for your time and attention at work.
It’s not uncommon for companies with a significant number of traveling employees to have an internal Corporate Travel Manager, or to make travel the purview of a specialist within the procurement department. In other cases, however, oversight of employee travel falls elsewhere; to finance, HR, or even operations. Travel management is rarely the sole responsibility of these CFOs, corporate controllers, HR managers, and others - or even their primary one.
If you’re involved with employee travel at your company, you need to be familiar with some essential travel management metrics. This post provides an brief overview of key performance indicators used by travel, finance, and procurement professionals to measure the effectiveness of their T&E management. To learn more, download Rocketrip's e-book, Is Your Employee Travel Program Working?
Translating Travel Management for Key Stakeholders
Corporate travel terminology can be somewhat opaque. “Managed travel,” for instance, does not refer to the general process of overseeing employee trips, but rather a specific set of practices designed to control the way employees purchase travel.
In the managed travel framework, employees are required to use a travel management company (TMC) and corporate online booking tool (OBT) when planning trips. TMCs function like a corporate travel agent, helping employees book trips, and securing contractually discounted rates with airlines, hotels, and other travel vendors. OBTs are tailored to ensure that employees book policy-compliant options.
For companies that have managed travel programs, it’s critical to measure the extent to which employees are using the official systems that are in place to control costs. The following key performance indicators help show how effective a company’s managed travel program is at driving policy compliance and generating cost savings.
To what extent are employees using approved booking channels? Booking visibility shows the amount spent through a TMC and OBT as a portion of total travel spending. The higher booking visibility, the better. Directing travel spending through an approved channel is important for data capture, and to take advantage of the discounted rates your company has with preferred vendors.
To what extent are travel purchases being made using a centrally controlled payment method, such as a corporate credit card? Payment visibility shows corporate card spend as a portion of total travel spend, which also includes employee expenses submitted for reimbursement. Since expense reports are often incomplete, they’re more difficult to use for reporting purposes. In other words, low payment visibility makes it difficult for a company to analyze exactly how it is spending on employee travel.
Spend Under Contract
What portion of travel spending goes to the preferred airlines, hotels, and rental car companies with which your organization has contractually discounted rates? This KPI helps measure the influence of travel procurement on employees’ spending decisions. Negotiated rate agreements are the primary cost-control method of managed travel. If employees do not use a specified vendor, their company misses out on savings opportunities, and may lose its discounted rates because it fails to meet the contractual spend requirement.
How do your negotiated airline, hotel, and rental car company rates compare to the undiscounted rates? Contract competitiveness is somewhat difficult to accurately assess, in large part because of the challenge of assigning a correct undiscounted rate to flights, hotel bookings, and car rentals. Available market rates fluctuate based on demand, so the fixed “rack rate” isn’t necessarily the relevant point of comparison. TMCs provide the data that allows a company to compare its negotiated rates against benchmarks from peer organizations. The larger an organization’s travel volume, the more competitive its contract rates tend to be.
Total Negotiated Savings
How much does your company save through its discounts with preferred travel vendors? Total negotiated savings multiplies the dollar difference between the market and negotiated rate by the contracted volume of flight, hotel, or rental car bookings. It’s a measurement of how much more your travel expense would potentially be in the absence of negotiated discounts. However, it’s important to note that the realized savings will not be as great as these potential savings if actual travel volume with preferred vendors is less than the contracted volume.
Cost of Travel Management
How much does your company spend on travel management services? TMCs can provide excellent value; they help negotiate discounted vendor rates, assist employees with trip bookings, and provide reporting. It’s important, however, to factor in the fees a TMC charges when calculating the total cost of employee travel.