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Corporate travel budgets are under renewed scrutiny as companies face economic uncertainty, rising costs, and pressure to operate more efficiently. But research from the American Society of Travel Advisors (ASTA) and Global Business Travel Association (GBTA) points to the broader business value of managed travel. The analysis found that a 1% increase in managed corporate travel spending was associated with a 0.2% increase in company revenue.
Skift Studio sat down with Mark Meader, executive vice president of ASTA Corporate, to discuss what that relationship means, how companies can evaluate whether they are investing at the right level, and where travel policies can become too restrictive. He also explained how travel management companies (TMCs) can help companies capture value that extends well beyond booking.
Skift Studio: When a CFO looks at travel as a place to cut costs, what might they be missing?
Mark Meader: From a CFO perspective, the risk is that they only look at one side of the equation. Corporate travel is certainly an expense, and companies need to manage it carefully. But travel also enables sales, customer relationships, collaboration, employee development, and other activities that can contribute directly to business performance.
Rather than just asking how much we can cut from travel, I think the better question is: Are we getting the appropriate return from what we invest in travel? Sometimes reducing travel might be the right answer, but in many cases, cutting too deeply can work against the company’s broader business objectives.
The research found that a 1% increase in managed travel spending was associated with a 0.2% increase in revenue. What should executives take from that?
The most important takeaway is that travel spending shouldn’t automatically be viewed in isolation from business performance. There is a meaningful relationship between managed travel investment and revenue, which supports treating travel as an investment that should be evaluated for its potential return.
The question is whether the company is investing in the right travel, at the right time, at the right level, and managing that investment effectively.
How can a company figure out what the right level of travel investment is?
The benchmarking model we created is really meant to be used as a diagnostic tool, not as a prescription. If a company’s travel investment is different from comparable companies in its industry, that doesn’t necessarily mean it’s wrong, but it should prompt a conversation about why. Why are we different? Why are we unique?
The benchmark becomes more useful when you look at it alongside the company’s own objectives and performance. A CFO or procurement leader, alongside the travel manager, can then have a much more informed conversation about whether the company is investing appropriately in travel and whether the program is producing the desired business outcomes.
Was there anything in the research that surprised you?
One of the most interesting findings was that the answer isn’t simply more travel or tighter control. There’s a point at which companies can become too restrictive and potentially diminish the value they’re trying to create.
A well-managed travel program isn’t necessarily the program that spends the least. It’s the program that makes thoughtful decisions about where travel creates value, puts appropriate controls in place, and gives travelers enough flexibility to accomplish the business purpose of the trip. It’s sort of the Goldilocks zone. The right middle ground will vary by company and by industry.
What does an overly restrictive policy look like in practice?
A traveler could be forced to stay at a hotel that is very far from the company they’re visiting, creating a long, unwarranted commute, or stay in a neighborhood they might not perceive to be safe. The same could apply to air travel if they’re not allowed to take a direct flight that is slightly more expensive than a connecting flight, adding to the time it takes to get to or from the location.
Those kinds of constraints can affect the trip and the traveler’s well-being. You’re not effective if you’re overly tired. I think the answer is allowing the right degree of flexibility, which only the company can define, and working with employees to determine what is workable for them.
Beyond booking trips and getting good rates, where does a TMC add value that companies tend to overlook?
Don’t measure the travel management company by the cost of making a booking. That only captures a fraction of the value a professionally managed program can provide.
A TMC can manage supplier relationships, identify savings opportunities, recover unused ticket value, support travelers when plans change, and manage disruptions. It also plays an important role in duty of care, helping ensure travelers are safe and that the corporation knows where its people are. That’s in addition to providing data and benchmarking and helping the company improve compliance.
The bigger question for the CFO shouldn’t just be, “What does our TMC cost us?” It should also be, “What value is our TMC helping us capture, and what would it cost us to replicate or go without those capabilities?”
For readers who may not be familiar with ASTA, what would you say is the core value of joining?
The core value of ASTA membership is collective strength. As a nonprofit, ASTA brings the corporate and leisure travel agency communities together to speak with one powerful, unbiased voice. That gives our members a seat at the table with government and industry leaders while championing the value travel advisors provide to their clients.
ASTA members can access the full report, “Calculating the ROI of Strategic Corporate Travel Investments,” which explores how companies can evaluate travel spending and manage it for stronger business outcomes.
In this report, you’ll find:
- New findings on the relationship between managed travel spending and revenue growth
- A benchmarking model for evaluating corporate travel investment
- Guidance for identifying potential over- or underinvestment in travel
- Findings on how travel policy and flexibility can affect ROI
- A closer look at the value TMCs provide beyond booking and rates
Not an ASTA member? Learn more about ASTA membership and how to access exclusive industry research and resources at ASTA.org.
This sponsored content was created collaboratively by THIS and Switch Studio.
Source: skift.com
