March 2, 2009 — The recent volatility of oil prices and the emerging global economic crisis have led to significant reductions in domestic and international capacity and, likely, to the airlines' subsequent move to add ancillary fees on top of rate increases as they combat continuous financial strain. Hotel room rates may still increase yet this year and into next despite new inventory coming online in relation to slowing demand. Car rental rates are also expected to increase to some degree.
With the overall cost of business travel on the rise and given today's industry and economic dynamics, companies are looking for strategies to further reduce costs without sacrificing the effectiveness of their overall travel program and without compromising a company's overall business goals and requirements. Demand management is the term widely used to describe these efforts.
Rooted in procurement practices, demand management suggests a highly disciplined approach to addressing the drivers of spend, aligning purchases to business needs and eliminating unnecessary consumption. While this is not an entirely new idea for many companies that have carefully monitored the purpose for business travel and performance of travelers for some time, there is certainly a new level of emphasis on, and interest in, this practice.
One definition for demand management states it is "a process that weighs revenue return against expense and productivity loss." In the travel arena specifically, this translates into a better understanding of the rationale behind business trips and a reduction in unnecessary travel. Demand management also considers alternatives for travel not classified as "strategic" or "revenue producing." An example would be using virtual meetings and video conferencing in place of some in-person internal meetings that may have involved air travel and/or a vehicle rental and a hotel stay.
More companies are integrating demand management initiatives into their travel programs. Some questions being considered:
- What are the objectives of a particular business trip?
- How will return on investment (ROI) be measured?
- Can the objectives be achieved through a means other than travel?
- What is the added value of taking this trip?
- Who needs to travel to reach the stated objective?
Policy messaging tools
Preferred supplier support
Reduction of upper-tier hotel properties
- Require 14-day advance purchase
- Require lower meal reimbursements
- Reimburse for only one checked bag
- Require approval for international travel
- Require use of corporate card for reimbursement of T&E expenses (when accepted by merchant)
- Reduce or eliminate same day trips under most circumstances
- Source meetings in lower cost cities
- Eliminate reimbursement for trips initiated outside of the corporate travel program
- Eliminate reimbursement for airline clubs
- Target communications with specific messages tailored to specific traveler/travel arranger audiences, such as executives, road warriors and administrative support functions.
- Use calling cards instead of mobile phones when traveling internationally.
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