• Strategy
  • CFO Magazine

Economy Class

Techniques and technologies for limiting soaring travel costs.

Forget Microsoft Corp. It’s the airlines whose recent dealings with competitors really have companies on edge. With alliances in the wind between United and Delta, American and USAir, and Northwest and Continental, companies face the threat that this increasing cooperation will exacerbate the already skyrocketing cost of business travel.

And skyrocketing it is. As American Express Co. calculates it, airfare accounts for more than two of every five business-travel dollars. It notes that prices for typical business airfares (the lowest priced, least restricted) jumped 16 percent last year alone, and have soared 38 percent since 1995. “You’d expect some price increases, but given existing inflationary trends, you wouldn’t expect the extreme price increases we’ve seen,” says Eric Altschul, a vice president at the American Express Consulting Services Group in New York. He blames the fare rises on the way “the airlines have tacitly gotten out of each other’s way.” Full-fare economy tickets for transcontinental flights, and even some from Chicago to the West Coast, now may routinely exceed $2,000 round trip, about 50 percent higher than five years ago.

While airline trade groups dispute how dire the picture is — an Air Transport Association spokesman contends that American Express overemphasizes the higher, published fares that business travelers usually manage to avoid — those business travelers certainly can’t argue that trips often are much pricier these days. Indeed, the rate of increase for the average business fare paid, which includes the discounts Amex figures that companies are able to use, nearly doubled last year, to 9 percent.

While airfares raise hackles now, lodging expenses will soon. Amex says that domestic corporate hotel costs, representing another dollar of that business-travel five-spot, will grow at between 13 and 15 percent this year in the top 25 business destinations. When other cities are included, last year’s 8 percent rise probably won’t be matched. Still, Amex observes that vacancy rates will remain so low that companies will continue having trouble negotiating discounts. On top of that, of course, such expenses as car rentals (up 4 to 5 percent) and restaurant meals (2 to 3 percent) continue to rise. Taken together, the sharp increases mean that travel — a company’s third-largest controllable expense — “is getting a much higher level of attention than it ever has” from corporate finance departments, according to Altschul.

At many companies, the ingenuity of cost-conscious individuals and travel offices is being sorely tested. And while there are limits to what can be done institutionally to reduce expenses without compromising the comfort and convenience of your road warriors, suggestions about how to make improvements fall into four general categories:

1. Go Higher Tech. By using the Internet and various new software tools, companies can find cost savings that travel agents often miss, and can even factor company travel policies into their arrangements.

2. Go Smarter. The list of available savings here includes not only volume discounts, advance booking of airfares, and Saturday layovers, but also use of alternative routes and airports.

3. Save after You Go. Sophisticated software has been designed to effectively reduce the costs of processing travel reports.

Discuss

Your email address will not be published. Required fields are marked *