Travel Tuesday — Is Procurement Getting More Involved in Travel Spend?

I thought I'd start a regular Tuesday column on a subject that is near and dear to my P&L: travel. When I looked closely at my costs over the past few years, I realized that our firm's travel-related expenses comprised a material percentage of our costs. Even though I run a small business, I know that travel costs -- and headaches -- often scale directly with company size (adjusting for industry differences, of course). I remember my days at FreeMarkets when, after a particularly bad experience with United, I learned how complicated the travel spending (and rebate game) was. The experience began with being stranded (with Premier Executive status, mind you) after missing an 11:00 PM connection because of a late flight, and being told that I'd have to spend the night on an airport bench unless I wanted to splurge for a hotel at my own expense. On principle, I told the agent that I was finished forever with United if they would not even offer accommodation after refusing to hold the next flight another 5 minutes (we saw it leaving as we pulled into the gate next to it).

At that point, two colleagues and I marched to a rental-car provider, jumped into a mid-size as quickly as we could, and drove through the night to arrive back at the office before sunrise. I then let United have it, starting with a letter to a number of co-workers, relating my experience (and United's response). I forwarded this letter to our United corporate account representative in Pittsburgh. Instead of the apology I expected, I got an angry call from our CFO telling me that my actions had jeopardized a $50K rebate check the company was expecting from United for hitting certain spending thresholds. As I recall, I told the CFO that I was sorry, but my contributions were worth far more to the firm than $50K, and my satisfaction as a traveler should come first.

Regardless, the experience woke me up to the fact that travel procurement was complex. The systems of rebates and the number of middlemen involved in booking -- and the differences in these for hotel and air -- only begin to skim the spending (and potential savings) surface of a system that still partially runs off mainframe computers better suited to the Cold War era than today's travel environment. I believe the complexity of travel procurement is one reason that it's a category few companies truly manage well across the board.

Still, there's hope, and good reason for procurement to get involved in travel. An Aberdeen blog post by Christopher Dwyer suggests that a recent study "found that 60% of enterprises saw a spur in policy compliance due to procurement's impact on sourcing travel … [and that] new data suggests that nearly 70% of enterprises currently have the procurement group involved in travel management." According to Aberdeen's recent research on the subject, 15% of companies have no procurement involvement in travel management, while 16% have limited involvement, and 69% are "currently involved," whatever that means.

I know for a fact that, based on our own research in the area -- and from a friend and colleague who ran Orbitz's P&L for business travel at one point -- that there's quite a bit of variation in what "procurement involvement" in travel means. Which should make this a great topic to explore regularly in further detail on Spend Matters.

Jason Busch

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