Delivering Value from Shrinking Corporate Travel Budgets in Uncertain Economic Times

A report just out from Morgan Stanley for corporate travel in 2019 painted a somewhat disappointing outlook. The survey of 203 corporate travel managers takes a look at their organisations’ travel budgets for the year, and compared the results against the predictions that they gave in November 2018.

November’s survey showed that travel leaders expected the travel budgets to increase an average of 4.4% in 2019. However, March’s survey revised this figure down to just 2.7%, the lowest level since 2015. The respondents that anticipated their travel budgets will shrink in 2019 almost doubled, from 11% to 19%. In the face of potential economic clouds, finance leaders are preemptively reducing discretionary corporate spend.

For any organisation which relies on its team members' ability to travel – which is, basically, all of them – these data paint a somewhat concerning picture. In an era where technology has improved policy enforcement and reduced wasteful spend, there are few options available. Companies can choose to either downgrade their traveller experience by moving towards lower quality hotels, budget airlines and cheaper flights with layovers, or they can simply cut the number of trips made by their employees. For most organisations, the second outcome is far more likely.

This begs the question: how do you decide where to cut travel spend? Is it an equal cut across the board? Does the sales team get their budget cut the same amount as other departments? If the sales team is included in the budget cuts, do higher-producing sales executives receive the same reduction as those who are less productive?

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The problem with these measures is that they are often arbitrary or based on intuition, instead of being driven by data-driven insight. Travel in particular is hard to measure, and the main reason is that it’s very difficult to measure the value – the actual financial benefits – that it delivers. As a result, department heads need to adopt an anecdotal, finger-in-the-air approach to travel budgeting, which can often be significantly inaccurate.

However, determining and analysing the value of travel need not be such an imprecise art, especially for sales teams. Almost every business now uses a CRM solution such as Salesforce, which contains vast troves of data on contacts made with prospects, dates of meetings, contract values and so on. Similarly, any organisation which now uses an expense management solution can easily track how much each employee/team spends on various travel elements, such as flights, hotels and car rental.

The traditional challenge has been that these two data repositories have been siloed, so there is no way to determine if one sales executive’s higher volume of T&E spend translates to more value (revenue) generated for the organisation. Neither can it determine, for example, if a particular customer is more receptive to account managers’ visits and hospitality spend when it comes to budget increases. As a result, companies may continue to spend excessively where it doesn’t deliver effective results, or can blindly cut budgets, leading to reduced revenues generated. For companies concerned about falling sales, this penny-wise-pound-foolish approach may harm the bottom line far more than it helps.  

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However, that era is now ending. Companies are now able to integrate these two solutions to glean meaningful insights from their team’s T&E spend on prospects and accounts. Travellers simply need to allocate each expense to a particular company, opportunity or individual from their Salesforce solution when submitting their expenses through a predictive text box (as the two solutions automatically sync). Sales and finance leaders can then analyse this data to determine how an individual’s spend impacts the revenue generated. This data can be viewed either on a dashboard or a map-based interface to provide insight such as if one executive can create more value per dollar spend, what types of T&E expense are the most or least cost-effective for revenue generation, and even how to optimise spend by grouping trips to a specific geographical area.

Armed with this insight, organisations can make informed, data-driven decisions on where to ratchet down spending, or reallocate spend from underperforming activities or individuals to those who are more proven to deliver value.

In a time where businesses are starting to worry about a potential downturn in sales, the last thing they should do is shoot themselves in the foot by sidelining their most productive revenue generators.