Phat Data can reveal the total cost of your travel program – and most of what you need to know is already in plain sight
What’s in your data-wallet? Last month we delved into the changing landscape of business travel. One of the topics we touched upon was the alignment of the travel program with business objectives and how travel data could support corporate initiatives. As we researched this month’s topic, it became glaringly obvious that perhaps the first step a travel buyer should take is to use the data to understand what the travel program they are managing actually costs their organization. For the travel manager this becomes Intelligence Worth Sharing.
This topic is often referred to as the Total Cost of Program or Total Cost of Ownership. As an industry we often look at our spend data: air, car, hotel, transaction fees as the footprint of our travel programs, but it is so much more. For many corporations uncovering their total program costs is shocking. But illuminating these costs can reveal so many opportunities for leveraging the data. So all that insight turns what was merely lots of data into something that is wise and actionable – which makes it Phat!
In many respects, the industry is an emerging market when it comes to all the innovative things Phat Data can do for your program, with the resources for obtaining the data for your total program costs being literally at your fingertips. Today you can begin to take action.
“Managing travel based on total cost of ownership is the next frontier,” maintains Albert Taras, managing partner at TCG Consulting, “allowing travel managers, CFO’s and procurement folks to take a deeper dive into the real costs of managing travel.” There are four key areas of focus that travel managers can use to determine the cost of their program.
Agency DataThe utilization of agency data to determine program costs is the smallest of all your opportunities. The booked travel data will never provide you the insight into what those bookings are actually costing your company since most of those actual costs occur during the consumption part of the trip – after the booking has been made. Everyone acknowledges this fact. But the agency data serves as the foundation on which to build out your program costs.
Program LeakagePart of the challenge in obtaining total program costs is determining just how much leakage your program suffers from. Every program has it. So now if you add to your foundation the corporate credit card spend data, you can compare what the difference is between the agency and card spend. The card data also begins to give you insight into spend categories that are travel related but not managed by the agency. The next category, general ledger, also supplements your ability to understand your program leakage.
General LedgerTaking a peek at the G/L numbers in travel-related categories will probably make some people nervous. It is here that we see significant costs that are not going through the agency or corporate card. It presents travel managers with a lot of talking points on where the spend is going and how is it getting there.
Administrative CostsThe last area for consideration is the costs to administer the travel and expense program. Highly automated programs probably have a smaller footprint, while manual processes will drive the administrative costs up exponentially.
“Understanding the administrative costs for managing a travel and expense program is difficult to define,” says TCG’s Taras. “We leverage the experiences we’ve had with other clients to help corporations refine that number.” Adding, “these costs can vary significantly and impact a company’s bottom line when it comes to travel program management.”
Value PropositionSo now that you have collected all this Phat Data, we must ask ourselves, “So what?” And what is the real value proposition for total cost of ownership? When an organization has a mature or maturing travel program it becomes more challenging to take out costs and drive incremental savings from suppliers. So being able to leverage this data allows travel buyers to manage their program differently.
The first step is to identify and isolate that proverbial program leakage that we talk about so often when we’re considering the possibilities presented by Phat Data. Buyers can now delve into the data and find leakage, analyze its causes and educate travelers on the impact of compliance, not only from an overall cost savings standpoint, but also as it impacts their safety and security on the road.
The second link comes with understanding the significant savings that can be realized through leveraging your corporate card program. Comparing the corporate card utilization to the G/L spend, it becomes clear what opportunities exist for expanding the scope of your corporate card program. This will enable companies to maximize rebates and create efficiencies for travelers.
The last item is cost taken straight out of process through enhanced efficiencies. Creating lean, focused processes for the entire lifecycle of a trip is critical. When a company can see how much impact the administrative costs around managing travel is having, it tends to return an excellent ROI for improving processes. But on the other hand, without the data, it can be a tough story to sell.
Advice to the BuyerUnderstanding the total cost of ownership for your managed travel program is critical. The majority of the data is already within your current systems and readily available to you. Taking the time to analyze the data from these sources adds value and credibility to your program and creates Intelligence Worth Sharing throughout your organization. As the role of the travel buyer becomes more technical and analytical, this is a great first step in taking the deep dive into your program and creating your own new value proposition.
“In the next five years, Total Cost of Ownership will be the widely accepted standard by which to manage a travel program,” says Taras. He also maintains that as the data becomes more readily available and in more detail, this opportunity becomes even greater for the industry. Once you have your story written on total costs, travel buyers need to share the information with finance, HR, shared services directors, CPOs and CFOs. There is something in this data for everyone!
So if you have been reading Phat Data for a while now and are still wondering, “Where do I begin?” remember the first step is reviewing the data you currently receive. Then ask, “So What? Understanding your total program costs is a great way to take that first step. The data is fairly easy to obtain and the impact can be extremely valuable to your company. It’s Intelligence Worth Sharing powered by Phat Data.