Booking Air, Hotel or Car Rental outside the TMC booking systems has always been considered “leakage” or “rogue spend” or “unmanaged”. All negatives. But is it always bad for your travel program? To set the stage – in companies with significant spend, typically 8% of Air, 40% of Hotel and 50% of Car Rentals are booked outside the Agency. That’s a lot of volume – about 22% of total Air, Hotel, and Car Rental spend.
Travel leakage has been considered an issue for several reasons:
- No visibility into spend outside the TMC reporting systems
- Duty of care risks when you can’t locate a traveller by quickly looking at their booking data
- Loss of spend visibility when negotiating and managing supplier deals
- Inability to see if travellers are following policy in selecting the right suppliers at the right price
From a Duty of Care perspective when you want to find a traveller during a crisis, leakage is clearly evil. This document though, will focus on whether employees are inherently costing the company more money by booking direct or through a consumer channel.
Based on experience analyzing detailed leakage data with our clients, we find the top reasons are not necessarily always a bad choice:
- Air Reasons – I used a low cost carrier who is not “approved” or doesn’t show up in the system; OR we have a flat rate on my route, so I typically buy last minute (common on short haul routes with frequent flights like London/Paris or Frankfurt/Geneva); OR (and this is evil) I have preferred status and collect points on a non-preferred airline, and didn’t want to get in trouble.
- Hotel Reasons – I needed to book the Air to get advanced purchase rates but didn’t know the meeting location of where other attendees/clients were staying; OR I didn’t need an air ticket for my trip, so didn’t think to use the Agency (typical in field service divisions); OR the customer wanted me to stay at their preferred hotel and rate; OR I wanted the Airbnb experience; OR (evil again) I have a favorite hotel and didn’t want to get approval; OR I wanted a hotel closer to the location and found a great rate online.
Clear insights into total aggregated spend across all channels is needed to drive incremental sourcing savings and identify new optimization opportunities. New data solutions are providing visibility into total spend by supplier, class, location, by merging together multiple data sources such as TMC, corporate card and expense. This eliminates the lack of data visibility issues.
So what should a well-managed program do to assess the true impact of leakage?
- Get control your data – If you integrate TMC data with Card and/or Expense Data and apply good analytics you can see where leakage is occurring by supplier, region, division and employee. You can then dive into the why and the impact.
- Analyze if Air leakage is costing more – A flat fare Air trip costs nothing more. Determine if ATP in leakage was higher or lower than the TMC ATP on that route.
- Analyze if Hotel Leakage is costing more – In studies done for two large corporations data showed that about 50% of the time the traveller paid less than the negotiated preferred rate. That still means 50% paid more – find out why. On the “paid-less” hotels, consider adding that property to the program if several people regularly use it.
- Begin looking for new savings opportunities in categories where data was not formerly available such as comparing air to rail on short haul routes, studying meal spend and policies, and clearly evaluating the impact of the sharing economy.
- Once travel managers have segmented and evaluated the information, they can influence the behavior leveraging the new knowledge.
Merging of travel-related data sources also provides the travel manager clear visibility into travel spend areas that are not traditionally capable of being managed or reported. The key spend areas now visible include rail, arranged car, taxi, meals, ancillary fees and sharing economy spend (Airbnb, Uber).
In travel, we have traditionally been data rich and analysis poor. We have come up with rules of thumb that are true in general. We apply these rules broadly and it does save money for most trips. If better data is available, you can better understand root causes and be more surgical in finding opportunities to drive measurable incremental savings.