Corporate Travel’s $1.25T Rewards Opportunity

Companies spend $1.25T, yes trillion, annually on business travel. So it’s no wonder they want to find ways to steer employees to spend less on their business trips. In the latest Topic TBD, Rocketrip CEO Dan Ruch explains how some of the biggest companies in the world are using an unusual rewards program to helps them do that, while answering the age-old question: What’s in it for the employee if they play along?

Corporate travel is a necessity for companies seeking to expand their top lines and bottom lines and customer bases. It’s also a hotbed of inefficiency — as employees who have to travel feel that part of the trade-off for doing so is being comfortable while on the road — and racks up the dollars along the way, dimming profits.

In the latest Topic TBD, Dan Ruch, founder and CEO of Rocketrip tells Karen Webster that the key to saving corporate dollars comes down to finding out, illuminating and using employee spending habits to incentivize them to save money as they book travel.

Motivation comes in two forms, Ruch told Webster, extrinsic and intrinsic. In the case of the former, there is some gain, some material value that accrues to an individual; while in the case of the latter, the benefit is that one feels good upon completing an action, “that you are doing the right thing. In most behavioral studies, intrinsic motivation works very well.” And many times, he said, intrinsic motivation needs “a nudge” in the right direction.

But motivation when it comes to corporate travel is a bit trickier, he said.  Consider the corporate policy that allows an employee to fly business class.  Dissuading them from doing so (with, ostensibly, an eye on the company’s bottom line) may on the surface seem to be the province of intrinsic motivation, which in turn takes the form of status on a leadership board. That’s until a travel fiasco creates friction that steers the employee to doing what’s right for them.

But if “you want to change behavior at a macro level you have to be willing to offset the cost of what we are actually going to give up … and it turns out that financial incentives are a tremendously powerful motivator of human behavior,” Ruch said.

But when it comes to corporate travel and getting travelers to play along, finding the right value exchange can be a challenge, said Ruch. Change “cannot be forced,” he said and likened modern corporate travel policies with an analogy of cattle, “fenced in … we expect them to stay in a certain place … and we do not care where they roam or graze so long as they stay in a fenced in area.”

Corporate travel policy is a “sub optimal structure” with $1.25 trillion globally every year being spent by companies on flights, hotels, cars and trains, with “no incentive by individuals to save money. Employees are spending someone else’s money — the company’s money” and lack the motivation to “sacrifice” for the good of the company since they’re the ones toughing it out on the road on behalf of the company.

Thus, corporate travel managers have two options, Ruch said. They can tighten what employees can spend, which creates friction and can drive churn “or we can motivate behavior.” Again, the operative concept here is cost and how to make it worth an employee’s while to switch behaviors.

Ruch said that his own firm, Rocketrip, has created a platform that offers up employee rewards for saving the company money by giving 50 percent of travel savings back to them, with the other 50 percent accruing to the company. The platform intersects with the technology used by client companies to manage travel, their corporate policies (including negotiated programs in place with certain vendors) and “a budget to beat” that comes out of historical data provided by the client. The budget to beat, said Ruch, “is a prediction of what an employee would have spent on that trip had there been no incentive to save, in other words, status quo.”

Employees can tailor a trip to come in under that threshold and save money by staying in cheaper hotels (or even with friends) or flying economy.

Upon being reimbursed at the end of a trip (with, again, half of savings accrued), employees rewards include points, which have dollar for dollar value that can be redeemed for things available as part of the Rocketrip platform, perhaps an Amazon Kindle or vacations.

Ruch said that where the platform is being used, more than half of the time employees do change their behavior, even in the subtlest of ways, such as booking a trip well in advance, resulting in cost savings. Subtle changes have big rewards here, resulting in cost savings of between 20 percent to 30 percent, which is good news for both the company and the employee in the long run.

In the end, said Ruch, it’s about employees becoming “enthusiastic participants in driving cost sensitivities throughout the organization … they want to do it because there is something in it for them.”