B2B Payments

Centralized Travel Procurement Is In

Experts in the travel procurement sector agree that centralized travel procurement is optimal, but not every organization is equipped to implement and support such a system. What can businesses learn from the experiences of those leading in house travel departments?

As the economy starts to pick up, so do cries for centralized travel procurement.

But not for the reasons you might think.

AirPlus managing director Caroline Haywood and Head of Strategic projects Roger Eccleston explained to The Wire UK that with the European business travel market strengthening and optimism returning it is not as important for organizations to reduce trip numbers and lower standards of travel as was previously seen in the years immediately following 2008.

Instead, minimizing travel costs should be the main focus, they said, which is particularly challenging when corporate travel policy is at odds with traveler preferences or membership in loyalty programs.

But that’s only possible if there is a centralized procurement organization to manage sourcing and monitor compliance. Last month, PYMNTS.com discussed an Egencia study that found European companies are more likely than North American businesses to have a centralized travel procurement operation.

Specifically, two out of three firms in Europe will have this sort of operation, while just one out three firms in North America have a centralized travel procurement operation.

A comment by a leading Irish hotel chain Managing Director, emphasized the importance of centralized sourcing and compliance stating that only 4 percent of those surveyed in a recent industry-wide survey said that the fact the hotel is preferred by their organization was the most important factor in hotel choice. According to Jon West, this means that companies might be open to risk of leakage from their travel policies and reduce compliance.

In a company statement, West elaborated, saying that accommodation costs account for approximately 22 percent of total travel costs. Because of that, companies are increasingly starting to realize that by accessing data and consultation services on an annual basis, “they can really optimize their hotel procurement and make substantial savings.”

How can businesses do this? According to West, companies can ease some of their pain by leveraging a single platform to tackle the entire procurement chain. Not only can this help drive efficiency, but West explained that it improves visibility and will ultimately lead to greater savings for the firm.

If a recent Global Business Travel Association survey is any indication, companies would be wise to work on nailing down their travel procurement operation soon. According to the report, U.S. business travel is expected to rise. Specifically, U.S. business travel spending is expected to rise 6.8 percent this year, to total $292.3 billion.

Global Business Travel Association executive director and chief operating officer Michael McCormick explained to CNBC that while those numbers are slightly scaled back from original predictions, it is still an important fact to take note of.

The decreased forecast is due to a decline in average spending per trip, according to McCormick, which is largely because business travelers are now visiting fewer cities per trip. Even so, McCormick underlined the fact that the travel numbers were increasing overall. Russian embargo news, the World Cup and stock market drama do not seem to have any effect, he said.

“They don’t have any impact on these numbers overall,” McCormick said. “In a global economy we’re becoming more resilient.”

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