Corporate spend on business trips is headed towards $1.6 trillion by 2020, according to the latest figures from the Global Business Travel Association (GBTA). The figure represents a 5.6 percent increase in travel spend among corporations each year between 2015 and the end of the decade.
This may be great news for travel and entertainmen (T&E) service providers and travel suppliers, but for the corporate spenders themselves, this is a lot of corporate cash. The industry tends to work against businesses' efforts to save money, too, says Duke Chung, CEO of T&E startup TravelBank.
The issue, he recently explained to PYMNTS, is travelers spend corporate cash to book travel and then request reimbursements after-the-fact, meaning CFOs and accountants can't retroactively push for employees to spend less. Chung told PYMNTS why the consumer credit card industry is a huge factor in getting companies to spend more on travel, and how companies can shift from blindly paying for employee travel to being more strategic about spending.
“If you think about expensing today, everything is retroactive,” said Chung. “You submit an expense report and hope it gets reimbursed. And, by the time you spend the money, there's nothing you can do about it — it's already happened.”
This trend is a result of corporate T&E companies focusing more on usability and productivity, the CEO continued, with industry players solving for automation of the generation and submission of expense reports. But there is a new generation of T&E solutions that is beginning to look at predictability, visibility and affordability.
“While expense systems and business travel systems area really good at improving productivity, none of them have focused on reducing cost,” he said.
In his professional experience, Chung said he has identified a major factor that contributed to this trend. The consumer credit card industry, he explained, is an example of “consumer products driving misaligned behavior” in the enterprise.
“There are a lot of credit card programs out there where the more you spend, the more points you get,” explained the CEO. “When a company doesn't have a corporate card structure, it misaligns the incentive — the traveler will tend to want to spend more, and not less, because they're benefitting themselves.”
Even if a company has a corporate card program in place, often times an organization will allow individual employees to keep the rewards they rack up by using the company card.
The travel industry has fueled much of this focus on “spend more, get more,” Chung added.
“What's happened in the last 10 years is that a lot of consumer products have gotten so progressive in their marketing, that it's coming to be a problem for a lot of enterprises to get a handle over,” he said. “You can say the same for the points programs of major airlines and hotels: They're aggressive on getting you to sign up for their points programs, so what's the incentive for the user to save the company money?”
This is critical for smal- and medium-sized businesses (SMBs) especially, Chung said, 70 percent of which do not have an expense system in place, and rarely have a corporate card program in place, instead relying on travelers to book trips with their personal cards.
“In small businesses, generally what we're seeing is unmanaged travel, and the equivalent of unmanaged corporate cards,” he said.
To that end, TravelBank is introducing a rewards program to help employees in smaller companies gain rewards by booking cheaper travel — and just scored $25 million in venture capital for it. According to Chung, this takes a change in behavior, which is far from easy. In booking flights, for instance, TravelBank found travelers tend to pick a preferred airline, travel in and out of the same airport without checking local alternative airports, choose nonstop flights and travel during peak hours.
But offering incentives like cash and credit to places like Lyft and Amazon might be the push a traveler needs to pick a cheaper itinerary.
“Not everyone will do it,” he admitted. “But we're looking at millennials and small businesses — they're focused on saving money, and it adds up pretty quickly.”