July 13, 2024

Taking back control

Rising prices are forcing SMEs to get a tighter grip on their business travel but it’s a fine balance, says Gill Upton

The rush by SMEs to fill their business pipeline immediately post pandemic – often with flagrant disregard to prices – is in stark contrast to what’s happening in 2023 as increased cost control has gripped the sector.

“Our SME clients are analysing every cost down to the nth degree; they’re looking at every extra as the cost of living crisis is really biting,” says Paul Ford, Business Development Manager at Agiito.

SMEs are pausing to look closely at the reasons for travel. ”It’s about purposeful travel, which helps with sustainability too,” says Donna Joines, Head of Corporate Traveller UK.

Typical is frequent traveller Floran Hoven, co-founder of KeyNest: “I’ve been hopping on trains for shorter distances between offices (my favourite one being Eurostar), not only reducing my carbon footprint but also for cutting travel time substantially. For a London-Paris trip, the train saves me over three hours of time, compared with a flight.”

Teams/Zoom and WebEx virtual conference platforms sort internal team meetings and the like but when only face-to-face will do, for relationship building and clinching deals for example, the trusty TMC is stepping in to control and manage travel costs.

“Our SME clients are analysing every cost down to the nth degree; they’re looking at every extra as the cost of living crisis is really biting”

Kieran Hartwell, Managing Director Corporate at Travel Counsellors, an SME specialist, has witnessed multiple trends this year. “We’re seeing extended trip durations, a shift to rail for European destinations, an increase in the use of apartments, and more requests to rent electric vehicles and shared ride services.”

Business traveller James Smith, founder of Travel-Lingual, is keen to balance frequency and cost. “While in-person meetings are still essential for building relationships, using technology to automate processes and minimise travel days is becoming more popular.”

Increased costs in the marketplace are driving much of the change in behaviour. Hikes in hotel rates are making a nonsense of rate caps, forcing constant reviews. Some TMCs are warning that average prices in London, for example, will shoot up from £160 to £190 by the end of this year.

“The cost squeeze is valid for all sizes of business so it’s about cost increase minimisation,” says Scott Davies, CEO of ITM. “SMEs are in cautious mode as much as the larger travel buyer, as there is no part of the travel ecosystem that hasn’t shot up in cost.”

Despite grappling with connectivity, distribution and technology industry issues, Davies says buyers are ever-pragmatic, knowing that there will always be something to wrestle with and that inevitably, solutions or workarounds are found.

Traveller Amanda Harper, founder of Unplugged Essentials, travels for business every two months or so, and is now using non-traditional accommodation such as Airbnb and sharing services to split costs.

“This goes beyond group ridesharing but also sharing living arrangements during the business trip,” she says.

One-day trips are a thing of the past and trip-maximisation is the new norm.

KeyNest’s Hoven says: “I’ve learned to combine my trips, so I get the most out of each journey by meeting clients, partners and attending conferences all in one go.”

“Organisations in the unmanaged space have been beating a path to the doors of TMCs, realising they need to meet duty of care as well as getting better deals”

Another traveller, Elena Nunez Murdock, board member at SMA, says: “I now limit my travel to once a month. I will stay in a city for twice as long – six days instead of three days or less.”

The company’s pre-pandemic travel spend of £300,000 has reduced to nearer to £200,000, thanks mostly to the wider acceptance of virtual meetings.

Longer booking horizons are another trend. “The trend is increasingly four to six weeks in advance, compared with two weeks or less during and immediately after the pandemic,” says Abby Penston, CEO of Focus Travel Partnership.

“SME clients recognise that the further they can plan and book advance, the more likely they are to gain cost savings.

“But they are also taking advantage of various new slightly higher priced airfares, which allow for more flexibility for date or time changes and potential refunds over the more standard historic fares, which once booked are totally inflexible. The expectation and need for flexibility is becoming the norm,” she explains.

Travel Counsellors’ Hartwell notes that there is a tipping point of around an annual travel spend of £2million when belts are really tightened. The bulk of the group’s clients spend up to £500,00 a year, in most cases with only a verbal policy.

At the other end of the SME scale, Good Travel Management Commercial Director, Laura Busby, cites the example of one large accounting firm that cut its travel budget by 56%. The TMC created a new travel policy with tighter approvals, introduced reason codes for short-haul trips, banished one-night stays, increased the number of three- and four-night stays and switched to virtual communications for all internal meetings.

Purposeful travel may be the buzzword now, to ensure that only essential travel takes place, but employers are also cognisant of the competitive job market and staff retention, so using carrots rather than sticks to shape travel behaviour.

“It’s a fine balance they’re striking,” says Corporate Traveller’s Joines. “They’re trying not to restrict, otherwise travellers will go off and book it themselves out of policy. They’re trying to educate travellers on what they’re trying to do as a business.”

“There is a tipping point of around an annual travel spend of £2million when belts are really tightened”

Joines stresses the importance of explaining clearly why the policy rules are there. “Give examples of what you can book without needing approval,” she says, adding that 95% of approvals are agreed.

“Clients embed the new policy into the online booking tool without ruining the travel experience and guide the travellers with recommended spend and rate caps,” she says.

“They show what the typical spend is in a certain area at a particular time and show the content. Travellers then have total visibility and options.”

Busby agrees, particularly for those Gen Z employees. “You can’t beat them with a stick,” she says. “The travel experience is important for younger travellers. They want a niche style of property to stay in and perhaps to add on a weekend trip to their business trip.”

Business traveller Jon Morgan of Venture Smarter has noted the rise in bleisure travel. He reckons that it has encouraged companies to explore creative ways to incentivise and reward their employees.

“This approach not only enhances work-life balance but also boosts employee satisfaction and productivity,” he says.

SMEs are also looking closely at the number of travellers per trip, generally cutting back on a business trip that used to take five salespeople to two to do the pitch.

Unsurprisingly, organisations in the unmanaged space have been beating a path to the doors of TMCs, realising they need to meet traveller duty of care as well as getting better deals.

“It’s going absolutely crazy in that world,” says Busby at Good Travel Management.

“Yesterday we had 10 new enquiries through our website and we’ve signed 47 new clients since the New Year who spend under £1000,000 per year on travel. 2023 will be our best ever sales year on record.”

“The cost squeeze is valid for all sizes of business so it’s about cost increase minimisation”

The same picture is reflected across the Advantage membership. “We have seen TMCs reporting sales and, in some cases, transaction numbers matching and even surpassing those of before the pandemic.

A key factor in these figures has been new business from companies which have traditionally been ‘unmanaged’,” says Guy Snelgar, Global Business Travel Director.

For Agiito, unmanaged business will represent 20% of what the TMC brings in this year, compared with a normal year say pre-2019, when it accounted for only 6-7%.

Most unmanaged companies have no budget and no idea what they spend on travel.  “They just spend what they need to get the job done,” says Agiito’s Ford.

Thankfully SMEs’ cost focus has skirted around questioning the 5% transaction fee and there’s a general acceptance.

“It’s a real education piece. We say, ‘Let’s look at the 95%, not the 5%’,“ says Busby.

Adds ITM’s Davies: “Quibbling over a 50p transaction cost is not the way to go.”