Defending business travel in a recession
— -- I loathe meetings. That's one reason I left the corporate world to work independently, but I know meetings are essential to facilitating commerce. Businesses must travel and hold meetings even in a recession (or perhaps especially in a recession) in order to survive and thrive. It's unfortunate that business travel and meetings have been the targets of sharp condemnation in the current economic downturn.
"Travel is the lifeblood of most companies," says Kevin Mitchell, chairman of the Business Travel Coalition. Mitchell is disturbed by the "reckless behavior" of some in Congress who have chastised business meetings "across the board in a very dramatic fashion" because a few companies abused their Troubled Asset Relief Program (TARP) funds.
"At a time when we are totally focused on creating jobs it is irresponsible rhetoric," says Mitchell, who feels this unwarranted attack is causing job losses in hotels, restaurants and many other industries dependent on business travelers.
The groundswell of criticism has put business travel on the defensive in many companies at a time when everyone is cutting expenses. It's not just the large companies we hear about that are cutting back. Small companies, which account for 70% of air travel spending in the U.S., are more likely to cut travel in an economic downturn because they often lack the capital reserves of large companies. Jean Covelli of The Travel Team, Inc., a travel management company based in Buffalo, argues that companies should view business travel as an investment in the future rather than a cost.
While there is clearly a tendency for companies to cut travel budgets in tough economic times, short-term savings in travel could have long-term detrimental effects. Rick Wakida, a global travel manager based in the San Francisco area, says many companies tend to cut travel "X%" in every department across the board because it is easier to administer. "A better approach would be to allow or limit travel based on trip purpose," according to Wakida.
"Whether the economy is in recession or doing well, cash flow is what really sustains companies," Wakida says. There are many business travel objectives, but Wakida believes each trip results in a cash flow to the company somewhere down the line. Direct sales trips might generate the most immediate cash flow, trade shows and external networking/meeting opportunities are more likely to generate cash flow at a future date, while internal meetings and team-building sessions might only produce cash flow in the very long term. Wakida says each trip should be evaluated by the cash flow it generates as well as its contribution to the bottom line. "It just seems like a more analytical approach to travel budgets," than imposing a "travel freeze" or cutting travel by a specific percent across the board.
At Moog, Inc. in East Aurora, N.Y., February travel was down 8-10%, according to Kathy Hall-Zientek, manager of travel services. But while some groups reduced travel, others involved in high-value acquisitions are traveling more, so Zientek expects her numbers to even out over the next few months.
Rather than cutting the volume of travel directly, Zientek is seeking other ways to reduce costs. "As a travel manager you have to be extremely creative," she says. Zientek is implementing new quality control software that monitors airline ticket prices before and after ticketing. Zientek is very excited about the additional cost savings she hopes to achieve with this software (from Cornerstone Information Systems).
Zientek is also focused on marketing the Travel Services group and educating travelers on the cost benefits her department can provide. Zientek now reports travel spending by group, so each of Moog's five internal groups can now dissect their expenditures and compare it with the others to better monitor costs. Moog also began housing long-term contractors in leased, furnished apartments rather than hotels. "It has been extremely cost effective," Zientek says.
Although group and meeting arrangements are handled by individual departments, Zientek also recently began offering to review each contract before it is signed. So far Zientek has captured additional savings on three contracts that have come through her office for a second analysis. All of these cost-savings initiatives allow Moog to reduce costs without affecting the number of trips.
Covelli believes companies can lower conference and meeting costs by reducing food spending and eliminating entertainment or other lavish expenses. She believes companies should put metrics in place to evaluate business travel. For example, for a sales call, how many times does the sales person go on the road to close the deal? For a manufacturing project, how many people must travel to complete the project in a timely fashion and how much time is saved by travel vs. remote Web sessions or videoconference calls?
"If a travel-related initiative does not allow for results in some form, then simply move on to the next measurable travel initiative," says Covelli. "Before, nobody measured anything, and now everything is measurable."
Arbitrarily cutting business travel can have adverse impacts in other ways. "There is always the issue of what your competition is doing," according to Mitchell. If your competition has more face time with customers, your company could be in trouble. "As a travel manager, I would be benchmarking my company's competitors and trying to find out what they are up to in terms of sales and marketing and customer acquisition," says Mitchell.
Canceling meetings already scheduled may also be problematic. Some meetings are planned as much as a year ahead of time and there may be stiff penalties for canceling. "In some cases, it would cost almost as much to cancel the meeting as to hold the meeting because of the penalty costs," says Wakida.
Finally, there is the issue of employee morale, particularly when it involves incentive travel. "It is a reward to the employees for prior services," Wakida says, "You are taking away something they have earned as part of their compensation," which may make employees less motivated to perform well in the future.
Send David your feedback: David Grossman is a veteran business traveler and former airline industry executive. He writes a column every other week on topics of interest and concern to business travelers. E-mail him at travel@usatoday.com.