Penny wise or pound foolish?

Business travel has assumed increasing importance in a world that has become extremely globalized. The recent recession that engulfed many of the world’s economies further highlighted the reasons for effectively managing corporate travel.

Photo: PhotoAlto/Frederic Cirou

Corporate or business travel is one of the largest discretionary expenditures within a company. In many cases it may be second only behind salaries. But can a company still think of business travel as discretionary?

Business travel is considered to be an essential tool of commerce in both large and small companies. In fact, small companies seem to have a greater reliance on business travel as they often lack the visibility of large companies.

Moreover, small companies have to compete with large companies in order to acquire new customers. And, in order to do that, they often have to invest substantially in business travel for the sort of face-to-face meetings that prove they are up for the job. It is estimated that in large firms business travel costs make up 3% to 5% of sales. In smaller companies this tends to be much higher.

A recent study conducted by an economic forecasting agency found that there is a definite link between business travel and corporate profitability. Every dollar spent on travel by a U.S. company can generate an average of $12.50 in revenue and $3.80 in profit.

While the ongoing economic downturn has made companies across the board consider cutting back or drastically reducing “discretionary” business travel budgets, the study is evidence this is a “penny wise and dollar foolish” approach. The bottom-line benefits that accrue from business travel are clearly achievable. Over the next five years certain industries such as real estate, utilities, rubber and plastic manufacturing and food services, are projecting a total of $129 billion in travel spending.

So, what can a company do to optimize the return on investment in travel and spend smarter? Travel is highly variable but the good news is, it is controllable. The best way to manage it is through compliance and setting firm rules for employees

By controlling and working with business travelers in regards to how a trip is to be booked, and where or with whom to book the trip, a company can realize the growth that only ‘getting on the ground’ can stimulate.

Tom Ciccone is the director of corporate sales and service for Fare Buzz