Change Your Own Oil?

Change Your Own Oil?

By Alan H. Hess

Hess Business Travel ManagementNew company policy: Employees are expected to change the motor oil in their company cars personally, in order to save money. With the cost of oil changes at quick lube establishments reaching nearly $45, you can save the company a good $25 by climbing under the car yourself. You will be reimbursed for the cost of materials up to $15; unfortunately, we are no longer able to cover the cost of snagged nylons. Be sure to clean grease and dirt from under fingernails before calling on customers.

Well, maybe not… but in the chaotic new world of business, everything is up for grabs, including who should book travel and how management keeps a handle on it.

The current confusion in business travel management comes primarily because of:

  • Unprecedented access for consumers to information about every aspect of travel
  • New channels for buying travel
  • Airlines suffering serious financial distress
  • Tough economic times for companies, forcing additional scrutiny of all costs

Not many years ago, a small percentage of travelers booked their travel directly with the airlines-even fewer than those changing their own oil. More recently, nearly half of air travel is booked directly with the airlines or through internet purchase options.

It’s all kind of new, and many companies are not effectively managing these booking channels. Though travelers know more than before, companies have a new problem: employees spending lots of time tinkering with their own travel on the computer.

Well what about it? Should business travelers use a managed business travel agency or not?

There is, after all, a cost associated with using a travel agent. It is clear that no business can operate without revenue, and domestic and international travel agencies are no exception. In the old days, almost all travel agency compensation came from airlines. All of that changed when airlines stopped paying commissions in the 1990’s.

The illusion is that consumers have a choice between (1) paying a fee to a travel agency and (2) somehow getting the service for free. The truth is that there is a cost associated with business travel management. With a travel agency, the cost is clearly stated. However, understanding the cost to companies handling travel internally can be more tricky.

Companies considering self-administered travel programs should consider the following:

  • Travel is a big expense-the second or third largest for most companies, and deserves management attention at least on par with other aspects of the core business.
  • Managing travel is not a no-brainer. Airline fares are a product of the most complicated pricing models in the world, and finding real value can be problematic. What seems like the lowest price may not be as low as appears.
  • Effective management control is almost impossible for companies when travelers book their own travel on the internet. Travelers have been known to spend additional company money just to get frequent flyer miles on their preferred airline or purposely wait to book a flight until the only class of service available is an expensive one that can be upgraded. Without oversight, companies lose control of how their money is spent. And that can be deadly.

Do travel agencies effectively represent their customers? In simplest terms, companies want the lowest price, and airlines want the highest revenue. Both will not get their wish. The mission of airline yield management is to extract as much money from customers as circumstances will allow. The model is something like this: the less you need to go, the cheaper the ticket; the more you have to go, the more expensive the ticket.

Even in the days of airline compensation to travel agencies, there was always strong motivation for travel agents to find the best deals to cement customer loyalty. Under the new model, travel agents charge fees to customers for services performed. Good performance and cost savings are rewarded by loyalty.

In the final analysis, the invisible hand of the marketplace decides the value of travel agents. It’s really very simple: If the value is there, customers will pay for the service. If not, they may change their own oil.

Founded in 1985, Hess Corporate Travel is a leading US travel management, consulting and advisory firm specializing in business travel operations. Hess Corporate Travel integrates advanced technological tools, a fierce determination to look after customer needs, and a level of personalized service that is uncommon these days. A representative of American Express Travel offering worldwide strength, Hess Corporate Travel is privately owned and operated.