HRG Hong Kong Communiqué

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DAVIDSON ON THE PURPOSE OF BUSINESS TRAVEL

24 August 2009 (The Beat) New York City

Farelogix president and CEO Jim Davidson contributed this guest piece...

I have the pleasure of speaking at many industry conferences around the world, where I meet with global travel management companies, airlines, the global distribution systems and a variety of top execs from third-party companies.

The general tone this year has been very serious, with many of the presentations and discussions focused on the economy and its negative impact on our industry. What I found most intriguing were those that attempted to address the reduction in travel, or specifically "alternatives to business travel."

First, let me say there is absolutely no acceptable or viable alternative to business travel. I have always had a very simplistic definition of business travel: "Travel for the purpose of creating or maintaining business." Put simply: It's all about increasing revenue.

The correlation between revenue generation and business travel is obvious. Corporations send key employees to customers or prospects to retain, grow or get new revenue. Even internal employee meetings and training sessions have the same purpose--to learn, meet face to face and create team spirit to maintain existing customers and find new ones. The math is easy: you spend a few thousand dollars on a business trip that will lead you to close a deal for ten or one hundred times that amount. There is no doubt about that business case.

However, the above scenario, which logically evaluates travel costs against resulting revenue, is not how business travel is measured anymore. In fact, there is often little or no correlation between T&E and the revenue it produces or saves. Instead, in far too many cases, travel becomes a budget line item that management seeks to contain or reduce by X percent during tough economic times. Corporate travel managers are evaluated on their ability to reduce costs, tighten the travel policy, increase oversight of incidental expenses and close loopholes in the trip authorization process.

The focus of business travel has strayed from the purpose and become blurred by the process. Within the current economy, it is very easy to slide into process improvement mode, which gives that false sense of confidence that we are "doing something to fix things."

"Just get the expenses under control and all will be well" quickly translates into a dramatic reduction in the number of corporate business trips, but this is where the math just doesn't add up.

If we believe that a positive correlation exists between business travel and revenue--meaning more business travel equals more revenue--then we have to believe the opposite: less business travel equals reduced revenue.

So what do we do?

First, we quickly re-insert a "purpose" filter on top of the corporate travel process. We analyze the correlation of business travel to revenue before putting "blanket restrictions" on travel expenses. This exercise can help corporations immediately determine where business travel is capable of generating or retaining revenue and plan for more of it, not less. Most companies spend far more time analyzing people reductions than they do analyzing travel reductions, despite the fact that in some cases strategic travel investments can have a more significant impact on the cost/revenue equation.

Second, we take a serious look at how we can get more travel for fewer dollars, without inhibiting traveler convenience. This can be achieved with the right combination of creative products from travel suppliers and technology innovation. For example, allowing a traveler to purchase a seat with extra legroom in coach is no doubt cheaper than a business-class ticket. In the right conditions, this type of "merchandised" flight option contributes to both responsible cost management and traveler convenience.

There is a growing belief that the economic conditions we are facing are producing a "social reset," whereby thriftiness and avoidance of waste--the definition of frugal--are embraced by both individuals and corporations. With '"frugality" as a new strong social conscience driver, new types of products, services and personalized experience will be required.

We cannot underestimate the convenience for travelers. Many people I know have been traveling most of their adult lives and still thrive on it, yet they say the actual process of travel is as tough as ever. Traveler convenience is not just about business class versus coach or four star versus two star. It encompasses the entire travel experience, from making the reservation to arriving safely and pulling up the covers at night. At every step along the way, travelers want choices that will enable them to have the most positive and comfortable trip experience.

Achieving the above does not mean higher travel expenditure; in fact, quite the opposite. These conditions create the compelling need for our industry to produce new products, technologies, and services that support highly personalized, cost-effective travel.

Yes, this will have a negative impact on some "high-end" providers. The good news is that I am overwhelmingly confident in the innovation capabilities of travel providers and companies that find themselves in a highly competitive sector. These companies will quickly respond to the evolving needs and desires of business travelers or they will as quickly perish on this new, frugal landscape.

In the end, I believe we need to keep our eyes on the purpose of business travel: to generate more business. If we continue to do this, many other decisions, processes and overhead that we once thought difficult may melt away before our eyes.

This is a time to call on all the creativity and innovation we as an industry can muster. Let's push our talented people to the extreme to find cost effective and innovative solutions to grow business, not shrink it.

~ Jim Davidson is president and CEO of Farelogix