Control of travel, entertainment costs top priority in many firms

Business travel

October 08, 1990|By Tom Belden | Tom Belden,Knight-Ridder

The Mideast crisis affects business travelers, as it does many people, in direct and often painful ways.

Besides paying sharply higher gasoline prices, business travelers will be hit directly this fall and winter with a 7 percent fuel-related increase in international air fares. Those increases are in addition to domestic fare increases totaling 9.5 percent since early September.

Besides a 5.3 percent domestic hike that took effect in early September, fares went up an additional 4.2 percent last week. The fare increases have come at the same time air travel is expected to slack off because of the slowness of the U.S. economy.

The fare increases help give special meaning to American Express Co.'s most recent biennial survey of business-travel management, which focuses on aspects of travel costs that most worry companies. The fifth survey in the series was released last week.

The survey of 1,600 travel managers and other executives, which was conducted before the Mideast crisis broke on Aug. 2, found that a growing number of companies list the controlling of travel and entertainment costs as a top priority.

"Since the survey was first published eight years ago, companies have become much more sophisticated in managing their business travel," said Roger Ballou, president of American Express' U.S. travel-services group. "They also recognize that winning the war against rising . . . costs is not a simple task."

The survey estimated that, since 1982, per-employee travel costs for companies had gone from an average of $900 a year to $2,120, representing annual rises of about 12 percent. Most companies have borne those increases without much flinching. But the recent fare hikes, along with the slowing of the economy, have been steep enough that they could depress business travel.

"Clearly, corporations should be looking at 1991 as a year when they'll be facing substantial increases in air-travel costs are a result of what's happened in the Mideast," Ballou said at a news conference called to announce the survey results.

American Express, like most travel agencies, also sees an encouraging aspect to the rising costs: Travel costs are controllable. In fact, for most companies, they're the third-largest controllable expense, trailing only labor and data processing. American Express estimates that in 1990, the expenditures of U.S. companies on travel and entertainment will be $115 billion, compared with $95 billion in 1988.

Five years ago, company executives thought they had travel costs under control if they simply had a travel policy that directed employees on such matters as using the lowest available air fare and advised them which hotel chains or car-rental companies to use.

Today, Ballou said, the survey indicates that companies are finding the task of managing travel costs more daunting because expense management has become more involved.

For instance, numerous companies are negotiating directly with airlines or through travel agencies to get lower fares, sometimes based on volume discounts. Some firms require employees to use a certain credit card for most travel expenses, and use automated systems to track costs and policy compliance. And many corporations more closely monitor now whether employees are following their travel policies.

Even with those extra steps, about a third of the companies surveyed did not think employees followed their travel policies. That proportion isn't particularly surprising to another American Express official.

Formal policies should be reviewed regularly to make sure they're realistic, and they must be consistently enforced and communicated to employees, said Michael Woodward, vice president for American Express consulting services.

In addition, Woodward said, senior managers of a company must "sign off" on the policy, meaning they set an example by living within its guidelines.

American Express officials added that another cost area being closely watched by many corporate officials was foreign travel, in which air fares and other expenses can be much higher than they are domestically.

The survey's new international travel section shows that companies with operations outside the United States spend almost twice as much on travel as those without overseas branches. And those companies recognize that, as global competition intensifies, they may be spending even more, Woodward said.

"Companies no longer treat their foreign elements and travel to and from those foreign elements as a minor part of the travel expenses," he said.

*

Flying through Northwest Airlines' Memphis hub could be very economical in October if the carrier delivers members of its frequent-flier program more than 14 minutes late at 18 Southern airports. If the flights are late, a World Perks member gets a full refund on the ticket.

Northwest said for the first six month of 1990, it was on time 94.3 percent of the time at the 18 airports.

The airports: Austin, Texas; Baton Rouge, La.; Birmingham, Ala.; Chattanooga, Tenn.; Fort Walton Beach, Fla.; Greenville-Spartanburg, S.C.; Gulfport-Biloxi, Miss.; Huntsville, Ala.; Jackson, Miss.; Knoxville, Tenn.; Little Rock; Mobile, Ala.; New Orleans; Oklahoma City; San Antonio, Texas; Shreveport, La.; Tulsa, Okla., and Wichita, Kan.

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