SURVEY FINDS 67 PERCENT OF COMPANIES SAVED ON TRAVEL BY USING PROCUREMENT STRATEGIES
Source: American Express Business Travel
May 24, 2008 - 6:18:37 AM
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American Express Business Travel and Business Travel
News Release Data from Second Annual Strategic Sourcery Procurement Practices
Survey
WASHINGTON, D.C., - Reporting from the
Association of Corporate Travel Executives (ACTE) Global Conference and
Corporate Travel World (CTW) in Washington, D.C., American Express Business
Travel today released the findings of the second annual Strategic Sourcery
procurement practices survey completed with Business Travel News. Along
with respondents' forecasts for future travel spending and program strategies,
the results detail convergence of procurement and travel departments as
companies search for smarter and more cost-effective ways to keep travelers on
the road given the current economic environment.
"Given today's industry
and economic dynamics, companies are seeking out strategies to take advantage of
savings opportunities without sacrificing the effectiveness or scope of their
travel programs," said Frank Schnur, Vice President of Consulting for American
Express Business Travel's Advisory Services. "Travel is increasingly viewed as
an investment, rather than a commodity to procure, and the partnerships and
shared strategies created between procurement and travel departments are
instrumental in maximizing the value of corporate travel and entertainment
budgets."
Despite softness in the economy, the companies surveyed
reported that travel is a crucial element for their business. Planning for the
coming year, 83 percent of respondents expect their travelers to take the same
or increase the number of trips this year as compared to last year. However, in
the face of rising costs for both domestic and international trips, 62 percent
of companies are looking to procurement activities to produce savings of five to
15 percent this year with another 19 percent expecting even greater savings.
Over the past year, 67 percent of the companies surveyed credited procurement
activities with creating savings for their travel budgets.
When asked
about the use of selected travel procurement practices, 53 percent of
respondents indicated they are mandating the use of preferred suppliers and 51
percent are applying demand management principles.
"The combination of
escalating prices and the pressure on travel budgets caused by the economic
downturn creates a need for companies to explore a variety of strategies to
drive savings," continued Schnur. "Through change management strategies and
utilizing compliance tools companies are better equipped to influence traveler
behavior and encourage the use of preferred suppliers. Depending on the methods
used, we estimate that incremental cost savings can range between 11 percent and
33 percent of a company's total air spend."
According to the survey, the
number of companies that view travel as a commodity decreased by eight
percentage points over the last year. As companies increasingly see the
investment value of travel, they are seeking out ways to measure the ROI. This
desire to quantify the performance and service levels of suppliers explains the
growing use of metrics to evaluate the effectiveness of travel spend. Of
companies that measure key performance indicators (KPIs), the majority track
between one and five specific areas of service success (airline 73 percent,
hotel 59 percent and car rental 75 percent).
Along with measuring
supplier performance with these metrics, companies continue to focus on
procurement practices for savings during various stages of the travel process.
The majority of companies involve both the procurement and travel departments in
the selection of suppliers and more than half (53 percent) mandate the use of
these preferred travel suppliers by travelers. Another 51 percent are actively
managing demand of travel services.
According to the survey data,
meetings management continues to be a focus for savings opportunities. Nearly
half of the surveyed companies reported the use of procurement practices in
meeting planning with a four percentage point increase over last year's results.
"Along with the traditional areas of travel spend -- air, hotel and car
-- companies are also scrutinizing their meetings programs for potential new
areas for cost savings. Applying many of the same practices and strategies,
companies are achieving meeting savings through strategic sourcing and other
procurement best practices," concluded Schnur.
Methodology
The
second annual Strategic Sourcery survey was completed by Business Travel
News with sponsorship and data analysis by American Express Business Travel.
This year, data was collected from 215 survey respondents who identified
themselves as responsible for travel, procurement or a combination of the two
for their company.
About American Express Business
Travel
American Express Business Travel (www.americanexpress.com/businesstravel),
a division of the American Express Company, is dedicated to helping its clients
realize the greatest possible value from their investment in travel through
increased cost savings, outstanding customer service and greater spend control.
For small businesses, medium-sized enterprises and multinational corporations,
American Express Business Travel provides a combination of industry-leading
booking technology, travel management consulting expertise, strategic sourcing
and supplier negotiation support, and customer service available online and
offline, around the world.
American Express operates one of the world's
largest travel agency networks. The Company processed $26.4(1) billion in global travel sales in 2007.
American Express Company (www.americanexpress.com) is a diversified worldwide
travel, financial and network services company founded in 1850. It is a world
leader in charge and credit cards, Travelers Cheques, travel, and business
services.
(1) $ 26.4B represents 2007 American
Express total travel volume including volume processed though non-consolidated
JVs and partner network
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