“Unmanaged ancillary fees” have become the new rallying point for business travel managers looking to cut costs in 2010. Having thoroughly explored the traditional approaches to reclaiming and containing business travel investment (i.e. negotiated fares and rates, rock bottom meeting costs, electronic travel and meeting alternatives as well as substantial travel cutbacks), business travel managers are setting their sights on expenditures that have been previously overlooked or swept under the fiscal carpet. Why? Because a recent survey conducted by the Association of Corporate Travel Executives (ACTE) revealed these expenses represent a substantial portion of the annual business travel spend.
How much is substantial? You’d be surprised.
For 40 percent of over 300 respondents, unmanaged ancillary fees constitute 5 to 15 percent of their companies’ annual travel expenditures. Another 20 percent claimed these fees represent 15 to 25 percent of their annual travel spending.
For the majority of polled companies – with travel spends between $50m and $100m – this represents a range of $2.5m to $20m. More than a third of ACTE buyer members polled earlier this year indicated they are still under an upper management mandate to find cost savings in the travel budget. Suddenly, expenditures that were previously regarded as too costly to track (in terms of their saving potential) have now become targeted.
The term “unmanaged ancillary fees” means different things to different companies, depending upon the extent of travel, the depth of the travel policy, and a particular corporate culture. It can include such diverse items as internet access at airports or hotels, GPS charges in rental cars, dry cleaning, priority boarding fees, tolls, gratuities, or even seat selection charges. The decision by many carriers to charge for unbundled services has resulted in major revenue streams for the airlines while confounding travel managers with millions in difficult or impossible-to-track charges.
It has been argued that many of these charges could fall into the category of items normally negotiated into volume discounts by savvy business travel managers, yet only 20 percent of the survey respondents believed they were managing the ancillary cost of a trip “well.” Big expense items, such as plane tickets, hotel rooms, and rental cars are already well-managed, but many companies let smaller spend items go unmanaged as the cost of tracking them was nearly as expensive as the items themselves. Now faced with the potential to save between five and 25 percent of the cost of a trip, companies have developed a new philosophy regarding ancillary expenses.
Surprisingly, only 44 percent of the survey respondents stated they had negotiated priority boarding, baggage fees and certain cabin amenities as part of their travellers’ fares. The sudden emergence (and widespread acceptance) of the unbundled fee structure during the past year has taken the industry by storm. However, it would be a short-sighted mistake to assume the air transport sector is the primary source of unmanaged ancillary fees.
With 72 percent of survey respondents citing data collection as a major challenge to tracking the total cost of a trip (and 50 percent claiming system limitations as a close second), business travel managers are caught in the middle. But perhaps not for long.
Future-proofing process
The International Airline Transport Association, which represents and serves the global airline industry, has set a goal of 2013 for deployment of a document that will identify and account for ancillary airline fees. Meanwhile, other industry stakeholders are simultaneously pursuing alternate solutions to track, collect and monitor smaller spend categories. 2010 will likely be a year of multiple product launches until legitimate solutions are tested and adopted by a critical mass of travel managers.
Just two years ago, some members of the business travel management profession mitigated the rigors of the trip experience for their road warriors by managing a more liberal corporate travel policy. It now appears the future demands tighter policies, stricter compliance, and preferred relationships with airport parking vendors, restaurants, and other service suppliers – in addition to a broader interpretation of what might be subject to negotiation. And more is likely to become negotiable as travel managers gain access to the data that makes it cost-effective to track the total cost of a trip.
These additional processes may be the sign of the current difficult economic times, but they are certain to be incorporated into the best practices of a fragile recovery that could go on for years. Even in the best of future economic times, it is not likely that the business travel industry will turn its back on effective revenue programmes, and tracking the total cost of a trip will be the new norm for business travel managers.
ACTE will hold a special general session at its upcoming Global Education Conference in Chicago, 16-18 May 2010, on the topic of managing ancillary fees. Attendees from around the world will be given a voice during this unique session that combines audience participation and real-time analysis from industry experts who have a vested role in this topic.
Additional information on this event, along with all of ACTE’s 2010 educational events – many of which address the topic of ancillary fees – can be found at www.acte.org.
