4 Hidden Travel Costs in Your Corporate Travel Policy
tl;dr: Booking rock-bottom prices for corporate travel (like Basic Economy flights or hotels far from the city) can seem like a smart way to keep costs low — but it could end up costing you more in the long run.
One important goal of any corporate travel policy is to control costs. By implementing expense guidelines and creating a uniform booking process, travel managers can help cut unnecessary business travel spend and make sure that they’re on track to hit (or come in under!) their budget.
But here’s the rub: some cost-cutting approaches to business travel actually have the opposite effect. Forcing employees to always pick the lowest-cost options can not only hurt traveler satisfaction and productivity, it can actually end up costing your company money.
If this seems counterintuitive, you’re not alone. Traditional advice about reining in corporate travel spend is all about cutting costs and making prudent policies about flight and hotel options. But the truth is that blindly opting for the lowest-price option is more likely to hurt your budget than help it.
How? The secret is that the cheapest options often come with the most restrictions, and often the highest hidden costs. And because business travel plans are famous for changing at the last minute, inflexible and restriction-rich options are liable to result in wasted money.
Here are four examples of corporate travel policies that look great on the surface, but may actually be adding hidden costs to your budget.
Basic economy airfare. A recent development in the airline industry is the “basic economy” ticket, which can be considerably less expensive than other options. When you purchase a basic economy ticket, you are simply buying a spot on the plane and will need to pay extra for seat selection, checked luggage, a carry-on, and other amenities. On top of that, basic economy seats are completely non-refundable and do not allow for any changes. With a normal ticket, you are able to keep the amount of the ticket in a travel bank for that airline in the event of a cancellation. But with basic economy, you will lose the entire value of that ticket if your plans change. That means purchasing an entirely new ticket when you decide on a new date of travel. Without the option for seat selection beforehand, your employees could get stuck in a middle seat or, worse, bumped from their flight. Altogether, economy class introduces a lot of hidden costs.
Flights with layovers. A lot of companies require their employees to book the cheapest flight available no matter what time of day it occurs or how many stops it has. This is the opposite of employee friendly. Not only could this ruin your employee’s trip and possibly hinder their ability to adequately represent your company, but the cheapest options often end up costing your company more in the long run. If your employee books a flight with a layover, there is a chance he or she will miss their connecting flight. If that happens, that person needs to be rebooked, which means paying for another flight. Not only are you wasting money, but your employee could arrive late to their meeting or miss it altogether.
Non-refundable hotels. Similar to basic economy, nonrefundable hotels seem like a great option to cut-down on business travel spend. You can usually save 10-15% off the nightly rate. However, you have to pay for the full stay up front, and if your plans change you are out of luck. Business trips change all the time so that money is gone if you have to cancel your hotel stay. In the business travel world, flexibility is more valuable than no-refund discounts in the long run.
The least expensive hotels. When it comes to hotels, employers often have the same attitude: find the cheapest option. But a cheaper hotel will most likely be farther from the city center (where your employee probably needs to be) and won’t have things like free wi-fi, or breakfast included. If the hotel is far away from the traveler’s meeting location, they will need to pay for a taxi or an uber every day, both ways. And if breakfast is not included, your employee has to go out of his or her way to get food in the morning or attend their meeting on an empty stomach. All of these hidden costs add up quickly, and will cause you to spend more than if you had booked a slightly more expensive hotel up front. Instead of setting guidelines that mandate the least expensive hotel, allow flexibility to pick the hotel that optimizes cost and location, perks and other features.
As is the case with so many aspects of life, (cost) effective corporate travel policies come down to balance — finding the perfect sweet spot between money savings and convenient, employee-friendly policies.
To learn more about creating a win-win corporate travel policy, check out our new eBook on the topic: https://www.lola.com/ebook/ten-steps-for-creating-a-win-win-corporate-travel-policy