Booking Leakage — What it is and why it's important to prevent
Booking leakage eliminates control of and visibility into travel spend — leaving you with an unhappy finance team.
You have a travel management system set up, but not all of your employees regularly use it. Frustrating, we know. More importantly, this behavior, called booking leakage, could have some serious financial consequences for your company.
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Travel management leakage is when employees book business travel outside of their company’s preferred booking channel. This likely includes booking flights and hotels on consumer websites, like Expedia or Kayak, instead of through the internal travel management solution your company has put in place.
Any travel booked outside of an internal system is essentially invisible to the travel managers or finance professionals who are often responsible for keeping track of employee travel and spend. When employees book externally, the travel managers have no visibility into the details of their travel plans (including cost and location) until the employee manually submits their itinerary details or sends in an expense report.
Can booking leakage cause problems for your business?
This type of behavior doesn’t only frustrate those responsible for travel management and reporting. It can also lead to significant finance, and even safety, consequences. Corporate travel management solutions are intended to track travel spend and behavior. If your employees aren’t using the platform, then you aren’t getting any value from it .
Three of the main reasons for a corporate travel management system are:
- To control costs
- To gain visibility into travel spend
- To access your employees booking information
The ability to control travel expenses is crucial for accurate budgeting and forecasting. With a corporate travel management system, you can integrate your corporate travel policy into the preferred platform to maintain control over how much travelers spend. If employees are booking out of platform, that control gets taken away.
Finance professionals need to have visibility into how much employees are spending on travel in order to predict and plan for future costs. Imagine you send your friend grocery shopping for you, but you don't tell them what food you need or how much money to spend. You're left to work with whatever ingredients they bring back to you, and you're committed to paying however much they choose to spend — without any say in the matter. What if they spent double your usual grocery budget. Wouldn’t you be upset?
When employees book out of platform, the finance team is left to deal with a similar problem. Because they lose visibility into travelers’ spending behavior, the finance professionals must deal with the expenses retroactively. Booking leakage creates unexpected costs that aren’t discovered until weeks after the fact when an employee submits an expense report, potentially throwing off the previously established budget.
Having access to your employees’ travel schedule is also essential. Every organization has a duty of care responsibility for their members, meaning your company is responsible for the safety and wellbeing of your employees during business trips. If you don’t know when they are traveling, where they are going and staying, or when they’ll be back, you will not be able to provide adequate support in case of an emergency.
Why does booking leakage happen?
Usually booking leakage isn’t the result of intentional shadiness from employees. Instead, leakage might happen because of incongruences between your company’s booking platform and employee preferences. Here are some types of employees you might find booking externally.
The discount traveler
This is the no-frills frugal traveler who doesn’t see the point in upgrading to business class or paying for lounge access. You’ll likely find them booking out of policy because they’re convinced that they can find a better deal to save your company money. This motivation may come from the goodness of their heart, but their actions have consequences.
The creature of habit
Let’s face it — road warriors are so used to the hustle of business travel that they don’t want anyone messing with their routine. They know what they like and what they don’t like. And they really don’t like people telling them what to do. This excuse is probably something they need to get over, but it is important to know what you’re dealing with.
Sometimes travelers’ preferences won’t align with what you’re able to offer in your travel management systems. Certain providers, like AirBnb, are not always accessible through self-booking tools that companies use in their travel management system. Traveler preference for a certain type of experience may be enough to drive them out of policy.
The rational thinker
There are some instances in which it would make sense for an employee to book out of policy. If one of your employees is headed to a conference, it makes sense for them to stay in the recommended hotel in order to easily meet and mingle with the speakers and other attendees. If that hotel isn’t in your company’s preferred booking channel, or doesn’t fit within the policy budget, employees turn to consumer websites to snag an out-of-policy room while they’re still available.
The last-minute decision maker
Another example of a situation in which leakage might be necessary is if an employee has to book a flight or hotel last minute. Any last-minute purchase is likely to be expensive anyway, but if they have to wait hours for approval from an admin, the price is going to skyrocket even more. To avoid a spiked price or a sold out flight, a traveler might turn to consumer sites to find a fast option that gets them a seat on the plane.
The UX purist
Corporate travel management is tedious and boring. There, we said it. Some of your employees have had bad experiences with clunky business travel tools in the past, and now refuse to use anything except well designed consumer tools. They're not wrong — most enterprise travel software is awful — but the new generation of corporate travel platforms are a lot closer to KAYAK than they are to Concur.
What can you do about booking leakage?
There are a few options for how to minimize booking leakage, and some work better than others. Here are a few of the most common methods:
Establish an incentive program
Some companies find that their employees are more likely to book within policy if there’s a what’s in it for me component. This usually includes financial incentives or other perks on an individual level. However, this strategy is probably not sustainable for the long run. Bribes only motivate people to get more rewards, so your employees may end up booking more travel than necessary, just to keep collecting the perks.
Eliminate a preferred booking method
Other organizations, like Google, are simply embracing the flexibility that their employees crave and are abandoning the idea of a preferred booking channel all together. Instead, employees are allotted a certain amount of money per trip, depending on the destination, that can be used to book however the traveler prefers. While this strategy solves the budgeting problem, it doesn’t help to improve visibility into employee travel.
Implement a flexible approval process
When it comes to corporate travel management, ease of use is key. This means your travel management platform and policy should be easily accessible, simple to use, and flexible. A flexible approval process means that when an employee goes to book a flight that is out of policy, they are able to complete the purchase immediately, without approval from an admin. Once the purchase has been made, an email will be sent to the appropriate admin notifying them and requesting approval.
Wait..what?! Yes, you read that right. Flexible approval processes allow for approvals to be made after a purchase has already been completed.
Why does this work? Because when approvals are required for out of policy purchases, it can take hours or even days, and the rate will inevitably go up. Research shows that 98% of out of policy requests are approved, so why waste more time and money on the lag time of back and forth communication?
Plus, the vast majority of flight and hotel booking give a 24-hour grace period. This means that, in the rare circumstance where booked accommodations are unapproved, travelers can still cancel reservations without penalty.
Flexible systems with features like a user-friendly interface and a loose approval process (like what Lola.com offers) can help your company prevent travel management leakage while also providing real-time visibility into travel spend and tracking employees’ travel schedules.