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Savings Against Market Rate with Managed Business Travel

Savings Against Market Rate with Managed Business Travel

How can your business can save money on corporate travel by using a travel management company?

When you buy in bulk, you expect to receive some type of discount. Given this, you’d think that businesses buying hundreds of plane tickets and hotel rooms each year (or more) would be able to receive some special discounts.

Sadly this is rarely the case. Except for large enterprises, most companies don’t typically see any discounts when buying travel, even if they’re spending tens of thousands of dollars a year on it. This is especially true for companies with unmanaged travel programs, which rely on consumer sites for travel inventory. 

With an unmanaged corporate travel program, employees book their own travel on consumer websites and pay rack rates. Especially in a small business, there is no access to the discounted corporate fares that are traditionally reserved for large enterprises. However, through partnerships and industry relationships, many travel management companies are able to offer exclusive corporate rates for flights and hotels to their users. What do those savings look like and how are these deals possible? We reveal all in this guide to savings using travel management companies for corporate travel. 

Managed travel vs. unmanaged travel: What’s the difference?

Did you know that implementing a managed corporate travel program saves travelers an average of $452 per trip? If your business takes 50 work trips per year, that’s $22,600 in savings annually. That’s money that you can use to hire more talent, travel more, or invest in growth opportunities for the business.

So what’s the difference between a managed corporate travel program and an unmanaged corporate travel program

Unmanaged travel programs are the Wild West of travel booking. Everyone fends for themselves and uses whatever method they want to make their travel plans. These business travelers end up using consumer websites, rather than marketplaces created specifically for corporate needs. Unmanaged travel programs don’t use preferred vendors and lack consistency in their booking methods. 

Conversely, managed travel programs bring order and savings to the world of corporate travel. While some companies choose to outsource travel management to travel agencies, more and more are using internal employees to manage corporate travel and equipping them with a travel management company (TMC) booking tool. TMCs have partnerships with travel vendors, through which they’re able to pass discounts along to their corporate customers.

How TMCs save you money on corporate travel 

So just how much can companies save on business travel when they use a corporate travel booking tool? Here’s a breakdown of what the savings look like and where they come from when you use a TMC.

1. Flights

Companies that book travel through a TMC with access to negotiated rates typically see savings of 10% on flights compared to the market price.

How are these savings achieved? TMCs negotiate discounts either directly with airlines or through business partnerships, such as with travel credit cards. TMCs provide these vendors with large volumes of business and are rewarded for their loyalty with savings that they then pass on to their corporate customers. 

2. Hotels

How much can you save on accommodations by using a TMC? Similar to negotiated airfare rates, some TMCs (like Lola) are able to partner with suppliers and aggregators to get access to prices not available to the general public. For example, Lola.com’s customers see savings in the 10-50% range, with savings of 20-30% being most typical.

How do these savings work? TMCs work with large travel vendors (like Priceline and Expedia) to access deals through closed user groups that aren’t available to the public. Again, loyalty and volume of business let TMCs pass savings down to their customers. 

3. Change fees

Change fees may seem like a necessary evil of conducting business travel, but with TMCs, they aren’t necessary. TMCs can waive these change fees, saving their clients up to $200 per trip. If your company takes 25 trips each year that need to be changed, that comes out to $5,000 in annual savings just by booking travel through a TMC.

How is this possible? TMCs leverage their relationships with travel suppliers to waive change fees. Because TMCs have preferential relationships with certain airlines and continue to give them business, airlines don’t see a changed trip as lost business and can offer no change fees, which usually isn’t possible for travel booked through consumer websites. 

4. Upgrades

Another perk of booking through a TMC is getting upgrades. Let’s say that you book an economy fare through a corporate travel booking tool and are upgraded to premium economy or business class because of your company’s loyalty and your status. 

A roundtrip flight on Delta from LAX to JFK in April on Main Cabin economy costs about $523. A Comfort+ seat, Delta’s premium economy, on the same flight costs $886. Delta One, their luxury offering, costs $2,936 for the same trip. If you book the economy fare and get upgraded, you’re looking at a value add of $363-$2413 per flight. If your team gets upgraded on 25 flights per year, that’s a value add of $9075-$60,325!

So how are TMCs able to upgrade their customers? The last few days or hours before a flight, it becomes clear that some of the premium seats won’t be sold. However, airlines already have the inventory. Because an airline might not be able to sell a first class seat at the last minute, they will upgrade customers who have status or loyalty, and try to resell the main cabin seat that you had already paid for. In this way, airlines have less of a loss, so it pays off to upgrade you. TMCs form relationships with airlines and are able to pass the perks of their relationships down to their customers. 

Using a managed travel program bolstered by a TMC like Lola.com will help your company maximize its travel budget, helping it get more done with less money. 

About the Author: Rebecca Morrison
As VP of Finance and Operations, Rebecca Morrison oversees financial reporting and analysis, forecasting, and budget management for Lola.com. Previously, she was VP of Global Finance and Operations at Midaxo, and has held various roles in Finance and Operations at HubSpot and EMC.