The Real Cost of Transaction FeesBy Rebecca Morrison, published on Oct 10, 2019
Paying a fee every time you book (or change) travel can lead to death by a thousand paper cuts
Did you know that the average company spends more than $8,000 per person, per year on corporate travel? Unfortunately, transaction fees can eat up a significant portion of this budget. From fees for booking and changing flights, to the costs of checking luggage and choosing a seat, these seemingly minor charges add up quickly. When multiplied across a whole company, fees dig into the travel budget and limit how much travel a business can conduct.
We’ve put airline fees under the microscope to uncover how quickly they can add up. You won’t just get bad news from us, however, as we’ve also compiled strategies for mitigating these fees to help your company maximize its travel budget.
1. Booking fees
If your company uses a travel agency to book and manage travel, you know that this service isn’t free. Travel agents typically charge between $100 and $500 per trip for researching, booking travel and accommodations, and creating an itinerary. If your business takes 100 trips every year, it could be spending between $10,000 and $50,000 on travel agent fees alone.
How to mitigate booking fees: When you use Lola.com’s corporate travel management software, you’ll be paying a flat-fee — rather than a per-trip fee — for booking travel. With fixed rates starting at $125/month, your company will save money on booking travel and won’t be penalized for traveling more.
2. Flight change and cancellation fees
Business isn’t always predictable. Meetings can run late or get rescheduled, and travelers aren’t always able to get on the flights that they originally booked. Unfortunately, airlines don’t make it cheap to cancel or reschedule a flight when travelers book non-refundable fares.
Here’s what some legacy carriers charge their customers in cancellation and change fees:
|Airline||Change or Cancellation Fees (Minimum is for domestic flights; maximum is for international flights)|
Let’s say that the 100 trips your company takes annually are made up of 300 flights, accounting for some indirect flights. And let’s say that of theses 300 flights, 75 domestic and 75 international flights need to be changed. With an average change fee of $200 for domestic flights and $500 for international flights, your company will pay $15,000 in domestic change fees and $37,500 in international change fees, for a grand total of $52,500 in change fees for the year.
How to mitigate flight change and cancellation fees:
- When you use Lola.com, the service team can leverage our industry relationships to eliminate most change fees.
- If you aren’t using Lola, opt for flexible fares. These fares cost more up front, but the amount you’ll save in change fees outweighs the initial costs.
- Take advantage of the industry standard 24-hour free cancellation policy.
- Earn elite status with airlines by booking through one carrier exclusively or getting travel credit cards for special treatment.
3. Luggage fees
While packing light is often a good goal for business travel, it’s not always possible to fit everything in a carry on for a business trip. Unfortunately, luggage fees add up.
Here’s a look at first bag fees that popular legacy carriers charge:
If business travelers on 75 of your company’s domestic flights check their bags, and 75 travelers on international flights don’t have complimentary bag check, your company could be spending $6,750 (75*$30=$2,250 + 75*$60=$4,500) in checked bag fees annually.
How to mitigate baggage fees:
- Avoid basic economy, which requires passengers to pay extra for carry on luggage.
- Airlines are happy to reward high value customers, so strive to gain elite status with your company’s favorite airline. Sign your business travelers up for airline credit cards to achieve elite status more quickly.
Sign the company up for a checked bag subscription service, which pays off for frequent travel.
4. Seat fees
Getting a “good seat” on a flight - typically one in an exit row, at the front of the plane, by the window, or in the aisle - can make a journey more comfortable. Airlines capitalize on their passengers’ desire for these seats by charging for the ability to choose a seat in advance.
Here’s what some airlines are charging for seat selection:
|Airline||Seat Selection Fee|
These seat selection fees come out to an average of $50. If your company does 300 flights each year, and half the travelers want to choose their seats, your company could be spending 150*$50=$7,500 on seat selection fees annually.
How to mitigate seat selection fees:
- Look for airlines that don’t charge for seats (like Southwest or United).
- Get elite status with your company’s preferred airline for complimentary seat selection.
Total annual fees for a company that makes 300 flights in one year
Individually, these transaction fees may not seem so bad. However, when you add them up and multiply them by the number of business trips your company takes each year, these fees lead to death by a thousand paper cuts.
Here’s what the fees discussed above add up to:
|Cancellation or change fee||$52,500|
|Seat selection fee||$7,500|
A company that takes 300 flights in one year can find themselves paying between $76,750 and $116,750 in transaction fees alone. This figure grows exponentially when you have a larger company or your company travels more often than the company in our example.
Transaction fees minimize your company’s spending power. These fees are money that could be spent on hiring more employees, conducting more business trips, growing the company’s marketing budget, etc. Minimize transaction fees when traveling to make the most of your operational budget.