# 5: The Preferred Hotel Savings Metric (Easy Version)

Metric Type                                                      Level
     SAVINGS: Yes                                              MASTER
     SERVICE: No                                                 ADVANCED
     SAFETY: No                                                   BASIC
     SUSTAINABILITY: No

Description
There are a number of different ways to calculate savings from contracts your company may have with hotels. None are perfect. Maybe that's why so many corporate travel managers and travel management companies shy away from even trying to quantify savings. Of course, if you have done the work to set up a list of preferred hotels, you might as well get credit for the savings. 

This posts shows the simplest form of calculating hotel savings from contracts (we called these 'preferred hotels'). 


Formula
Preferred Hotel Contract Savings = Dollars Spent in Preferred Hotels / (1 - Average Savings % for Preferred Hotels) x Average Savings % for Preferred Hotels


Process
At the time you negotiate your hotel rates (typically Q3/Q4 for the following calendar year), you must identify the difference between the standard rate your travelers would pay without a negotiated discount and your contracted rate. For example, if a hotel's typical corporate non-contract rate is $150, and you negotiate a rate of $125, your savings is $25 per night or 17%. 

Do this with each of the hotels you have in your preferred hotel program (some firms have only a few while others have hundreds). Average the savings percentages together to find the average (mean) discount.  [NOTE: you may want to weight the average if you have a few hotels with significantly more room nights than average, especially if your discount percentages with these hotels is significantly different than the median discount). 

Whichever way you do it (unweighted or weighted), you have now identified your Average Savings Percentage for the entire year (assuming your program and your travel trends don't change). 

Now, using data supplied by your travel agency, identify how much spend your firm had in these preferred hotels for a given time frame (quarterly is pretty standard). Then simply apply the formula above to come up with a good, yet conservative, savings projection. 


That Was Too Easy
You have to acknowledge that this is a relatively rough (although perfectly credible) estimate.  Things to keep in mind:

• Because we are using an overall average, the "true" savings figure will most likely not be exactly what you calculated. When you think about the work that would go into researching and documenting every single reservation (whether it was made via the travel agency or not), the cost of getting a more accurate number seriously outweighs the value of having a truly accurate figure.
• Some may argue that if the preferred rate wasn't there, the traveler would have stayed in some other place at the same rate (because the travelers is oh so budget conscious). Point out that the reasons hotels are selected for your list go beyond simple rate calculations. Consideration is given to proximity to office or client destination (saving ground transport costs), quality of the property (cheaper hotels may not be of a reasonable enough standard for your travelers), and savings from negotiated ancillary services (calculations for which to be discussed in another post).
• Finally, for most companies, only a percentage of hotel bookings are actually made through the travel agency. Industry benchmarks show that 40 to 60% (more for non-US locations) of room nights are not booked through the agency. Some unknown portion of these 'unmanaged' room nights are booked in the preferred hotels at your preferred rate anyway. By only using the travel agency's reporting, you are purposely under-counting the savings. Therefore, the hotel savings you are claiming with this calculation are actually conservative if nothing else. 

Usage
This metric should be used in your communications to your boss, senior management, and the travelers. Clearly highlighting the value of these programs, and asking for more compliance (both in staying at these properties and booking through the agency) can help you improve the savings figures each year.

This type of metric is easily understood by non-travel professionals, although as we noted above, some push-back may be expected from some cranky quarters.

# 4 Stakeholder Satisfaction

Metric Type                                                      Level
     SAVINGS: No                                                  MASTER
     SERVICE: Yes                                               ADVANCED
     SAFETY: No                                                    BASIC
     SUSTAINABILITY: No

Description
Simply put, corporate travel is in the customer-service business. If people do not like the service, they will push back, sandbag, complain, and work against the other goals of the program. It won't matter how much your program is saving if all senior management hears are complaints and criticism of the program. Employing and maintaining a structured set of satisfaction metrics enables you to a) get ahead of service issues before they blow up, b) communicate real results company-wide that minimize the impact of one-off anecdotes about horrible service, and c) show value to the company beyond simple spend-and-savings statistics.

To get started, all you need to do this are three questions and a survey tool (many online options to choose from). 

1. How well does the company's travel program suits your needs as a business traveler and/or arranger of business travel? Rate your satisfaction on a scale of 1 (Not At All) to 100 (Perfectly).
2. What do you think the travel program does particularly well? [Comment Box]
3. What do you think the travel program could do better? [Comment Box]

Why These Three Questions
The first question provides you with a benchmark score to compare over time. The following two questions are where you find out what people really think about the program. Simply read all the comments, categorize them based on what the comments relate to (e.g. the agency, the online tool, airline, etc.), and you have all the information you need to improve the perception of the program. 


After That
Asking questions is the easy part. However, it is critical that once the survey is complete that you quickly perform the following tasks. 

• Address any comments that require immediate attention (whether because of the timeliness of the complaint or the importance of the respondent). 
• Next, review the results and the comments with the agency, the front-line agents, concerned travel suppliers, and other relevant parties. 
• Draft action plans to address any significant and/or frequently cited concerns.
• Publish a summary of the responses. Highlight the overall satisfaction score, note some of the positive comments received, and share a high-level summary of the action plan to address some of the common complaints or opportunities for improvement. This summary should be published no later than 1 month after the end of the survey period. 

It's been said that one of the best ways to demoralize a group of people is to hang out a suggestion box and to ignore it. Think of the surveys as a periodic suggestion box. Once people see you are listening to them, engagement and satisfaction increases. 


Whose Satisfaction Are We Measuring?
Certainly the travelers and travel arrangers. You should do this at least twice a year, and as frequently as once a quarter if you can. You can get a list of who traveled and/or who booked trips during the time period since your last survey. 

Department/line managers who have significant numbers of travelers should be surveyed twice a year. For them, modify the first question to "How well does the company's travel program support your department/line of business?" or something similar to change the focus from the individual to the department. The other two questions stay the same.

Senior/executive management should be surveyed once a year. Again, simply adjust the first question to focus more on the company overall rather than an individual or a department. 

Suppliers with whom you have contracts and/or a lot of business should be surveyed at least once a year. For them, the focus is on how your company is perceived as a client and the ways in which you can improve your relationship to better serve both entities. 


What about Other Questions
When designing surveys, people tend to get question-happy--piling on question after question to try to learn everything about everything--seemingly afraid that they'll never get another chance to ask a question.

You can certainly add a couple of questions to the Basic Three. Here  are a couple you might consider:

• For the traveler/arranger survey, ask whether they felt they were quoted the lowest logical fare when making reservations (whether or not they took it). There is a strong correlation between low fare perception and overall satisfaction. Sometimes it's real, but sometimes the respondent doesn't take into account how the firm's travel policy affects what fares are offered.
• Consider having your agents add this to their script: "The lowest fare, based on the company's travel policy, is $650. However, there are fares between these two cities that can run as low as $250, but you would need to be flexible with your times or dates. Do you want me to investigate those for you?"  A few will actually work with the agent to look for a lower fare, but the majority will simply gain a better perception of the low fare performance of the agency--in turn improving overall satisfaction rates. 
• You may also wish to differentiate between satisfaction with the live travel agents and the online booking tool (if you employ one). The variance between these two modes of reservation can be stark. 

What you want to avoid when adding questions are those whose answers do not inform actions. For example, I've run across surveys that ask "Do you find the agents friendly, knowledgeable, and professional?" The results show that 67% of respondents do. What next? Does this mean that the agents are friendly and professional but not knowledgeable? Or some other combination? Do one-third of the respondents simply not like the agents? You can't tell from the way the question was phrased. This is the inverse of the old maxim which in case says:  If you can't manage it, do not bother measuring it.

Usage
The first question is used to evaluate, over time, changes in the perception of the travel program from a range of stakeholders. The others are used to inform your short-term action plans to improve and/or enhance certain aspects of the program based on respondents' feedback. 

This type of metric is easily understood by non-travel professionals.

The Purpose of this Blog - Introducing the Four Ss

First off, let's be clear...if you are a corporate travel manager, or an account manager for a travel agency, or a travel supplier representative, you are not reporting all the value you are creating for the company you are servicing.  And by not doing so, you are at least hindering, if not outright hurting, your program and potentially your own career prospects.

Traditionally, the metrics reported by corporate travel programs are limited to the amount the company spends on travel, some level of savings generated by the program (although typically far-from-comprehensive totals), and, in some cases, periodic traveler satisfaction scores. A well-managed travel program, however, creates value far beyond these basic metrics. Unfortunately, not many take the effort to quantify this expanded value proposition, and in not doing so, they expose their programs to some significant challenges that can be easily avoided.

If you're a corporate travel manager, is your department simply seen as a cost center? Has your firm ever imposed a "travel freeze"?  Do you spend too much time addressing anecdotal service issues? If so, you haven't communicated the total value of your program.

If you work for a travel agency that supplies corporate travel services, have you ever lost a client because a competitor offered a transaction price a couple of dollars cheaper than yours? Has a departing client ever justified leaving by saying "it is just time for a change"? If so, you haven't communicated the total value you can create for a company's travel program.

If you work for an airline, hotel, car rental firm or other travel provider, have you lost business to competitors based solely on small price variations? Are you seen as a commodity by your clients, easily replaced?  If so, you haven't communicate the total value you can create for a company's travel program. 

The purpose of this blog is identify how to identify and track all the value created by and for well-managed corporate travel programs. Most entries will focus on one metric at a time. However, they will be categorized using a more-expansive view of value creation than is typically used in corporate travel today. We have four primary categories of value:

1. SAVINGS: these metrics compare your program's performance to a) what the cost would be with no program in place, and b) the changes in your program's performance over time.
2. SERVICE: these metrics track the quality of the experience various stakeholders have with the travel program. Typically thought of through a traveler-centric lens (e.g. traveler satisfaction, SLAs, phone performance); we expand the focus to include line manager, senior management, supplier, and other stakeholder interactions with the program.
3. SAFETY: these metrics track how safe and productive travelers are when on the road for the company. Individual-level, corporate-level, and global-level risk-exposure and management are all considered. These measurements are critical to meeting Duty of Care requirements, and for ensuring that travelers are treated and cared for appropriately.
4. SUSTAINABILITY: a growing concern for many companies, these metrics measure the environmental impact of travel programs. 

These are the four primary categories of value. In later posts we will discuss HOW to use the results of these metrics to enhance the value of your program to the company and how to use them to change behavior to meet your program objectives. But for now...just start tracking. 

And remember...if you don't measure it, you can't manage it. 

# 3: Travelers Alert Index

Metric Type                                                      Level
     SAVINGS: Possible                                        MASTER
     SERVICE: No                                                 ADVANCED
     SAFETY: Yes                                                BASIC
     SUSTAINABILITY: No

Description
Tracking and reaching travelers in potentially dangerous situations is key to addressing a company's Duty of Care responsibilities. 

While many companies have these components in place, and do in fact reach out to and assist travelers as events warrant, not many have metrics in place to measure the ongoing effectiveness of these efforts. Without tracking, companies a) have no idea how well they are servicing travelers in need and meeting Duty of Care requirements--either for a singular event or over time, and b) get little-to-no credit (outside the immediate parties involved in the situation) for delivering this valuable service. 

Establishing a basic metric here only requires two components: a capable and willing travel agency, and a tool/system that tracks global events that could negatively affect travelers.

Formula

Travelers Alert Index (TAI) = Total number of travelers in high-alert regions / Total number of travelers

• In Q3, we had 80 travelers in areas where a Level 4 or 5 safety alert was issued. Globally in Q3 we had 425 total travelers. The formula for TAI is 80/425 = 19%.
  Last year for the same quarter, our TAI was 30/415 = 7%.
  This significant increase is primarily a result of increased travel to County X.    

Usage
This metric is used to evaluate, over time, changes in the percentage of travelers operating in potentially dangerous areas. As this percentage increases, it may require further actions on the firm's part to put in place further processes (ex: pre-approval of these types of trips), services (ex: repatriation services), and tools (ex: enhanced insurance coverage) to address changing needs. 

This type of metric is easily understood by non-travel professionals.

# 2 Car Rental Contract Value

Metric Type                                                      Level
     SAVINGS: Yes                                                MASTER
     SERVICE: No                                                   ADVANCED
     SAFETY: No                                                     BASIC
     SUSTAINABILITY: No

Description
When you have a contract with a car rental agency that offers special corporate rates, calculating the value of the contract savings may require multiple calculations and a few grains of salt here and there.

Formula
Corporate Rate Paid (with surcharges and fees) - Next Lowest Alternative Rate (with same) x number of rental days = Contracted Rate Savings

• For example, a three day car rental cost $45 per day plus $3 per day city surcharge for a total of $144. The benchmark rate for a similar class of car at the same time was $49 per day plus a $5 daily city surcharge for a total of $162. The contract savings for this rental is $18. 

Many car rental companies offer a discount off of 'best rate of day' which protects you should prices drop below your contracted rate. The calculation noted above still applies here.

Alternate Formula
It must be noted that the above metric can be time-consuming to calculate (since you have to look at every rental or at least have your travel agency note a savings amount in each record for easier reporting). An alternative method is to identify at the point of contracting what the average savings per rental would be (assuming volumes and trends remain consistent). There is a three-step process, which is quite quick to perform, once these assumptions have been made.

1. (Total Rental Spend x Percent of Rentals at Corporate Rate) / (1-Average Corporate Rate Savings %) x Average  Corporate Rate Savings % = Total Savings from Corporate Rate
2. (Total Rental Spend x Percent of Rentals at 'Best Rate of Day')  / (1-Average 'Best Rate of Day' Savings% ) x Average 'Best Rate of Day' Savings %  = Total Saving from 'Best Rate of Day' discount
3. Total Savings from Corporate Rate + Total Savings from 'Best Rate of Day' discount = Total Contract Savings

For example, let's say your company has spent $500,000 over the last year on car rentals. Based on conversations with your car rental rep, you estimate that 90% of these rentals were booked at the corporate rate (which you estimate at 7% less than what you would have paid without the discount) with the rest getting the 'Best Rate of Day' discount (which you saved 5% on based on your agreement). Using the steps outlined above, we find:

1. ($500,000 x 90%) / (1-7%) x 7% = $33,871 in Corporate Rate Savings
2. ($500,000 x 10%) / (1-5%) x 5% = $2,632 in 'Best Rate of Day' Savings
3. $33,871 + $2,632 = $36,503 in Total Contract Value

Bonus Formula
You may wish to take this one step further and calculate your Net Effective Discount using the following formula:

• Total Savings / (Total Spend + Total Savings) = Net Effective Discount
• $36,503 / ($500,000+$36,503) = 6.8% Net Effective Discount

Usage
This Contract Savings figure can be used as a snapshot measurement (e.g. how much did we save last quarter) and as a trend metric showing variations in savings performance over time (e.g. are travelers more compliant, is this year's deal better than last year's, etc.).

The Net Effective Discount can be used as described above, plus it is a useful metric for benchmarking with other companies whose actual spend and savings totals will vary from yours.

This type of metric is usually understood by non-travel professionals.

Caveat

1. This metric measures contract value only. In the above example, there may have been an alternate car rental, from another car rental agency perhaps, priced between the corporate rate and the standard rate. The true contract value may be somewhat less than calculated here, but tracking to this level is quite impractical. With explanation, most executives accept contract value as a valid savings metric.
2. Where you get your data is critical here. In most companies, travelers will book car rentals either through the preferred travel agency, direct with the car rental agency, or both. Relying on travel agency data reporting my shortchange your savings. Use the car rental agency reports for more accurate tracking.

#1 Airline Fare Contract Value

Metric Type                                                      Level
     SAVINGS: Yes                                                MASTER
     SERVICE: No                                                   ADVANCED
     SAFETY: No                                                     BASIC
     SUSTAINABILITY: No

Description
When you have an airline deal that offers a point-of-sale discount, it is relatively easy to calculate the value of the contract discount savings.

Formula
Fare paid / (1-Discount %) – Fare paid = Contract Value

For example, a flight that was flown at $900 after the 10% discount generates $100 in contract value ($900 / (1-10%) - $900 = $100).

In the fondly remembered past, many airlines offered market-wide discounts (e.g. 15% off all fares all the time). Calculating the contract value was quick and easy. Today, unless you manage a truly market-moving amount of air volume (> $100M), the growing sophistication of reporting systems are driving discounts that are segmented depending upon fare basis codes and city pair routings. Calculating the contract value today means breaking down your airline flight data into fare basis buckets, applying the formula above where the discounts apply, accommodating any variances by city pair, and summing up the savings.  I suggest requesting a savings summary from the carrier to match against the data provided by your TMC to validate the savings totals. Some variability is expected, but variances of more than 5% for the same time frames need further analyses.

Usage
This savings figure can be used as a snapshot measurement (e.g. how much did we save last quarter) and as a trend metric showing variations in savings performance over time (e.g. are travelers more compliant, is this year's deal better than last year's, etc.).

This type of metric is very easily understood by non-travel professionals.

Caveat
This metric measures contract value only. In the above example, there may have been an alternate flight, on another carrier perhaps, priced at $950. The discounted fare of $900 is still the cheapest, but the true “savings” in this instance could be considered $50 (for the closest alternative to the fare chosen).  This level of granularity is difficult to measure without a lot of manual coding at the point-of-sale by the travel agents and/or going through an extensive fare audit from a third party provider.  With explanation, most executives accept contract value as a valid savings metric.