#9: Measuring YOUR value

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

Description
So you're a travel manager. Are you worth it? What is your ROI?

What I mean is that do you, and your corporate travel management program, create more value for your company than your cost? 

If your company takes a strictly spend-and-savings approach to corporate travel management, then the numbers better add up in your favor. 

According to Business Travel News, the average travel manager made about $98,000 in total compensation in 2012. That means at the most basic level, in order to have a positive ROI, that travel manager should have created at least $98,001 in savings for the company. (Coming up short? Read the other entries in this blog to find additional ways of capturing savings that you may not be recognizing). 

But wait...to get the true picture of whether your program is worth its cost, you need to add in the total cost of program management. Here's your list:

• Internal Cost: This includes not only your salary, but the other costs to the company related to you and any other employees supporting the corporate travel program. This means your T&E costs, equipment, phone charges, space allocation, training, etc. It may be hard to get the exact cost of these items, so I would suggest asking Finance for a suitable percentage based on the total employment and total costs to the company for supporting employees ("overhead costs"). Let's just say here that this figure is 10%, meaning you must add another $9,800 to the average salary to come up with the loaded costs. Do the same for each FTE that supports the program...so if there is another person who splits his/her time between travel management and facilities for example, add half of that person's costs to your program management costs.
• TMC Cost: This should be simple to calculate. Just get a statement from the travel agency(ies) that support your program that shows how much your company paid them for services in a given time period. This typically includes transactions fees, account management fees, maybe licensing or reporting fees, services fees for RFPs or benchmarking.  Just the total amount paid to them. 
• Other Cost: If you engaged a third-party to help support your program--like consultants (a wise investment), safety/security services, audit firms, RFP assistance, data aggregators, benchmarkers, etc.--then total up how much you spent on these services.

Now you have all the components of your program management costs. I assume you also have your spending and savings totals for the same period. That's all you need.

Formula
Program Savings / (Internal Cost + TMC Cost + Other Cost) = Program Management ROI

Let's do an example with the following data points:

• Internal Cost = 1.5 employees with a total compensation of $115,000 plus a 10% overhead cost for a total Internal Cost of $126,500
• TMC Cost = 10,000 transactions at an average of $20 per transaction, plus $10,000 in account management, plus $10,000 in hotel RFP fees. Total TMC Cost = $220,000
• Other Cost = $10,000 for safety/security program, $25,000 for airline RFP help. Total TMC Cost = $35,000
• Savings = total for airline, hotel, car rental, TMC, and behavioral savings = $500,000

So, the formula is:
      $500,000 / ($126,500+$220,000+$35,000) = $1.31

This means in this example, for every $1 spent on travel management, the company saves $1.31. 
     
Usage
Okay...now you have a number...what do you do with it?

First, if the number is less than $1.00, that means that your cost is higher than the savings you are generating/capturing for the company. You need to read this blog to find other ways of capturing savings that your program may be generating. Some of these metrics are a bit challenging to calculate, but let's face it, you need all the help you can get. 

Next, if your program seems to be saving less than it costs to administer, start benchmarking with peers to see where and why your program is falling short. Maybe your airline discount levels are too low compared to what your volume can typically justify. Maybe you need to expand your hotel program. Maybe you need to look into promoting travel alternatives like videoconferencing. 

Let's say your figure is over $1.00. That means you're saving more than  you cost. Congratulations. Your next step is to benchmark this result with other peer companies to see how you stack up. This is a safe metric to compare because it doesn't reveal your actual total spend, costs, or savings. It's just a benchmark number that can be easily compared with other companies' benchmarks.

If your number is higher than others, then you can point that out internally. Maybe use it to show that you are under-staffed compared to others and that your savings supports hiring more help. 

If your number is lower than others, then see the first couple paragraphs of this section.

Caveat
Relying strictly on spend-and-savings metrics can be a dangerous game. A well-managed corporate travel program creates value that can't be easily distilled into dollars. 

A strong safety program with processes and protocols helps the travelers and the company by minimizing risk. The value is real, but difficult to quantify.

Ensuring that the level of customer service delivered by the TMC and suppliers saves travelers time and grief. I suppose you could quantify some time-savings created by eliminating the traveler need to search for the lowest fares from multiple sources, or to measure the impact on employee morale of having a TMC available to help when events necessitate a change in plans, but those are hard to calculate and some people seem them as dubious measurements. 

Tracking and mitigating environmental impact supports many companies' green initiatives, but quantifying the dollar value that a supportive travel program creates is challenging as well.

So...it's good to have a positive ROI. It's also good to make sure that everyone at your company recognizes the other values your program creates. Be proactive in managing this, or someone else might do it for you.

#8: Valuing Hotel Amenities

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

Description
Okay. You've negotiated the best daily rate you could at a hotel. You then negotiate to include free breakfast and free WiFi. How do you realistically account for the savings generated by these 'free' extras?


Formula
Regular cost of amenity x % of population likely to use it x Room Nights = Projected Amenity Savings

For example, let's say the cost of WiFi, in the absence of your agreement, is $9.95 per day. You project that 80% of your travelers would have otherwise purchased WiFi access (and expensed it). You put 300 room nights into this hotel under this agreement.

     $9.95 x 80% x 300 = $2,400 in WiFi savings

Do the same for breakfast, airport shuttle service, and any other amenity that replaces costs that would have been spent otherwise.



Process
How do you come up with the percentage of travelers likely to purchase and expense these amenities? 

You could dig through a representative sampling of expense reports to come up with an answer. Depending upon how detailed your expense reporting requirements are, you may find this information challenging to sift through.

Ask the sales manager at the property what their take rate is for each amenity. I typically use this as my first data point. 

Then I augment what I've heard from the property by asking the travelers. A quick, targeted survey, done annually with your traveling population, can help you establish baseline percentages for your assumptions. (TIP: you may want to offer something in return for responses like a drawing for a free weekend stay at a hotel to ensure a strong enough response rate). 

I take what I've learned from these sources, drop it down a little to be conservative, and use the resultant percentages in my calculations. 

I usually see about 80% for WiFi usage (although this is dropping with greater use of smartphones that can access emails via cellular networks). I put breakfast at about 25% (or 0% if it's not reimburseable). The shuttle service can be a big savings, but it's very dependent upon location (i.e. do people still have to rent cars to get to the destination or is the hotel very close?). 



Usage
Let's assume you did a great job at negotiating a rate of $25 under the standard corporate rate at the hotel in the example above. You put 300 room nights in there for a rate savings of $7,500. Without adding in the value of the amenities you negotiated in as well, you are under-counting the value you created. You can add the $2,400 for WiFi savings, and maybe $1,000 for breakfast as well. That just improved your savings figure by almost 50%

Do this exercise for each of your top properties (in terms of room nights) and make conservative assumptions for the other properties that mirror percentage-wise what you're saving in the top hotels in your program. Add this savings figure to the total you report to senior management, your boss, and the traveling population. 

#7: Travel Agency Transaction Fees

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

Description
When it comes to metrics, I've always embraced the "Trust But Verify" approach. Your travel agency (or travel management company or TMC) should be your trusted partner in managing your company's travel program. You pay it a fee in exchange for its assistance in reservations and service.

But let's face it, sometimes wires get crossed. Sometimes you are paying more than your agreement outlines, but because no one is paying close enough attention, you never find this out. I'm not saying a TMC would do this purposefully (and hope to remain in business), but I have found that doing a quick and easy measurement of fees is worth your time and effort. 

This metric works if you are paying your TMC a transaction fee for each reservation. You simply measure the number of charges you receive compared against a benchmark like airline tickets issued. We know that the number of TMC fees should exceed the number of airline tickets issued because of changes and refunds, and the like. It's the change in the ratio between TMC fees and Airline Tickets that is the key here.


Formula
Total Number of Transaction Fees Charged / Total Number of Airline Tickets = Travel Agency Fee Ratio

For example, one of my clients began its partnership with a TMC with a ratio of 120 transaction fees for every 100 airline tickets issued (a ratio of 1.20). This metric slowly increased over the span of two years to 151 transaction fees for every 100 tickets (1.51). 


Usage
As you can imagine, this metric sent off some warning bells once we started measuring it. The funny thing is that we never would have noticed it in the normal course of business, but we were looking for the total we paid the TMC for a year and simply applied historical measurements to it. 

Turns out that both the TMC and the company were "at fault." The TMC was double-counting certain online transactions that were 'touched' by an agent (instead of simply reverting to a 'touched' fee, the TMC was charging both the initial fee and a touched fee). Because the company was pushing online adoption hard, but hadn't given enough training to the travelers on what information was required for billing, a larger number of transactions were transitioning from no-touch to touched.  The agency corrected its transaction billing, and the company increased training to streamline the booking process.

# 6: Travel as a Cost of Sales

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

Description
In the ideal world, every business trip would generate more revenue than its cost. That's not the way the world works however. There are always trips that do not directly, or even indirectly, increase sales. While teasing out which trips pay for themselves and which do not is challenging, tracking overall travel costs compared to revenue can tell you if your program is getting better at reducing travel expense as a percentage of overall company revenue. Highlighting this metric can even encourage senior management to start paying more attention to what it truly costs from a travel perspective to acquire and retain business. 



Formula
Total Travel Spend / Total Company Revenue = Travel as a Cost of Sales

     alternatively

Total Managed Travel Spend  / Total Company Revenue = Managed Travel Spend as a Cost of Sales


Process
For Total Travel Spend take the sum of all Travel & Entertainment (T&E) reports. You can usually get this figure from Finance.  Next, for public companies, getting the revenue figure is easy. Simply take it from the annual report. If your company doesn't publicly release revenue figures, you can get this figure from Finance. 

Now divide the first into the second to get a percentage. If Total Travel Spend was $1M for a given time period, and company revenues was $14M, then the Travel as a Cost of Sales figure was 7.1%. 

You could do this with Managed Travel Spend (e.g. anything that's booked through your preferred agency or tracked under your negotiated agreements--typically airlines, hotels, car rental, and ground transport). This figure will be lower than the Total Travel Spend (which would include "un-managed" items like meals, taxis, etc.).  This may be a better metric for showing the value your program is creating, but it lacks the brutal simplicity of the former. 


Usage
This metric should be tracked over time, ideally quarter by quarter. It's usually easy to go back and get the historical data to get started. The goal of this metric is to a) highlight that travel is a manageable part of the Cost of Sales, b) identify any out-of-the-ordinary spikes or troughs that could identify potential problems, and c) to elevate travel management to a more strategic level in the company. Use this metric correctly, and senior management will be coming to you for ideas on how to optimize the cost of travel for the company.


Caveat
Of course, this number in a vacuum doesn't do you any good. "7.1%? You don't say? [yawn]"

I can see three clear uses for this metric.

1. Oddness: this metric is good for identifying potential issues that might not normally be detected over time. Let's say your quarterly figure trends around 7% (with a couple of tenths of a point variance). Then one quarter it shoots up to 9.5%. Something is up. This metric won't tell you what it is, but it can help you bring it to senior management's attention. 
2. Benchmarking: this is a handy benchmark figure that eliminates the impact of revenue and cost variances.  A company with $100M in sales can benchmark the Travel as a Cost of Sales against companies with $10M in sales and $1B. 
3. Travel Alternatives: Let's say you want to see the impact of a new strategy or tactic in travel (e.g. videoconferencing, gamification, etc.). It is notoriously challenging to measure the ROI of videoconferencing for example. Rather than focus on a reduction of travel costs (typically the metric IT uses for installing videoconferencing), you can augment this with the Travel as a Cost of Sales. The number of trips taken may decline with the introduction of videoconferencing, but because the technology allows for more people to join in a meeting--the sales person on site could have his IT, Legal, and Product people join via videoconference--revenue should go up and travel costs should go down.  The Travel as a Cost of Sales helps measure this impact.