'Hey, CFO! Hands off my travel budget' By Eric Tyree, Chief Data Scientist, and Michael Ryan, Managing Director, Australia / New Zealand at Carlson Wagonlit Travel
Travel budgets are constantly under pressure – often severe pressure. That’s because travel is often in the top five costs. So when the CFO looks for savings, all too often, travel winds up taking the hit.
How does a travel manager defend that pot?
Well, first, you need to cast travel as an investment with a return – not just a cost. This shifts the argument and puts you back on the front foot.
Many large Australian companies spend tens of millions of dollars each year on business travel, with hardly any way to measure return on investment (ROI). Any other department in a company would need to prove ROI for this sort of money, and travel should be no different
Business travel should be viewed in the context of operations, revenue streams and human impact. More to the point, organizations need to understand how business travel helps their corporate strategy – if you can show in clear, concrete terms how travel is critical to that strategy, you’re in a much better position.
However, you can go much further by measuring travel ROI directly, in quantifiable terms. For example, measuring and demonstrating the relationship between travel expenditure and revenue is a fantastic way to demonstrate travel ROI. That helps protect travel budgets but also provides arguments for expanding them.
The key is to combine traditional travel data (hotel, air, expenses) with HR, corporate finance and other non-traditional data sources, allowing you to view travel and travel policy as part of the whole.
One of the simplest ways to quantify ROI is to correlate travel expenditure to revenues. To do this, you need to match your travel data (travel, expense and card) with data on where the travelers sit within the organization – ideally by cost code or cost center. Once you have that, you should be able to get revenue information by cost code/center. Granted, this won’t cover all travel but, for most businesses, it will cover a significant chunk. With these data – travel, organizational and financial – you can get a pretty good correlation between travel and revenue generation. If you can get historical data going back a few years, even better.
The aim here is to show the relationship between travel and revenue. If you can do this, it’s much harder to slash travel budgets - the last thing anybody wants to do is impact revenue.
The process above can be repeated for other corporate or departmental KPI’s such as growth, operational efficiency, effectiveness – wherever good, quantifiable data is available.
For many companies travel is the critical tool with which a large proportion of business and operations are conducted. However, as travel is often viewed as a cost and not an investment, it’s all too easily pruned back to the point where the savings are negated by the damage caused.
So: demonstrating the ROI on travel is the best way to keep flying.