For many corporations, business travel is an integral part of their company operations. It offers opportunities for networking, attending conferences and training sessions and also for meeting with clients. However, it can also be a significant expense in their budget and something that needs to be managed carefully. It is important to understand the various components that make up the costs of business travel. That way, you can implement strategies that will optimise these expenses in order to enhance the financial health of the company. This guide will take a look at some of the key factors that influence the costs associated with business travel for corporations, and also consider some practical cost-savings strategies you may wish to consider.
What key factors influence the cost of business travel?
The costs associated with business travel can vary significantly based on a number of factors. Let’s take a look at some of the primary components that can contribute to those costs:
Airfare
If the destination for your business travel requires you to travel by air, then this will often be your most significant expense, particularly if your flight is international. Travelling by economy or business class, booking as early as possible and being a member of a loyalty program can all help to keep the cost down. Last-minute air bookings are usually more expensive.
Accommodation and meals
Hotel costs can also be quite substantial, particularly if you are travelling to a major city or if your business travel occurs during peak travel season. There are factors that can influence the cost of hotel accommodation. Star rating, location, duration of stay and amenities can all play a part. Remember if you stay in a hotel, you should also factor in dining, either in the hotel restaurant or going out, and this is a cost that can really add to the expense. Of course, if you are entertaining clients then this is a necessary expense.
Serviced apartments or aparthotels are an alternative to the more traditional hotel, offering many of the amenities you might need but with more flexibility and often better pricing, particularly for longer business trips. They also offer a good alternative when it comes to meals as this type of accommodation usually includes a kitchen where you can prepare simple meals which will also help to keep the cost down.
Local transportation
Whether you opt for a rental car, taxis or even a rideshare service it can add up, particularly if you will be doing a lot of travelling around. Where possible, public transportation is a much cheaper option and, in many countries, more frequent.
Other expenses
Other costs associated with business travel that you may want to consider include things like visa fees, travel insurance, internet and phone charges, laundry services (if you are staying for a longer period of time. If staying in a serviced apartment you may have access to laundry facilities as part of the package) and incidental expenses such as parking fees, tips, and any office supplies you may need.
Compensating business travellers as employees
In the UK, all employers need to compensate business travellers by reimbursing all reasonable travel costs that they incur during business trips. These costs may be related to transportation, accommodation, meals, and other day-to-day subsistence costs. All employees should be aware of what costs will be covered following HMRC guidelines and there should be clear policies set out in employment contracts as good practice to ensure everyone knows where they stand.
Flights and accommodation may often be booked through a business’s accounts department and paid in advance, meaning they will not need to be reimbursed. However, meals and things like train tickets will need receipts in order to verify the reimbursement claim.
Employees should also be able to claim mileage allowance if they use their own car for business travel (using the HMRC approved mileage rate), subsistence allowance, which is a set daily amount and covers the cost of meals when travelling (HMRC have different rates which are location dependent).
Practical cost-saving strategies
A strategic approach is required for effective management of business travel expenses. This must balance cost control and the need to still be productive, whilst ensuring employee satisfaction. Advanced booking for things like flights and accommodation can help you make savings as early bookings are often subject to lower prices. You may want to establish relationships with preferred suppliers; airlines, hotel groups and car rental companies to garner discounted or better rates. This is particularly valuable for larger companies who can leverage their travel volume to achieve this.
Have a clear travel policy in place that will help your employees to understand what limits are in place and also what costs they may claim for. Ensure that this policy is kept up to date to reflect current market conditions.
Not every business meeting needs to be undertaken in person so consider if some travel can in fact be avoided in favour of virtual meetings. This will ensure that those important meetings that need to take place face-to-face will be able to go ahead.
It is also a good idea to consider cheaper travel alternatives where possible, for example train travel or carpooling when these are more cost effective. Smaller airports and accommodation that is less central can also offer great savings.
Cost balanced with opportunities
For many corporations the cost of business travel is a significant expense, however it also represents some important opportunities for strategic optimisation and management. When the key factors that influence travel costs are understood and practical cost-saving strategies are implemented companies can find a good balance between controlling expenses and maintaining their productivity. Travel management that is effective can not only result in financial benefits but can also improve decision making, enhance employee job satisfaction and support the sustainability goals of a corporation.
The business landscape is continually evolving and those companies who choose to prioritise efficient and responsible practises in their business travel will find themselves better positioned to succeed in the fast-paced, competitive global marketplace.