Three years ago, a top 10 Fortune 500 company asked our technology startup WhereTo to help re-engineer its travel program.
We had wide latitude on how to do it, provided we lowered their total travel spend while raising business travelers’ satisfaction. We soon discovered that their clunky booking experience was only the surface problem.
The deeper issue was with the industry-standard travel policy and how it is configured. Corporate booking tools are stuck in the 90s, but travel policies are stuck in the 80s.
Having successfully deployed WhereTo (powered by Travelport’s search data) among clients large and small, we can now share six of the policy changes that made the biggest positive impact on budgets and travelers.
Unlike the blunt rules of the analogue age, the new rules bear digital precision, and take advantage of access to live data – offering more flexibility to travelers while better serving a company’s business objectives.
We call the new era of data-driven rules Travel Policy 3.0.
This three-year project was supported by hundreds of travelers and travel managers who provided their suggestions, as well as our exclusive work with Travelport, a global travel commerce platform that we have worked with since our conceptual days.
Travelport enables our booking platform to deliver more relevant, personalized, and broader search results through the platform’s massive data set.
With that said, here is a summary of the top six new rules:
1. Increase freedom of choice to decrease travel costs
Mandating preferred suppliers is standard practice in many large companies. Typically, travel managers choose a set of brands, commit to a certain market share for them, and then configure their online booking tool to drive employees to those preferred suppliers.
It’s time to retire the mandate. Not to say travel managers should stop negotiating volume discounts with preferred suppliers. Rather, we encourage letting travelers decide whether or not to select them, staying within the limit of the recommended budget.
Opening the options obviously makes employees feel less micromanaged, but it can also arm travel managers with data to negotiate deeper discounts.
If a market share commitment was not met because the discount was consistently not large enough for travelers to voluntarily select it, then the travel manager and supplier can look at that data to determine what level of discount is sufficient to drive more business next year.
The threat of losing business is powerful leverage.
2. Implement the lowest logical rate and mean it
It has become well known that online booking tools produce unreliable flight recommendations because of the simplistic way they calculate the lowest logical rate.
We found three ways to overhaul the lowest fare “logic” for the 21st century:
- First, the variables should be balanced much the way that people reason, rather than dictated by layers of rigid rules For example, instead of recommending a non-stop flight within $100 of the cheapest flight, a modern system weighs price against commute time and other variables dynamically: for many, a one-hour layover that saves $800 is worth the hassle, while a six-hour layover that saves $150 is not.
- Second, we add in relevant factors like loyalty status and commute time in traffic. For many, a free bag and early boarding is worth a slightly higher ticket price, and conversely it is worth driving to an airport 20 minutes further to save $600.
- Finally, these configurations should be tunable by and for each client without needing a computer science degree.
We baked these three strategies into our own recommendation logic, which motivated users to select one of our top ten flight and hotel suggestions 71% of the time.
3. To control travel costs without causing a revolt, use a lighter touch
Fortune 500 travel managers we interviewed dis-favored both extremes in the war against online overspend.
The stick approach - mandating that travelers book the lowest logical fare - breeds resentment, and often requires a time-consuming back and forth to grant exceptions.
The carrot approach – compensating employees to beat a benchmark price – sends the wrong message and requires companies to outlay additional capital to potentially realize savings down the line.
We recommend the middle approach. When users select an option above the recommended budget, a warning appears that the overspend will be reported. Guilt is all it takes.
Deployed for a 600-person sales meeting at Snap, Inc this month, 99% of travelers presented with this warning went back to book a flight $183 cheaper, cutting $45,000 from the total travel costs for the meeting.
“WhereTo’s warning design is nice - it’s gentler but more effective than what I’ve seen with visual guilt,” says Snap, Inc.’s travel manager Sean Parham.
4. Take advantage of non-refundable and prepaid rates
Non-refundable hotel rates typically match the savings of deeply discounted websites like HotelTonight and Hotwire, but they are usually blocked in online booking tools because of the general truth that business plans often change.
But this is only true in the abstract.
Companies can consistently save money by applying a more nuanced policy that treats non-refundable rates as a measured risk.
Specifically, we recommend making them available alongside refundable rates and expressly allowing employees to select them when their plans are certain and when the savings is significant.
Likewise, we recommend incorporating pre-paid rates onto your online booking platform and adjusting your expense policies to enable employees to book them.
When adding non-refundable and prepaid rates, it is important that their restrictions are clearly marked to avoid complaints. We recommend adding an acknowledgement checkbox on checkout.
This calculated approach kept the cancellation rate of non-refundable rates at less than 2%--which generated a net savings of $80 per hotel booking including the occasional full penalty.
5. Welcome comparison shopping on your online booking tool
Many business travelers reported that they regularly compare their companies’ negotiated rates against consumer websites. That’s fine.
Rather than fighting this trend, managers should embrace it by bringing those supply chains onto their online booking platform, and ensuring apples are compared to apples.
Adding multi-source shopping lowers a company’s travel spend by ensuring travelers are always booking the lowest rates.
Even for one of our clients with thousands of negotiated hotels, the wider channel search found better refundable rates 6% of the time. It also avoids leakage since employees have more reason to stay on the platform and book online.
6. Use configurable single-use guest links to reduce liability and travel costs
Booking guest travel is a pain for many companies. On the one hand, giving recruits, partners, or interns temporary access to the company’s online booking tool is a hassle at best and liability at worst. On the other hand, having agents book their travel manually is expensive and time consuming.
To address these concerns, modern booking tools now allow managers to create highly configurable single-use guest links.
Administrators simply enter the guests’ names, payment details, and flexible rules--and then email out a link that guides guests through the restricted options.
In fact, we used this approach to help Snap, Inc. save weeks of booking time and tens of thousands of dollars. Sean Parham, notes: “In the past our annual 600-person sales group had to be booked manually. WhereTo helped make this year the fastest they’ve ever been booked.”
To conclude, the new crop of more sophisticated online booking platforms bring the opportunity for a more data-driven travel policy. The results speak for themselves.
By implementing Travel Policy 3.0, WhereTo has achieved a 98.5% online adoption rate, a 10/10 most common user satisfaction score, and savings up and down the board.