“The largest corporations that spend the most on business travel are generally at about 75% of their 2019 spend, and they seem to be plateauing there. The growth is really coming from the small and mid-sized enterprises – those are the ones that are powering the recovery.” – Scott Gillespie, Founder & CEO of tClara
Corporate travel is still in recovery mode, feeling its way out of the pandemic slump. But recent travel trends are exposing mixed attitudes around business travel, with some companies embracing it as a competitive advantage, while others are holding back due to cost or concerns over sustainability and climate impact.
One theme rings true for organizations of all sizes: as part of the travel recovery, businesses are becoming more intentional and strategic about where and when to invest in travel.
For this week’s podcast episode, I spoke with Scott Gillespie, founder and CEO of tClara, a company that provides advice, thought leadership, and innovation to business travel industry stakeholders. He shared the findings from recent research into the ROI of justifiable business travel, and how the decision making process can be optimized.
Low vs. High Value Business Trips
Scott shared his quantitative framework for determining which categories of business travel are low value and which are high value. Defining the difference allows companies to make more thoughtful, informed decisions about travel spend, expected outcomes, and where to invest their resources. According to his findings, roughly 25-30 percent of business trips fall into the low value category.
Low value trips can generally be replaced by virtual meetings without any loss of benefit. Determining whether a trip is low or high value is a bit of an art form when left up to the opinion of the traveler. To use quantitative data to determine whether a trip was justified, Scott recommends asking 4 questions as a part of a post-trip assessment:
- How successful was the trip?
- How important was the trip?
- To what extent could the trip have been substituted with a virtual meeting or two?
- What was the net expected value of the trip?
Within this framework, trips that are reported successful and that could not have been substituted with a virtual meeting are deemed “high value.”
Predicting Value Before the Trip
Assessing whether a business trip was justified after the fact is all well and good, but by that time, money, resources, and time have already been spent.
For many companies, the pre-trip approval process is clunky and does little to predict or evaluate the overall value of the trip. What procurement needs is a framework to model the ROI of a trip before it happens, protecting the business against the risks of low value trips and making more strategic decisions about corporate travel costs.
“I’m excited that we can actually envision a category spend management principle where we’re evaluating the probability of a low value trip, and we’re flagging it for further attention,” said Scott. “I’m not saying they should be the procurement police. … but we can help you make a much more disciplined assessment about whether or not you want to spend this money on a low value trip, or maybe spend that money on two or three higher value trips.”
Scott recommends asking travelers to speak to the value of their trip and justify it through a short series of questions as part of a pre-trip assessment. In his experience, an overwhelming number of business travelers said they would be very willing to do this exercise. This gives procurement a “green light” to rely on travelers to help articulate and justify the overall value of the trip.
Calculating the Value of a Business Trip
Once procurement has input from the traveler, there are 3 main questions the business needs to answer in order to calculate the net expected value of a trip and determine if it is justified:
- What is the value of the traveler’s time on the trip?
- What is the overall cost of the trip?
- What is the highest amount you can have approved for this trip or the maximum justifiable cost?
Taking these 3 cost considerations into account simultaneously will enable procurement to identify a maximum price at which it makes no sense to take the trip. Once you have this net expected value of the trip established, considering it alongside the projected ROI of the trip can give the team a quantitative framework for decision making.
When calculating the expected ROI of a trip – and especially when communicating that ROI to management or company leadership – Scott says it’s more valuable to measure whether the trip is helping to achieve business goals than it is to solely rely on tracking things like ticket price, hotel attachment rate, or company compliance rate.
In an ideal scenario, calculating the value and ROI of a trip would require the traveler to conduct a credible, honest pre-trip assessment to help establish the value and purpose of a trip. As Scott says, “it should be a very decentralized decision … between traveler and their manager.”
While corporate travel assessment is a collaboration, the business traveler ultimately plays a large role in helping to determine if a trip is high or low value, and it’s up to management and procurement to make sure they’re clear-eyed in this evaluation process, not just about the financials of the trip, but also for their individual concerns, needs, and objectives.
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Links & Resources
- Scott Gillespie on LinkedIn
- White Paper: The Justified Business Trip
- How to Procure Travel More Strategically by Measuring Outcomes, Not Savings w/ Scott Gillespie
- What Does a Category Manager do? (To Elevate Procurement’s Impact)
- Build Your Category Management Framework with Five Evergreen Principles
