Balancing the pitfalls and benefits of the sharing economy
18 Jan 2017 - by Tshipi Alexander
The adage that cheap doesn't always mean better comes to mind when one thinks of the sharing economy and travel expenditure.
Sure, you may save a buck upfront, but that doesn't always translate into savings at the end when one considers aspects such as preferred agreements, payment processing and even the use of amenities.
While the sharing economy can certainly deliver considerable savings to corporates, it is important not to compare apples with oranges, and to take into consideration all the potential hidden costs of procuring sharing economy accommodation.
Will travellers have the same amenities when booking an Airbnb apartment as they would in a hotel? Does the traveller need breakfast, room service or access to a gym? Have you calculated extra costs in your budget when booking Airbnb accommodation? And will your company lose relationships with preferred suppliers, resulting in lower discounts next year? These are all important questions to ask yourself when considering the sharing economy.
According to a recent report from International SOS, using sharing economy services for business-related travel creates risks and challenges that need to be managed and mitigated. While 40% of travellers reported using services such as Uber and Airbnb when travelling abroad for business, 75% of organisations lack policies or procedures for how to use these services during international business travel.
On the other hand, an interesting benefit of sharing economy options is that business travellers are probably less likely to commit expense-reporting fraud or hide expenses. This may be because there are simply not as many ancillary items that could be added to a hotel bill, such as in-room dining or movies.
Enabling the use of sharing economy suppliers can also enhance traveller satisfaction for those travellers who look for a home-away-from-home experience, or who simply prefer the autonomy that comes with the sharing economy.
Suppliers such as Airbnb and Uber have started taking the first steps towards integration into travel programmes to allow travel managers and travellers to mitigate any possible risks and to control spend better. Although South Africa still seems to be lagging on this front, travel management companies in Europe and the US can now seamlessly capture Airbnb and Uber data into expense reports.
In November 2015 American Express in the US also announced a first-of-its-kind integration with Airbnb and created an on-platform loyalty programme. US American Express Card members can, for example, create an Airbnb account by using their existing americanexpress.com user ID and password. This will allow them to sign up quickly and put a card on file, so booking is fast and easy in the future.
Despite the strides being made in terms of reporting and expense management, it's important for travel managers to consider all suppliers when looking at cost-cutting measures and see where they can encourage improvements. They need to look at whether the demand for sharing economy services has exposed gaps in their managed travel programme and how they can address these gaps.
In terms of budgeting it is important that travel managers accumulate data on the average cost of the trip to build a more robust budget. There will be a period of learning before this can be ascertained reliably, but this is where expense management solutions, such as Concur, can help by consolidating travel expenses and allowing transparent reporting.
Although there are some obstacles and duty-of-care issues associated with the sharing economy, it certainly offers the possibility for companies to cut costs. But there needs to be a careful balance between the company's needs for cost reduction and the associated risks.
Tshipi Alexander is the head of corporate issuing and merchant services at Nedbank, and has over 16 years of experience in the financial services industry, with 13 years’ experience in the Consumer and Corporate segments of banking. His specific experience includes Private Banking, Structured Lending, Merchant Card Acquiring, and Card Issuing. He’s responsible for the business unit that provides cards and merchant acquiring solutions to businesses across South Africa, with a focus on client acquisition, client retention, and P&L.