Power Panel: Can incentives be an effective way to influence travel policy compliance?
9 Mar 2018 - by Zia Taylor
Travel costs are one of the biggest expenses a company faces, and managing a budget for a ‘product’ that has such fluctuating costs can be difficult. Travel budgets need to allow room for changing costs of airline tickets, accommodation, and ground travel. Dynamic pricing models have also impacted budgets, as last-minute, highest-cost bookings are sometimes unavoidable. Practical financial reasoning aside, travel budgets and policies also need to be broad enough to allow employees to travel in comfort and, most importantly, safely. While policies could theoretically offer only the cheapest accommodation and meals, this would likely result in a disgruntled, ineffective traveller who could end up costing the company more in lack of productivity than they saved on travel expenses.
It stands to reason, therefore, that corporates would encourage travellers to book within policy, and to do it as cheaply as possible. While educating travellers on what exactly the policy states goes a long way, further savings would make a significant difference to the bottom line. Companies have started to implement incentive programmes like those designed by Rocketrip – a platform that encourages employees to save on their travels by offering them specific rewards based on the amount of savings.
What the incentive companies say…
Jay Walker, developer of Upside, believes, as he told Fox Business in an interview, that “flexibility is the last frontier in monetisation”. Upside specialises in garnering relationships with suppliers and thereby offers a range of rewards that corporates would not ordinarily have access to. Big data and aggregators allow travellers to “see all their options and how much their flexibility is worth,” he adds. Travellers who are willing to travel slightly further from a conference, or book a cheaper hotel or connected flight, could save the company a considerable sum, and be rewarded with gift card in return. Greater savings translate into greater rewards.
Dan Ruch, founder of Rocketrip, shares a similar philosophy but believes a fundamental culture change needs to take place, and that it needs to happen at all levels of management. He also believes that monetary rewards work well. “Give employees a percentage of the money they save,” he says in a blog post. “I recommend half. Do this, and you’ll find employees will be eager to make cost-effective choices. You’ll also find that employees will find very creative ways to save. I see people book two one-way tickets for a round trip flight or share rooms with colleagues just to up their rewards.” Rocketrip gives travellers a bespoke ‘budget to beat’, and awards ‘Rocketrip points’, which can be redeemed in numerous ways.
Cash, or the equivalent thereof is considered taxable income, which is essential to take into account when offering these kinds of incentives.
What the travellers say…
Incentive programmes could be effective in theory, but if it’s not something that the travellers would consider using, then the theory falls flat. Research suggests that adoption of these policies would work better in certain sectors, and definitely applies more to short-haul, infrequent travel.
Mike Nel, a regional manager in the mining sector, says they are charged with booking the cheapest fare possible within routing considerations, so being incentivised over and above that would be a bonus.
The Country Head for Australia and New Zealand for a large re-insurance company says that scheduling is the number one driver of flight selection. “When travelling, my main aim is to minimise the time I actually travel. Our company policy already states what hotels we can book – actually a generous set of criteria – and what flights we can do economy or business (more than five hours’ duration). I am happy to work within these bounds.” The company does, however, emphasise the importance of booking early, and flags are raised if long-distance travel is booked less than two weeks in advance.
While for some, any kind of incentive is beneficial, others note that they feel a fair tipping point for short-haul travel is 50%, and a third of the saving on long-haul travel. Cash incentives appear to trump value-adds due to versatility, although some concern was noted regarding tax implications of receiving cash rewards.
Across the board it was mentioned that there were certain instances in which incentives would not be considered. Says Nel, “There are often flights I make that are more expensive than the cheapest option. Considerations are total travel time, routing, travel itineraries fitting work schedules and airline reliability.” Another traveller adds: “My aim is to minimise my travel time and to make travelling as efficient as possible. I also wouldn’t skimp by booking budget airlines over national airlines.”
And how the travel buyers feel…
Feedback received from travel buyers is that corporate culture would need to be amenable to a rewards programme of this nature. The company policy itself would need to be convenient, logical and efficient, because vouchers and incentives themselves will not drive compliance, or soothe pain points of an inefficient policy. Employee rewards programmes can also be cumbersome to run, and come with HR implications, tracking, and taxation, meaning that return on investment should be carefully evaluated.