Opinion: Corporate contracts don’t necessarily guarantee better rates
12 Sep 2018 - by Oz Desai
Companies are investing more money than ever to send employees around the world on business, while corporate travel spend is set to rise further still in 2019, based on global business travel estimates.
The GBTA is forecasting that hotel prices will rise by an average 3,7%, with airfares expected to increase by 2,6%. A recent GBTA Global Travel Forecast predicts that by 2020 the business travel industry will be worth US$1.6-trillion in total.
While these numbers put travel managers under added pressure to keep travel budgets in check, negotiating airtight corporate contracts and securing discounts won't necessarily mean better rates.
Why? Because there can be major pitfalls to pre-negotiated, client-specific contracts.
The minimum spend requirement is often quite high. If companies miss this target, the deal will probably fall away the following year.
Also, rate discounts usually apply only on higher-priced airfares, and not cheaper rates. This means a company could pay substantially more than the most affordable available ticket price.
The same applies to negotiated hotel rates because of how hotels manage yield. A static corporate rate is not a great option, as it means you won't be able to take advantage of lower, last-minute offers.
If we consider that one hotel in Dubai changes its rates as many as 14 times per day, depending on availability and demand, being locked into a pre-set, static rate can mean business travellers miss out on significant savings.
What’s more, a rigid travel policy that enforces the use of specific preferred suppliers can have a severe impact on traveller happiness. A flight that includes a layover might save the company money but the traveller could arrive too tired to work or end up with burn-out, which is a costly trade-off.
How does a travel manager balance the need to save on costs? Their TMC is their greatest ally and will deliver the most benefits for any company, regardless of its size. TMCs have the expertise and insight to make the right decisions for the business.
For example, did you know that booking domestic flights more than six months in advance is going to be more expensive, or that the cheapest time to book travel in Africa is between one and three days before departure? Were you aware that booking accommodation outside the Cape Town CBD could save up to 46% on the cost of a room for a night?
Corporate Traveller’s data reveals the most expensive months to travel are January, July and December, while May and November are traditionally cheaper for travel.
In our experience, the cheapest time to book for domestic travel is one to two months before travel. This is because airlines charge a premium on airfares booked more than six months in advance and won't be in a position to entice travellers with special deals that far ahead.
For international travel, the most expensive time to book is usually three to four weeks before departure, when airlines are generally still offering reduced fares to boost load factors.
What does this data tell us? That there are far better ways of achieving savings on airfares and hotel bookings than by locking yourself into a corporate contract. Instead, partner with a TMC that has volume deals in place, benefiting from their buying power, and that helps meet your supplier targets and unlock further savings.
Companies we work with have the flexibility to choose the best option at the time of quotation and are not forced into using a particular airline or hotel chain that doesn’t provide them with the flexibility to travel according to the needs of the business.
Armed with these insights and the expertise of a TMC, businesses will be in a better position to tackle the challenges and rising costs in 2019 and beyond.
With a proven track record in business management and finance, Oz Desai heads up Flight Centre Travel Group's dynamic Corporate Traveller brand in South Africa. Having worked in a retail travel, management and the finance environment within the Flight Centre group, Oz's first-hand experience brings great depth to the role of positioning Corporate Traveller as the preferred provider of travel solutions to corporate South Africa. Skilled in operations, sales, negotiations, budgeting and customer service, Oz holds a Postgraduate Diploma in Leadership Development from Stellenbosch University and a Bachelors in Business Management and Financial Management from UNISA. In his free time, Oz enjoys reading, running and snowboarding.