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Rising travel expenses force companies to implement stricter T&E policies.
Vincent Ryan, CFO Magazine
January 1, 2008
Higher business-travel costs may force finance departments to run just to stay in place.
The cost of the average U.S. domestic business trip, including airfare, hotel, and car rental, is projected to climb 6 percent this year; for international trips expect a 7 percent increase, according to American Express Business Travel's 2008 forecast. Higher airfares are responsible for most of that increase, particularly for international trips.
In addition, a disconnect between supply and demand is driving up hotel rates, forcing business travelers to compete with globe-trotting tourists for the best deals, says Mike Streit, vice president and global leader for American Express Business Travel's Advisory Services. Overnights on the Continent will be especially expensive, with published hotel rates rising 12 to 14 percent.
Since corporate guardians of T&E have mostly maxed out the savings made possible by leveraging discounts from preferred suppliers, Streit says, they will have to look to improved internal policies to rein in costs.
Cypress Semiconductor, a $1.1 billion chip maker with more than half its head count in Belgium, India, Ireland, and the Philippines, expects its travel costs to rise 10 percent this year as it promotes new programmable systems on a chip, says CFO Brad Buss.
That increase might be larger if it were not for the corporate-travel policy that Buss and his team firmly enforce: mandating 14-day advance bookings, requiring a controller to preauthorize all expenditures, cutting down on "ridealongs," and, on the back end, flatly denying out-of-pocket expenses deemed too exorbitant. In the second half of last year, for example, Buss made every employee fly coach — even on international flights.
"Travel is a hardship," he concedes. "It is not fun. We want it to be comfortable but not excessive." But the company will flex on its own policies if it can save money. If executives can save big bucks by booking their own flights online, for example, Buss welcomes it. "Self-service is making a nice dent [in our cost structure]," he says.
Streit adds that CFOs have to ask themselves what kind of culture they want to drive. "One of recommendations," he says, "or mandates?" As costs continue to rise, expect more to opt for the latter.
Top destinations for growth in corporate travel spending in 2008
Source: National Business Travel Association