With the Spring event season nearly in full swing, business travel is expected to rise amid conferences, trade shows, and in-person client visits. As rising costs impact nearly all industries, travel and hotel expenses are no exception. This, combined with the hit these industries took during the pandemic, has prompted many companies to consider whether or not the cost of attendance to particular events is worth the value they provide.
In a recent report from Emburse, findings indicated that companies are spending more to travel less than they did pre-pandemic. According to findings, companies spent 85% more on domestic air travel in Q1 2023 than in Q1 2022, and 42% more than in Q4 2022. Despite booking volume climbing 52% over the same quarter in 2022, and a 29% increase over Q4 2022, it is still significantly lower than the frequency of travel pre-pandemic.
Emburse features software that specializes in travel expense and travel management, and the company analyzed over 140,000 transactions by travel management companies, breaking down both the cost and frequency of expensed business travel.
With CFOs looking at different ways to trim allocations and control costs, many will consider their team’s travel budgets as potential areas to cut. According to Emburse’s CFO Adriana Carpenter, trimming a travel budget should come with a well-constructed, strategic process.
“I don’t think executives should just give carte blanche for travel budgets, but if you’re going to make spending cuts, you need to be both creative and judicious in your approach,” said Carpenter. “It’s easy to just say, ‘let’s cut all internal travel budgets because that’s the least important kind of travel,’ but instead executives should first try to optimize their spend across the board, by analyzing where their travel dollars go and how they could improve efficiency.”
It’s no surprise finance leaders are looking at trimming travel budgets. According to data, the average spend per round trip for domestic travel is up $110 since last year, with the average length of stay increasing 1.26 days within the same timeframe.
I don’t think executives should just give carte blanche for travel budgets, but if you’re going to make spending cuts, you need to be both creative and judicious in your approach. — Adriana Carpenter, Emburse
“Look at how much you spend on lodging,” Carpenter said. “Are you using different hotel chains? Could you negotiate a better rate with one chain in return for funneling more business through them? The same goes for airlines and car rentals; you can reduce overall spend levels without having to cut out travel.”
While CFOs have a large list of events to attend this year, the idea that in-person connection on a consistent basis is needed was proven mostly false during the pandemic, Carpenter said. Carpenter said the benefits of in-person connections are evident but aren’t needed for most companies to function.
“For my sales teams, getting back out to meet prospects and customers is hugely important for building personal relationships,” Carpenter said. “So as CFO, it’s incredibly beneficial for me to meet with investors, customers, and my team in person. These in-person interactions are particularly beneficial to develop stronger relationships and in working through projects where a high level of collaboration is needed.”
The cost of international travel and attendance at corporate trade shows are increasing at a much higher pace than domestic travel. Pricing ranges in the thousands of dollars for attendance to many events alone, and so those who wish to travel abroad for work will have to make the most of their time if cost is in mind. According to Emburse findings, international air travel spend is up 285% since last year, with the overall trip costing on average, $794 more than it did at the same time last year.
With these costs in mind, Carpenter advises that finance leaders utilize virtual meetings if possible. “[The pandemic] proved that business can still be done fully remotely for a large number of organizations, and most meetings work just fine over Zoom,” she said. “But, people are innately social, and in-person meetings deliver a level of interaction that can never be replicated over a video call.”
For those CFOs who are frequent flyers, or require their teams to frequently travel long distances to maintain relationships in things such as supply chains, the rising costs of travel as a whole have largely become the cost of doing business. According to Carpenter, incorporating technology into the process can not only approve efficiency, but save companies time and labor costs.
“Let’s say you buy a morning coffee and a muffin at Starbucks for $12. You take a photo of your receipt and upload it. The system reads the receipt, knows that Starbucks is a restaurant, buying it at 7:00 am means it was breakfast, and it was $12. It extracts all of that data and maps it to create an expense item, with an image of the receipt,” said Carpenter.
“When it’s submitted, the system knows that $12 is within policy at your company, so there is no need for further human verification, and if you like, can automatically be approved and reimbursed, with no further human interaction.”
According to Emburse’s finance chief, the idea of using technology to facilitate and payout expenses is just the beginning. The development of new technologies in these areas is focused on combining simplicity with cost-cutting measures.
“That’s just the tip of the iceberg,” Carpenter said. “[There’s] things like integration with your corporate travel and credit card provider, and issuing corporate cards that have your spend policy baked directly into it make it even easier for expenses to be proactively controlled to be in-policy and then created, approved and reimbursed.”