“In business, as in life, you don’t get what you deserve, you get what you negotiate.”
-Chester L. Karrass, chairman of Karrass, the world’s largest negotiating training organization.
Corporate travel is here to stay and consequently, so is travel negotiation. Yet, most businesses find it complex if not challenging to get great deals out of service providers such as airlines, hotel chains, local transportation companies, and telecom carriers. In fact, Concur Technologies reports that small businesses spend on average 19.7% more on travel. So, a simple solution is to hire a Travel Management Company (TMC), right? Not necessarily. If your SMB calls for substantial travel, it’s often best to keep travel management in-house. Your employees and bottom line will thank you for it.
Your Customizable Travel Policy Template
Once you have formulated an airtight travel policy based on your uniquely-diverse needs and chosen your ideal travel vendors, it really comes down to the most human constituent of business: negotiation.
Here’s how you can pack a punch while negotiating a winning deal for your small business:
1. Capitalize on the Number Game: Global Consolidation
If your business functions across multiple branches or subsidiaries, make sure the travel bookings for all of them are done centrally. This will not just avert a logistical nightmare but will also lend you the economies of scale. According to Acendas, companies can save up to 25% on total travel spend by employing the global consolidation strategy. You will also be equipped with a larger number of units to be booked, coming across as a high-value account to the vendor who will want to turn you into a long-term client no matter what. This is also the best way to compensate for spend per unit being low and still maintain an edge. The strength in numbers when booking will get you better discounts and put you in a strong position to negotiate.
2. Define Your Relationship with the Vendor Unequivocally
Send over a legally-binding contract with ample reference to the law of the state relevant to each point of negotiation. Give select vendors ‘Preferred Supplier’ status so the relationship is crystal clear. The most impactful negotiations often happen verbally, but putting everything down in writing shortly after is imperative. Get the vendor to sign the agreement immediately after the agreement to ensure that the terms are crystal clear and there has been no misunderstanding. It’ll also ensure that nobody goes back on their word, which would make the painstaking negotiation effort futile.
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Long-term negotiations, mainly with hotel chains, may be of two types: a fixed pricing model and a dynamic pricing model. The former is more popular according to Teresa White, senior director of North American sales for Dolce Hotels and Resorts in Hotel News Now. She adds that companies that work on stricter budgets (including SMBs) usually prefer negotiating a fixed price contract with caveats to take advantage of promotional offers. In case of intricate contracts with caveats, it becomes much more important to have a written contract, acknowledged by all parties involved.
3. Share Your Travel Policy with Your Preferred Suppliers
Your travel policy is your corporate travel bible, so spread the enlightenment, especially with your preferred suppliers and employees. Express to the vendor the importance your company attaches to policy adherence. However big the supplier may be, they are in a service industry, and asking them to understand your company travel policy is a rational demand. In fact, it goes a really long way in communicating your company’s needs.
Some important points that you may highlight when sending over your travel policy are as follows:
- Proof that your policy is up to date and based on data, past and present industry trends and thoughtful analytics.
- Points of priority that are absolutely non-negotiable to you.
- Annual travel budget and the margin of safety maintained (at least 20% of the budget.)
- Compliance incentives for suppliers.
4. Think it Through: Multinationals vs. Boutique Vendors
In most cases, hotel chains and multinational airlines are often a better choice than their boutique-style counterparts (smaller vendors with a single hotel, domestic airlines, eg- JetBlue) because the negotiations can be location-independent. This will allow you to focus on price and quality. Bigger vendors work on larger profit margins and may be in a position to provide larger rebates. But as an SMB, if your operations are highly localised to a country or state, with lots of last-minute bookings, then boutique vendors may be a better option for you. Sometimes, smaller budget hotels looking to target business travelers, for example Ibis Hotels, might be a great option as they have great corporate loyalty programs.
5. Hot Property: Guesthouses and Short-term Apartment Rentals
Guesthouses are apartments leased out for at least a year, whereas short-term apartments are contracted per night. With major brands like Airbnb, VRBO, FlipKey, and more making the latter more accessible, it makes a lot of business sense to consider these economic albeit offbeat alternatives. In the case of a guesthouse, the opportunity for negotiation is immense, as the contract would span a longer period leading to major savings. But guest-houses are only worth it when they are occupied by employees on site for at least 80% of the year. So, choose your guesthouse location very wisely, if at all. In the case of short-term apartment rentals, negotiation may not always be possible. But you can spot affordable deals online and end up with a pragmatic, frill-free business accommodation at an attractive price. In fact, according to a Concur executive, the growth rate in the business traveller segment of Airbnb was “eye-popping” in 2014.
Your Customizable Travel Policy Template
6. Live by the Ten Second Four Hour Rule
As a matter of discipline, ensure that all bookings are made within four hours of the dates being finalised. Period. Why four hours? It gives everyone enough time to make informed decisions but also ensures that no one slacks off and loses out on greater discounts. Make sure this rule is pervasive so that the right scalar chain of communication gets activated as and when appointments and meetings requiring travel are finalised. This way the travel manager gets plenty of negotiation power because there is wiggle room aplenty. This way they can weigh in the various permutations and combinations of flight, accommodation, etc. at lower (early bird) prices and decide upon the best option. What if there are last minute changes, you ask? Well, the likelihood of last minute changes does exist but is usually low. In case any changes do occur, the margin of safety in your travel budget comes in handy. But that should not deter you from making early bird negotiations and big savings.
7. Encourage Employees to Maintain Logs
Another pervasive rule that could result in huge savings, in the long run, is the maintenance of travel logs by employees. When they are on a business trip, employees should be encouraged to document all their expenses (large and small) using simple mobile apps such as Concur and Expensify or even Evernote, Asana or our own virtual business travel assistant, Claire. You can also download a free travel expense report template here. When the employees turn in their expense reports, segregate the expenses into necessary and avoidable. Also, analyse the major heads of expenditure and any deviations from budgeted amounts, as these could become important points of negotiation with suppliers the next time around. Also use these documents as a data source on most-used travel destinations, employee travel preferences, feedback and try to identify spending patterns and trends. This exercise will also give you an idea of how much time and energy to devote to each component of corporate travel and in time, make you a travel negotiation guru!
8. Choose Cash Rebates Over Quality Cuts
When negotiating with travel vendors, maintain a firm position on cash rebates and other preferential partner discounts. Do not give in to service quality cuts easily. It may be tempting to think, “Oh, fewer hours of free wifi won’t hurt much.” But agreeing to service quality cuts puts you in an unfavourable position in the long run when you are negotiating. In some cases, the vendor might even think it’s appropriate to cut corners with you, which you do not want. Even if you are a small company, it’s best to negotiate specifically for price cuts and reserve quality cuts as the last resort.
9. Remember, the Minute Details Make All the Difference
In the spirit of full disclosure, it is essential to inquire about all the applicable tariffs, taxes, terms and conditions—or the 3T’s, so to speak—sometimes adding as much as 33% or more to your travelling cost. Also, be weary of surge-pricing in the case of taxis; be sure to maintain a reasonable buffer. Make sure these points are discussed before the handshake as these miscellaneous amounts can make or break your negotiation effort.
10. Company Cap All the Way
As a reward for long-term loyalty, you may request a company-special cap on prices of preferred suppliers, especially hotel chains. These price caps may be contingent on a minimum advance booking period. It’s also a good idea to negotiate deals for senior management, partners and CXOs separately, something like a “VIP Package.”
11. Negotiate for Key City Pairs
This tip is simple but a real life- (and cash-) saver. In a lot of cases, all business travel can be narrowed down to employees shuttling between two key business coordinates, e.g., New York and San Francisco is a popular city pair. Negotiate special deals for air travel for these pairs. This, coupled with the corporate guesthouse tip is a savings bonanza. So, harness the power of the Pareto Principle today!
12. Foster Supplier Relationships
Invest monetary and non-monetary resources in relationships with suppliers and do so sincerely. Know your SPOC (Single Point of Contact) on a first name basis and maintain cordial relations even when business travel is not in the cards. This can not only optimise your negotiation potential but also help in case of rare last minute bookings, where the SPOC can pull a favor as a goodwill gesture.
All in all, negotiating with vendors as an SMB is no child’s play, but having some structured strategies in your arsenal will give you the upper hand. As with any other skill, you’ll get better with time and develop your own style and tactics, too. If you are an SMB and have a few travel negotiation tricks up your sleeve, do let us and our readers know in the comments below. Happy negotiating to you!