ROI on Travel and Meetings – Why Bother?

Have you noticed a surge of interest in measuring ROI on travel and meeting (T&M) spend?  I’ll get right to the point.  Trying to measure the return on travel or meeting spend is not worth the effort.

It’s like taking a long walk in the desert with a crappy map.  You wouldn’t do it by choice.

I get why suppliers, lobbyists and trade associations want to link spending with a positive economic return, especially in these harsh financial times.  I get why buyers would like some way to measure the ROI of their travel budgets.  And I like numbers  and metrics and quantifying stuff more than most people…so why don’t I like this quest to measure travel ROI?

It’s Impractical

With a couple of exceptions, I don’t see any practical way to produce reliable and meaningful measures of return on T&M spend. Yes, that’s a pretty short-sighted reason, especially from a guy who admires innovation.  But I’m stumped.  What are the measurable inputs (travel costs for sure; maybe productivity costs..what about opportunity costs?) and outputs?

As soon as you start thinking about measurable outputs of a trip or meeting, you see the problem – there aren’t any good ones.  By good, I mean robust enough to apply to most trips or meetings, and sturdy enough to be measured repeatably and accurately.  Not to mention the problem of defining the payback period…should it be a month, a quarter or a year?

There aren’t many good answers to these tough questions, especially at the level of measuring a trip or a meeting’s ROI.  An exception is a macro-economic study, such as the one done by Oxford Economics. (And after trading e-mails with the author about that study’s methods, I remain skeptical of its findings).

What can be measured, or at least estimated,  is the degree to which a trip’s goal was met.  Did you improve the relationship?  Did you sign the deal?  Did you pass the exam at the end of the training session?

Measuring the outcomes of a trip or meeting, rather than outputs, makes some sense…up to the limits of the next point:

There’s a “Good Enough” Solution

It’s called management.  It requires subjective decision-making using the facts at hand. Is this meeting worth the $75,000 cost?  Is that trip worth $1,200?  What if we do a Webex or a Halo meeting instead?  That’s how T&M budgets get authorized, and that’s how T&M spend gets evaluated.

It’s a remarkably efficient method – no paperwork, no number-crunching.  Precise? No.  Effective? Usually yes, or you eventually get new management of the T&M budgets.

What’s the Best Practice?

Think about some other big spend categories and the extent to which anybody is measuring their ROI.

Take telecom.  Telecom is like travel, in that both typically involve communicating with another person for any of a bazillion reasons.

Can you imagine having to calculate the ROI of your last phone call?  Too granular, you say?  How about measuring the ROI of your annual BlackBerry/iPhone subscription plan?  How is travel so different?

Or take something less interpersonal, but even more prevalent – the desktop computer category.  Does any buyer or manager try to calculate the ROI of purchasing a computer for a new employee?  Not that I know of.

Instead, a manager makes a judgment call that the employee (or traveler) should or should not have a computer (go on a trip), given the expected cost of a computer (trip). Once that decision is made, then the procurement process takes over to ensure that the company gets the best value it can.

Which brings us to the topic of savings and how you’re measuring that all-too-critical metric.  For my recent thoughts on that, see this post.

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15 Responses to ROI on Travel and Meetings – Why Bother?

  1. Rob Wald says:

    Hi Scott,

    Long time no talk and good post here.

    Agreed. For those who believe they can solve this problem, you can also point to any number of “dead bodies” who have already attempted and failed. Not sure exactly what it is, but perhaps because the travel industry is one of the largest if not the largest industry (depending on how you define it), many people smell blood (oppty) in solving “age old” problems without doing the due diligence that perhaps many others have gone down the same rat hole and fell short.

    Anyway…

    Cheers,
    Rob

  2. Scott Gillespie says:

    Thanks, Rob – and good to hear from you!
    Glad you and Gerald agree. Rob, you saw a lot of this effort back in your days with e-Travel. Maybe some day somebody will solve this problem, but for now there sure seem to be better ways to spend management’s time.

  3. Hi Scott, I share your scepticism about the validity of some of the claims linked to the ROI on travel.
    Travel is still a business expense, rather than an investment. This means it can help to be productive but not really achieve a return in its own right.
    Having said that, I applaud the industry’s attempt to measure the value of travel. Are the models currently deployed bullet-proof? Probably not. Should companies spend days or weeks to apply those to their own travel spend? Almost definitely not. Yet should companies apply the logic to gauge if they spend too much and/or enough on travel (eg through a “travel intensity” or “expense productivity” metric) by tracking those metrics over time, against the sector they work in or amongst their business units ? In my eyes critical for strategically managing travel!

    Check out a related short article on http://tinyurl.com/yby66j5

    A quick side note: As you say, the quest for a detailed ROI analysis per trip is probably not worth the effort – a high-level cost/benefit judgement is. Strangely enough this is still not an established way even in companies with pre-trip approval.

  4. Scott Gillespie says:

    Hi Torsten,

    Thank you for the link. The article has a good summary of the two ROI studies. Both agree there is positive economic value resulting from business travel, as expected. After all, it would be hard to understand a $100 billion industry if it didn’t create some value, right?

    Regarding the merit of a metric like “travel intensity” (presumably something like travel spend divided into revenue?) – it seems so much like other benchmarks – very descriptive; not very prescriptive, and so not valuable beyond a giving managers an answer to the question “How do we compare to our peers?”

    The problem is no one can use these benchmarks to tell if they should spend more or less than the average. The high-spend firm may believe in taking lots of sales trips and team meetings, and the low-spend firm may believe in phone calls and webexes…how can anyone say which is best?

    The one thing that benchmarking always produces is a statistic. What it so often fails to do is provide insight and direction. That’s why companies need trusted advisors like you!

    Hope to see you soon. Perhaps at the Mastersin DC?

  5. Amon Cohen says:

    Dear Scott

    I have just read your piece with great interest because I am writing a feature on this subject for Supply Management in the UK. My first thought is that for a supposed ‘numbers’ man, you are sickeningly good with words too. You write as well as any professioanl journalist on corporate travel. It’s not fair!

    To the point of your article, I agree with you up to a point: trying to put a precise number on the benefit of a trip is – for now – an illusory quest. However, if you speak to some companies which have started to look at this in Europe, they say they have still gained from thinking about ROI, because they regard it more as a means of communication than a numerical calculation. Just by getting employees to think more systematically about what value they obtain from a trip will start to make them more prudent about travelling.

    This is even more valid a way of thinking if a company can offer its employees virtual alternatives to travel and make them consider travel as just one method of meeting among many. From this point, they can be encouraged to think about what are the additional benefits of face-to-face that could not be achieved by e.g. a video-conference. This may come back to what I started with: numbers and words. The additional benefit may be impossible to quantify numerically but even people writing down the purpose of a trip has its merit.

    One company I spoke to this very morning has ‘Meet more, travel less’ as its meetings/travel strategy slogan’, and that is exactly what its staff are doing, saving cash, carbon and time but boosting productivity.

    Best wishes
    Amon

    PS May I reproduce extracts from your article in my feature?

    • Scott Gillespie says:

      Hello Amon,

      Thanks very much for your kind words, and yes, you may quote any of this post as you see fit.

      More importantly, you’ve gone to the heart of the issue. As you say, it’s good to get travelers thinking about their options.

      Anything that helps them consider the costs and benefits of travel and its alternatives has to benefit their employer. They’ll improve their ROI on travel and meetings – with or without any complicated calculations.

      Great angle on this topic, Amon. Thanks for sharing it!

  6. Adrian says:

    Dear Scott,

    I have read with interest your posts and find them most informative. There is one aspect of business travel I would like your opinion on though which I have been unable to find an element on within the site.

    Intergrated Expense Management Tools. I am finding it hard to decipher the tools used by HRG,CWT, AMEX and BCD and indeed establish what tool if any is the best to utilise or if indeed a tool used by a TMC is the solution? What are your thoughts on the future of intergrated expense management tools and the future for them? Will travellers/employees simply be able to input travel expenses via a PDA with no recomciliation of paper work etc?

    Would really appreciate your advice or direction in where to establish the main players, what is the best in the market and what are the pitfalls etc?

    Best regards

    Adrian

    • Scott Gillespie says:

      Hi Adrian, welcome to the conversation! You ask some very relevant and timely questions. I’m glad to give my views on a bit of this, but would be happy to hear from others with far more expertise in this area.

      Regarding Integrated Expense Management (a.k.a. end-to-end) solutions, I think they are very valuable if done well. By done well, I mean offering an easy user interface, helping travelers comply with travel and expense policies, idiot-proofing the mid-office functions involved in booking travel, capturing meaningful data and streamlining the traveler’s workload when filing expense reports.

      You raise the question of a single-supplier solution versus multiple suppliers. I don’t have an informed opinion here, but will say this. Many buyers like the principle of “One neck to choke”, and so favor the single-supplier solution.

      The optics of a single supplier to control are often more attractive than the reality. And if the technology is truly designed well by the independent suppliers – such that the handoffs work seamlessly as promised – then I see no harm in that approach.

      My view is that unfortunately the technology is not often designed well, and so there are more problems with the implementations and ongoing processing whenever you involve multiple parties. But that’s not to say the integrated single-supplier solutions don’t have their share of problems.

      I wish I could be of more help here. Perhaps some readers with more experience in this domain could share their views??

  7. Doug Blakely says:

    Hi Scott – great discussion hear … anyone who has managed a travel program can certinaly align with this.

    You’re right and I agree that trying to measure ROI is … well … there are better things to do with one’s time like out-of-policy spending and audits … that’s where a lot of the root cause problems exist…..
    …love this part of your writing

    ****There’s a “Good Enough” Solution

    It’s called management. It requires subjective decision-making using the facts at hand. Is this meeting worth the $75,000 cost? Is that trip worth $1,200? What if we do a Webex or a Halo meeting instead? That’s how T&M budgets get authorized, and that’s how T&M spend gets evaluated.

    It’s a remarkably efficient method – no paperwork, no number-crunching. Precise? No. Effective? Usually yes, or you eventually get new management of the T&M budgets. ****

    Thanks for the info and keep it coming my friend.

    All the best,
    Doug

  8. John Northrop says:

    Hey Scott and contributors. Very appetizing topic. I just finished reading the Dec 2009 Procurement.Travel article on ROI, entitled “Measuring ROI Moving to Science”. Within the piece, The Oxford study was acknowledged and an interesting methodology was described by Catalyst Group president, Todd Hanson.

    Todd suggests that measuring meetings’ value can be done at five levels, ranging from basic (level 1) to complex full financial ROI (level 5). Not every meeting should be measured at level 5 (in fact, only the larges/most expensive meetings, he says) but all meetings should be measured to level 3. I tend to agree with his reasonable statements, but would want to understand the HOW behind gathering the metrics – my view is that automated data gathering must be employed.

    I’ll bullet the levels below, but for detail, check out the aricle, penned by Mary Ann McNulty.
    Briefly, Hanson suggests five levels of measurement:
    1.) Measure reaction and perceived value of the participants.
    2.) Measure the learning, or skills/contacts, gained.
    3.) Measure the USE of info, knowledge or skills/contacts
    4.) meassure the business impact and consequence linked to the meeting (getting harder, eh?)
    5.) measure actual return on investment, typically evaluated over several months…

    Happy to hear views on this from others, as resource constraints is on everyone’s mind, I’m sure….

    JHN

  9. Scott Gillespie says:

    Great points, John – thanks for sharing this!

    Here’s a link to the article John references above:
    http://www.procurement.travel/news.php?cid=measuring-roi-analytical-tools-value-of-travel-science-events.Dec-09.01

    It’s hard to argue with the quest to evaluate the value of a trip or a meeting, however broadly one may wish to define value. Anything that gets managers to think more critically about value before and after an event, purchase or investment has to be good.

    This topic will be covered at the Masters Conference in D.C. in a couple of weeks. Mr Hanson of the Catalyst Group will be on the panel, as will Adam Sacks, the author of the Oxford Economics study mentioned in the original post.

    Stay tuned for an update from that session.

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  11. Ira says:

    Hi Scott. Hello everyone.

    If I may, please allow me to be a bit provocative on the topic …

    (Where I’m coming from:the former Director of Financial Planning for the now defunct Rosenbluth International, freelance analyst and consultant, and now, as an analyst and evaluation professional working in the world of Learning & Development)

    The Level 1-5 evaluations noted by JHN above are the Kirkpatrick/Phillips levels, typically used since the 1960s in Learning & Development to evaluate the effectiveness of training and training programs. Today, the same ROI debate rages on in L&D.

    The actual truth is – there are many ways to measure ROI. Kirkpatrick/Phillips is just one set of many different evaluation methodologies. And ROI, which is a ratio from Finance, is a very specific measurement which is intended to answer the question – The company has a limited amount of funds to invest towards our future. We can stick it into an investment fund, or buy a new factory, or hire people, or travel (you get the point). The question of ROI is a question of comparative value, strategy and corporate decision-making. The ROI equation is one of “compared to what?” (When you ask about the ROI of a phone call – there really aren’t any good or cheaper alternatives – so the calculation of ROI isn’t worth the investment in analytical time.) But when you ask about the ROI on travel or on meetings (or a trip or a particular meeting), the question is – the value compared to what? To some less costly alternatives.

    There are other possible analyses; ROE, or Return on Expectations, for example. What did the decision-makers and leaders expect from X? Were those expectations met or exceeded?

    Evaluation professionals know that there is never one right answer – but there are always several pretty-good estimates with hard numbers, and when they all tend to point toward the same range of numbers – well then, there you have your answer – good enough to make comparative decision calls. That is, it is the preponderance of evidence that matters, not a specific number. Evaluation of ROI, then, would never be sufficient for an accountant who requires every debit and credit to tick-and-tie, but is sufficient (and necessary) for the enlightened CFO who is charged with investing the firm’s funds wisely and responsibly.

    When asked to product an analysis, evaluation professionals know to ask first, “What sort of measurement will you require? How are you quantifying the outcome? What level of value are you expecting?”

    There – that’s enough for now. If anyone has any questions, or if you’re looking for an experienced corporate travel analyst and evaluation consultant – get in touch. ira@analyticalconsulting.info

    Best regards,
    Ira Greenberg

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