The Real Question Behind Travel ROI

Charles Petruccelli, President of Global Travel Services at American Express, sees great value in helping companies find their industry-optimized level of travel spend.

Where American Express leads, the travel industry often follows.  So the quest for finding travel ROI isn’t going away.

But is it the right question to answer?  If it isn’t, then what is?  Here’s my take:

I think American Express and other industry leaders should absolutely want to help companies optimize their travel spend.

As Herve’ Sedky, SVP and GM, Global Business Partnerships at American Express Business Travel, said at the Masters Program last week, “Travel is like cholesterol.  There’s good travel and bad travel.  We want more of the good and less of the bad.”

That’s what we’re really after, isn’t it?  How do you recognize which trips and meetings are going to help grow revenues, cut costs, improve quality or ignite innovation? Yes, the cost of travel needs to factor into the decision, especially given the range of travel alternatives.

But managers aren’t going to worry about calculating any after-the-trip ROI number on their travel spend.  What they do want is an easy, credible answer to this before-the-trip question:

“What’s the most effective method for achieving my goal?”

You know what? That’s a worthy question, and it’s ripe for an innovative answer.  There’s got to be a market for helping companies make good decisions about how they allocate their spend between travel and travel alternatives.  Slashing travel budgets by 40% and stopping all “non-essential” trips and meetings  is just too blunt of an axe.  No doubt “good” travel gets eliminated, to the detriment of future growth and profits.

We’re already seeing some progress here.  I saw these two slides presented by Jeremy Stubbs of Sabre’s GetThere and Waseem Sheik of Cisco at the ISM/NBTA conference in Tampa last month:

The framework says that there are two key dimensions to understanding the appropriate method for collaboration.  If you know the complexity of the topic and the emotional context, you should have a good indication of how to communicate.  This slide gives more details about what goes into thinking about these two dimensions:

This approach strikes me as much more practical than trying to calculate a trip or meeting’s ROI.  It gives you an easy-to-understand framework, doesn’t require any numbers and has good “face value”, meaning it makes sense at first glance.  No doubt more can and will be done with this type of an approach.  Good stuff.

Back to the issue of travel ROI.  There was a very good panel session moderated by Christa Degnan Manning at the Masters Program last week on this specific topic.  Between the questions raised in the audience, and Paul Tilstone‘s well-crafted counterpoint to my skeptical views on this topic, I’ll lay out a more constructive approach to tackling this topic.  If we’re going to answer that question, we might as well do it as best we can.  Look for another post on Travel ROI soon.

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This entry was posted in Innovation, Metrics and KPIs, Travel Management and tagged . Bookmark the permalink.

5 Responses to The Real Question Behind Travel ROI

  1. Hagen Hennrichs says:

    you always get what you spend for, and given the complexity of human interaction and communication none of the media that are available to be exhausted can deliver the person to person approach. Daily activities illustrate how challenging issue resolving can become via email exchanges or even conference calls. 1 hr of face to face and side by side work can resolve hindrances and further business that cannot be clarified in weeks of email exchange and conf calling. Cost saving is becoming a threat to successful business in this context. If cost saving is the driver of ROI assessment one has to be very aware of respective countervaillance ….the potential cost of not investing in personal meetings is much harder to assess than the historic cost of related travel at a given point…

  2. Scott Gillespie says:

    Your point “Cost saving is becoming a threat to successful business in this context” goes to the heart of the issue. It’s easy to calculate the ROI’s denominator (cost), and very hard to calculate the numerator (benefit). That’s one reason I’m skeptical of any effort to manage travel by the ROI metric.

    I’d much rather see managers use a well-informed framework for making good decisions about the best method for meeting the business goal. As you say, many issues can get resolved with face-to-face time. Let’s be sure that managers don’t overlook those opportunities.

  3. herve sedky says:

    Scott – thanks for sharing my quip – on reflection I’d say we really think of making sure our clients have a balanced connection diet – everything in moderation!

    But seriously, we are investigating what is the optimal mix of collaboration by role, function and business purpose: in person, telepresence, video, online, on a company’s waist line, ie bottom line.

    Of note, we just released an extension of the ROI study our eXpert insights research practice did with NBTA that looked at the impact of strategically managed travel on revenues and stock price, just like doctors look at weight as well as body mass index (BMI).

    While one may not be able to connect every single trip to a specific ROI, there are key metrics like revenue, profitability, and stock price where companies that manage travel well will outperform their peers.

    We’ll be focused on supporting the analysis of those metrics as they correlate to the travel category for real ROI of travel as well as strategic travel management – healthy practices for any industry.

  4. ROLFE SHELLENBERGER says:

    Scott:
    I tried to contact you a while back and your email address bounced. I’ll get it right if you reply to this be email.

    A solution to this issue might be adoption of a recommendation I originally made in 1989: create trip models (templates) for all corporate destinations predictably needed. Add new trip models by “remembering” first itinerary covering that destination. Modify standard trip models for individuals with special requirements, e.g. lawyers, engineers or by their preferences, assuming these do not undermine cost control. A corporation’s top 50 destinations would probably constitute a 90% coverage of all travel activity. Note that trip models can be created for POV-served travel as well as air, rail or marine transportation.

    Planning in advance is only superficially performed currently. And self-booking is a very costly practice with scant oversight and it’s too dependent on supplier selection priorities. Anyone who has shopped for hotels on the Web knows that at best it’s a crap shoot.

    • Scott Gillespie says:

      Hi Rolfe,

      My apologies for the long delay in responding here. My current e-mail address is scott.gillespie2008@gmail.com

      Your trip templates for predictable journeys makes sense, especially for travelers who may not be as familiar with the destination (e.g., going to the corporate training facility once a year). I suspect we’ll see more of these as the GPS functionality improves in the smart phones. The phones could store the template, then provide turn-by-turn directions en route.

      I’m not sure that the template concept relates directly to the question of ROI on the trip, other than to give the traveler confidence that the template results in a satisfactory low trip cost. Perhaps you see more here?

      (By the way, my e-mail address is scott.gillespie2008@gmail.com)

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