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Lesley's Column

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12th September 2016

Measuring your travel savings

How does an organisation capture their travel savings in a meaningful way? And what actually qualifies as a saving?

Companies tend to measure travel savings in different ways, often in line with their own financial metrics which don’t bear much resemblance to the reality of corporate travel.

Some TMCs benchmark savings against the ‘full’ fare on a given route or the rack rate at a hotel. But with prices varying on a daily basis that’s hardly accurate and, after all, who pays the full price these days?

One method we’ve found that works well is to agree a benchmark average fare or hotel rate for a given route or city (for companies with multiple destinations, simply use the top 10 as this is likely to cover at least 80% of the total spend).

To work out the benchmark average fare, take the average prices paid at the start of the contract using the fares/hotel rates paid during the three-month period leading up to that time. Then, for the duration of the contract, measure the current average fares/rates against that benchmark.

It’s then a simple calculation to multiply the number of bookings by both the benchmark price and the current average price. The difference will be the ‘saving’ – or the cost increase if things have not worked out as expected.

It’s a simple measure that is easy to understand and sell to internal stakeholders.

Inflation can be added to the benchmark prices if required. If there are any glaring anomalies, these can be investigated and explained through your or the TMC’s local market knowledge.

If these results are tabulated in a spreadsheet, it’s a simple matter to add additional tabs/columns for other savings you’d like to record, such as Waived Cancellation or No Show fees, creative airfare pricing, savings over previous TMC contracts, etc.