The years 2020-2022 saw a slowdown in economic growth globally. The COVID-19 pandemic disrupted all markets, with companies struggling to grow revenues and generate profits. Managing business travel was challenging, with many offices going remote and some operating in a hybrid work culture.
However, the post-pandemic business travel industry has bounced back, with industry experts claiming a whopping investment of $1.4 trillion and a full recovery to the pre-pandemic levels by 2024. With corporate travel back in full swing, organizations worldwide must look for better ways to improve their return on investment (ROI). And this can be done only with a holistic approach.
What Does ROI in Business Travel Mean?
Return on Investment (ROI) in business travel refers to the financial gains or benefits a company expects to achieve about the costs incurred for business-related trips. This measure is used to assess the profitability and effectiveness of travel expenses, keeping in mind the tangible and intangible outcomes of the travel activities.
By calculating the ROI of a business travel activity, companies can calculate and evaluate their potential profitability and make informed decisions about their business travel management.Â
In the context of business travel, the ROI formula is typically expressed as:
ROI = (Net Gain from Business Travel-Total Costs of Business Travel)/Total Costs of Business Travel x 100
A positive ROI indicates that the financial returns from the business travel activities exceed the associated costs, signifying a profitable investment. Conversely, a negative ROI suggests that the costs outweigh the benefits. It’s essential for businesses to carefully evaluate and manage their business travel expenses to ensure that they align with strategic objectives and contribute positively to the company’s overall performance and growth.
Monitoring and analyzing ROI in business travel can help companies make informed decisions about travel expenditures, optimize travel policies, and enhance the overall effectiveness of their business travel initiatives.
What Happened to Business Travel ROI in 2023?
According to a study by Oxford Economics U.S.A, business executives indicated that the average return of business travel on revenue was between $10 and $14.99 per dollar invested across different types of trips.
- Customer meetings were cited as having the greatest returns, in the $15- $19.99 per dollar invested.
- ROI for conferences and trade shows ranges from $4 to $5.99 for each dollar spent.
- Incentive travel investments yield more than $1 to $4 ROI.
| Trip Type | Avg. Travel Budget | Return on $1 of Investment |
|---|---|---|
| Customer meetings | 34% | $15-$19.99 |
| Conferences | 10% | $4-$5.99 |
| Trade Shows | 10% | $4-$5.99 |
| Incentives | 5% | $4+ |
U.S. companies have experienced a profit of more than $4 for every dollar invested in business travel, which means the revenue increased by 15X. Hence, companies that invest in business travel experience returns that more than warrant the investment.
What’s in Store for 2024?
Corporate travel in 2024 will prioritize maximizing return on investment (ROI) over traditional practices. The new norm is to carry only essential items and focus on ROI evaluation for every trip. Business trips directly linked to revenue generation, like deal closures, will receive priority for approval, while visits centered on relationship-building will face stricter evaluation processes.
In 2024, the landscape of business travel ROI is set to undergo further evolution, driven by advancements in technology, changing corporate priorities, and a heightened focus on sustainability. Companies will increasingly leverage data analytics and predictive modeling to optimize travel expenses and enhance ROI. Additionally, there will be a shift towards more personalized and experiential business travel to foster stronger client relationships and drive long-term value.
4 Approaches that Companies Must Follow for Improved ROI in 2024
If your organization is looking to improve travel ROI in 2024 and beyond, then here are some of the holistic approaches that you can adopt:
1. Reward Early Birds
Early flight bookings are a common phrase that everyone is well aware of. However, it still holds true in today’s day and age. With many employees traveling globally for business purposes, there is a chance of budget leakage if flights are booked at the last minute.
If you are a cost-conscious company looking to improve your ROI, then early flight bookings are the key. As per the data on the ITILITE platform, 50% of users booked flights and hotels at least 10 days in advance.Â
Moreover, you can reward your employees through incentives for booking early flights. This helps save up a lot of travel costs, which otherwise shoot up during last-minute bookings. Companies can also make last-minute approvals stricter to avoid any unnecessary cost leakages.
2. Non-negotiables of Business Travel Approval
One of the primary blunders that most companies make is implementing a soft approval system. A soft approval system typically refers to a process where approval is granted with certain flexibility or informality. Employees can make travel bookings without approval from their manager or higher authority. However, soft approvals can lead to cost leakages and affect your company’s bottom line.
A hard approval system can significantly reduce travel costs. A hard approval system usually has well-defined criteria, strict guidelines, and a structured workflow that must be followed to obtain approval. With hard approvals in place, travel managers or authorities must approve the trip before any bookings are made.
According to a survey by ITILITE, 70% of companies have mandated hard approvals, which helps them gain greater control, avoid out-of-policy bookings, and save travel costs.
3. Flight Re-Shop and Unused Tickets
Companies worldwide are doubling and implementing strict measures to reduce corporate travel costs for better return on investment. A technological solution such as flight reshop can significantly reduce your budget.
The price drop and reshop feature on ITILITE tracks flight prices after employees have made the bookings and re-books the tickets automatically whenever the price drops to the lowest. The amount saved is transferred back to the company’s account. This helps companies save extra on flight bookings.
Unused flight tickets can significantly increase your company’s expenditures. According to Business Travel News, in 2020, many companies across the globe reported having 1 Mn. dollars in unused tickets. In such scenarios, if these tickets are not utilized or recovered, they can impact your company’s financial health. At ITILITE, you can track unused tickets, analyze balances and expiry dates, apply for a refund, or transfer the ticket to another employee whenever possible. This helps save more and provide better travel ROI.
4. State-of-the-art technology for Higher ROI
Many companies have realized they need modern technological support to ensure high ROI. An advanced T&E solution, which gives a virtual travel consultant access, can help companies improve ROI. Virtual travel consultants like ITILITE Mastermind compare travel and expense data against industry standards and suggest where you could have saved more.
It uses machine learning and predictive analytics to analyze your company’s spending behavior, policy violations, and last-minute travel bookings, which will give you an insight into cost leakages. This will help you avoid any unnecessary spending in the future.
Green Business Travel for ROI
Green travel, or sustainable travel, is a new element that recently entered ROI. Corporate travel contributes to global warming primarily through the combustion of fossil fuels in transportation, particularly aviation. Air travel releases CO2 and other pollutants into the atmosphere, leading to the greenhouse effect and contributing to climate change. The environmental impact of business travel is substantial, with long-haul flights emitting significant amounts of CO2 per passenger.
According to data by Reuters, there is a shift in corporate behavior as many businesses continue to curtail air travel in favor of more sustainable alternatives. Major companies such as SAP, PwC, and Lloyd’s Banking Group stand out for slashing corporate air travel emissions by over 75 percent, signaling a concerted effort to prioritize environmental concerns.
Green travel contributes to a healthy environment, improves brand image, enhances employee satisfaction, complies with regulations and policies, and reduces carbon footprint, among many others. Customers want to invest in green travel as more people have become environmentally conscious. They are looking to travel in airlines that use biofuels instead of kerosene or jet fuel, asking for carbon footprint reports, offsetting carbon emissions, and many more.
Therefore, investing in green business travel can help you save money, reduce carbon emissions, and promote sustainability. This can increase profitability, improve brand image and customer loyalty. Although it may seem like a huge investment, it is beneficial in the long run as it helps save costs, increases sales, and, in turn, increases your travel ROI.
How Can ITILITE Help You Improve Your Company’s Travel ROI?
The business travel industry is a billion-dollar industry and is projected to reach $2.1 trillion by 2031, growing at a CAGR of 9.5% from 2022 to 2031. Hence, companies with employees traveling often for business must monitor their travel spending carefully for a good ROI. However, ensuring a good ROI requires careful planning, analysis, and ongoing evaluation. Following the tips outlined in this blog can minimize costs and provide better ROI.
If you require further information and assistance, ITILITE can help. ITILITE corporate travel management software can give you an eagle-eye view of your company’s travel spending based on employee level, department, destination, transport, etc.
Additionally, our virtual consultant ITILITE Mastermind will help you identify cost-saving opportunities, thus ensuring better travel ROI for your company.
Get a free demo of ITILITE to know more about our advanced features.
