Q&A in the News
April 15, 2010
Companies must decide: Is a business trip worth it?
Companies must judge when technology will work or if only face-to-face will do
For Greg Knight, a machinery company executive, being on the road is a key part of doing business. But in the last year, he and his colleagues have pondered every trip and asked: Would it be worth it?
"We really needed to look at, is this trip the difference between closing business?" says Knight, a vice president with AMT Machine Systems in Columbus, Ohio. "Is this necessary for some reason?"
Sometimes the company's employees would decide that a phone call or e-mail would do. "But ... there are times when nothing works as well as sitting in front of someone talking to them," he says. "We really rely on our people to be the best judge of when that is the case."
Companies are sending more of their workers back on the road this year after having slashed travel budgets and halted trips to save money during the recession. But even as the economy slowly rebounds, many business analysts and advisers say businesses will continue to carefully weigh when travel is necessary and when it makes more financial sense to have a staff member stay put and connect with a client or colleague by video screen or conference call.
"Right now, the focus for our members is looking at whether that trip brings value back to the company," says Megan Costello, executive director of the Association of Corporate Travel Executives, whose membership comprises the people in companies who oversee travel. "There's a shift, a new way of doing things that I don't think will go away."
To make that first sales call, launch a product or close a deal, corporate travel experts such as Costello say businesses will probably decide a staff member needs to travel and see a client face-to-face.
But internal meetings are increasingly taking place through video conferences or webcasts.
American Express Business Travel has consultants who will talk with clients about whether a trip is essential and what alternatives could be effective. A growing number of companies are using online tools to quiz would-be travelers on the purpose of their trips and sometimes suggest that they consider a virtual meeting instead.
"I have never seen as much analysis going into decisions with regard to travel," says Carol Ann Salcito, a travel management consultant to corporations who is based in Norwalk, Conn.
Competition can spur travel
Business travel dropped precipitously last year. The U.S. Travel Association says roughly $215 billion was spent on business travel in 2009, down from $244 billion in 2008.
The travel industry predicts an uptick this year. There was a 1.5% increase in spending on travel and entertainment during the first quarter of 2010 compared with that period last year, says Mike McCormick, executive director of the National Business Travel Association, or NBTA, and a 2.8% increase during the first quarter of 2010 over the fourth quarter of 2009.
And that travel can spur more — for competitive reasons.
"The stabilizing and growing economy puts companies, competitors, back out on the road — especially the sales departments," says Kevin Mitchell of the Business Travel Coalition. "So you can't really sit back like you were able to comfortably do through most of 2009, comforted in the knowledge that most of your competitors were scaling travel way back as well."
Some business-travel analysts say that for businesses to profit and grow, travel is essential. An NBTA study conducted by IHS Global Insight determined that for every dollar spent on corporate travel, the average business would see $15 in profits.
"The only way to grow sales is to go out and get them," McCormick says. "All it takes is for (a company) to lose that piece of business because their competitor showed up and they didn't, and they're back on the road."
Ultimately when evaluating whether to hit the road, corporate travel experts say, companies are trying to figure if the potential for revenue in the near future or down the line is greater than the cost of the trip.
Such decisions are often as much art as science. They depend on many factors, including a company's priorities, the service or product it's selling, and the status of a particular client relationship and transaction.
"It's very much down to individual companies and what they prioritize," says Eric Bausman, of Carlson Wagonlit Travel, a global firm that helps companies manage corporate travel programs. "Typically ... those initial introductory meetings, the very first sales calls until you make the sale, those are the ones you really target for being in the room with the customer."
Once a relationship is established, Bausman says, a business might consider visiting the client less frequently, supplementing "those trips with virtual meetings: cellphone calls, Web meetings and video conferences."
Giving technology a try
The economic downturn has compelled many businesses to consider or better utilize virtual meeting technology, corporate travel experts say.
Options include telephone conference calls, streaming a meeting via the Internet, or telepresencing, in which large screens can make meeting participants in another part of the world appear to be practically sitting across the conference table.
The Association of Corporate Travel Executives says the percentage of its members who were "seriously looking" into using videoconferencing rose from 21% in 2007 to 81% in 2009.
The cost of communication technology has dropped and quality has improved, industry analysts say.
Costello says it's increasingly being used by companies to cut down on internal meetings that would require travel — trips that many of the association's members said were using up to 40% of the corporate travel budget but not producing revenue.
An American Express Business Travel survey conducted in January found 74% of respondents said they use or plan to use audio conferencing as an alternative to travel, while 71.6% were using or planned to use Web-based online conferencing or videoconferencing as an option.
"In the vast majority of our client discussions ... in terms of new enhancements with our program or areas of interest they'd like us to explore, virtual meetings are always at the top of the list," says Issa Jouaneh, a vice president at American Express Business Travel.
American Express Business Travel launched its virtual-meeting expert service in August. Consultants work with a client considering a corporate trip, asking about the meeting's goals and such things as the number of people who would attend. Based on the answers, they advise whether a virtual meeting might be more efficient.
Many businesses are also using corporate online booking tools to help would-be road warriors decide whether to go or stay.
GetThere — a business unit of Sabre Travel network, which provides such a tool — says that last year many companies moved the question asking about the purpose of the trip from the end of the booking process to the beginning.
Depending on the reason you give — "training," for example, or "customer visit" — a message is triggered as to whether to consider an alternative such as a Web conference or if you'll need to get approval for the trip.
Of GetThere's more than 3,000 clients, the number using dynamic messaging — which also advises on preferred suppliers if you are going to take the trip — more than doubled last year.
Eventually, says Chris Kroeger, GetThere's president, the booking tool could calculate which way to go.
But even if the dollar figures say a teleconference is the way to go, Kroeger says, the person involved should be able to say if the meeting is best done face-to-face.
When only a meeting will do
Although some advisers expect some business trips will be replaced by technology, they say technology won't become a wholesale substitute for meeting in-person.
"It's not that we're going to suddenly switch from all meetings face-to-face to all by virtue of technology," says John Millikin, who teaches strategy and human resources management at Arizona State University. "You may have a rise in the use of technology to supplement face-to-face meetings so that you are getting a little bit of the best of two worlds."
Last year, Knight, the machinery company executive from Columbus, says his business trips were reduced by at least 25%. He adds that his company has used videoconferencing for some training and is exploring using it for other purposes as well.
Still, he says, "I just don't believe you can exactly boil it down to: 'Here are guidelines. Either you can close business with this trip or there's no trip.' I think that's a mistake."
The impact of each trip has to be examined, Knight says.
"There are certain places where it's obvious I need to go," he says. "Sometimes that's to hold a hand. Sometimes it's to help them understand a concept on a project that you're just not getting through by e-mail or phone or documents."
For some businesses, there are no complex calculations to make.
Earl Quenzel, who with his wife has an advertising and Web marketing agency in Fort Myers, Fla., says that during the depths of the recession, they took pay cuts and reduced their fees.
But they refused to cut travel. And he's not about to start now.
"If a customer wants to see you, you go," Quenzel says. "If you even think the customer might want to see you or could use a little TLC, you go see them. And the same with a prospect. ... You don't cut the things that involve (serving) your clients or winning new business. It's just stupid."
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