Quantifying the business benefits of Managed Travel 3.0
In an earlier blog we introduced the concept of 'Managed Travel 3.0', which is driving our product development strategy here at Serko. As you'd expect, Managed Travel 3.0 is more of an evolution than a revolution. Armed with a better understanding of the buyer/traveller's behaviour and the latest technology, we've taken what was already great and made it better. Managed Travel 3.0 focuses on three core pillars:
The earlier blog focused heavily on the 'what' but didn’t do justice to the ‘why’, which is vital if we’re going to convince organisations to come with us on the Managed Travel 3.0 journey. This blog puts more flesh on the ‘why’ bones.
Managed Travel 2.0 has been around for the better part of 10 years and it's value proposition is well understood by the industry. In a nutshell - by getting employees to book their business travel through a purpose-built portal or Online Booking Tool (OBT) as it is known as, organisations can achieve higher levels of travel policy compliance and drive down cost. In practice, this means that travellers book the suppliers that they’re supposed to book, more often, and every trip is pre-approved before it gets cast in stone, which means the business cuts down on wastage and improves visibility. Serko’s success over the last 8 years is testament to the validity of the Managed Travel 2.0 value proposition.
Managed Travel 2.0's single biggest problem was (and indeed still is) leakage. Data from Serko customers show that most employees are quite happy using their OBT to book flights (upwards of 95% compliance) but have a far greater problem 'towing the line' when it comes to booking accommodation.
Even with the very best policy and employee incentive programs in play, hotel leakage still hovers around 40% for most organisations, which is better than the industry average for OBTs, but still high enough to be a problem. When we sat down and talked about hotel leakage with our customers, we discovered that end-users either didn't believe that they could book the hotels they wanted through their OBT or they believed that they could get better prices by booking online on leisure sites like Expedia.
Whether end users could or couldn’t get cheaper prices by booking outside the OBT isn't really important, as the driver for hotel booking through the OBT is now as much about visibility (in the light of new Health and Safety legislation) as it is about saving. For what it's worth, the data suggests that the vast majority of hotel bookings that happen outside of the OBT ultimately end up costing more than the Managed equivalent after all of the extras and changes have been factored into the total cost equation.
Managed Travel 2.0 didn't really have an answer to the leakage problem, but Managed Travel 3.0 does. It solves the problem by bringing the 'leisure' content that users are familiar with and want to book into the OBT. The results speak for themselves; by allowing users to book what they want, with brands they are familiar with, leakage is reduced significantly and wastage that is associated with non-refundable, inflexible leisure bookings is eliminated. The same logic applies to low cost airline providers like Jetstar, which are increasingly blurring the lines between business and leisure and need to be bookable through the OBT to minimise air leakage. With this insight, Serko is focused on integrating as many low cost hotel aggregators and as many of the low cost air providers into Serko Online as possible.
Let’s move on to explore role of mobility and how it can drive incremental savings for Managed Travel programs. Over the last 10 years many organisations have had a chequered experience with mobility. The theory is that by mobilising enterprise apps they become more accessible and usage increases, which is logical, but the costs associated are significant and the benefits that flow can be questionnable. The good news is that the mobile business case for Managed Travel is extremely positive, particularly here in Australasia.
Here in Australasia approximately 70% of travel bookings are made by travel administrators and 30% are made by actual travellers. This figure contrasts with the USA and Europe, where the numbers are effectively reversed. In Australasia this means that a there’s a huge amount of administrative resource being applied to travel that doesn't really need to be there. Why Australasia is different to the rest of the world is not entirely clear, but regardless it does present an opportunity to unlock more savings.
A cornerstone principle of Managed Travel 3.0 is the idea that travellers, regardless of seniority, should administrate their own travel. Having researched the problem extensively, we now know that in order to get the traveller to take on the role of primary booker, it requires a fairly fundamental rethink of the booking process and in particular the booking medium. Travellers are by definition mobile, so it stands to reason that the booking medium should also be mobile. The problem is that mobile phones are small and business trips are notoriously complex.
Under Serko’s vision of Managed Travel 3.0 the vast majority of trip bookings are initiated and managed by the traveller on a mobile device through a simple, highly intuitive and predictive interface that automates the vast majority of the workflow. All the technology to do this exists today, it’s just a matter of putting it into practice and getting travellers to understand that it’s far easier to book and manage travel themselves than relying on a PA, administrator or Travel Agent. Once this behavioural shift takes place, and we’re confident it can, then organisations will be able to unlock resource savings that are currently tied up administrating Managed Travel 2.0. Serko's vision of mobile booking is quite radical and is being worked on right now. It will be released to the market later in 2015.
The third value leg of Managed Travel 3.0 is a little more abstract but no less important. Unlike Managed Travel 2.0, which started and stopped at the booking, Managed Travel 3.0 recognises a business trip as a holistic experience that typically starts with a booking of some description, and ends with expense reconciliation. Between the two are a multitude of different steps, activities and interactions that all need to be supported if the traveller is to have a successful and productive trip. Again, mobile plays a key role in delivering this aspect of Managed Travel 3.0 and is at the heart of our Serko Mobile proposition. It’s obviously difficult to place a monetary value on happier, more productive and engaged business travellers, but if there was a choice between an engaged traveller and a disengaged traveller, wouldn’t you rather have one that’s got both feet in the game?
To conclude, we’re extremely excited about Managed Travel 3.0 and what it means for organisations and travellers alike. It’s been a long time coming, but we’re convinced it’s been worth the wait and we look forward to taking our customers on the journey with us over the next few months.