Business Travel

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Business Travel

Business travel is a significant expense for companies of all shapes and sizes. Indeed, business observers cite travel costs as one of the largest cost categories for many companies, sometimes close to payroll, data processing, and a few others. Given this reality, business surveys often cite cost containment as the single most important element of travel management.

Certainly, several American industries rely on business travelers for their continued existence. But while business travel is commonly associated with huge corporations, many small businesses rely on the practice as well to make sales, keep in contact with vendors, market their products or services, and keep up with industry trends (via trade shows, conventions, etc.). Indeed, intelligent choices in the realm of business travel can be a major boon to small businesses hoping to curb spending without sacrificing in other business areas.

With this in mind, business consultants urge companies to implement written policies on all aspects of business travel, including spending limits on lodging, meals, entertainment, transportation, etc. Businesses are also urged to establish a person or department responsible for coordination of travel needs and to consolidate their travel needs with one agency. By implementing such steps, companies can register savings in a number of areas while still attending to their basic business needs.

HOTELS

Several factors are typically taken into account when a hotel is selected for business travel. Convenience of location (proximity to client, field office, or airport), quality of room, and quality of service are all major considerations. But price is often the paramount consideration, especially if other elements of the hotel—location, etc.—are acceptable.

Small businesses can pursue a couple of different strategies to cut down on lodging expenses. Writing in Nation's Business, Peter Weaver noted that "you can sometimes cut one-half off quoted room rates by getting your reservations through a hotel broker. Hotels often designate 10 to 15 percent of their rooms to be sold by brokers at deeply discounted rates because these specialized travel companies can guarantee the hotels business in the low season and can bring in new customers all year … Hotel brokers generally find the biggest discounts among the largest chains in major metropolitan areas and resort spots. But you can often get even lower rates by staying at budget hotels." In addition, surveys and studies indicate that small business owners are often able to cut their lodging expenses by negotiating discounts of as much as 30 percent if they provide a large volume of business to a particular hotel. Finally, business travelers should keep in mind that many airlines will pay for overnight lodging in the event of a cancellation or major delay (more than four hours) if they receive a request for such assistance.

AIR TRAVEL

Small businesses can save huge amounts of money on air fare if they are able to plan trips in advance. This is not always possible, of course, and there may be instances in which the company may simply have to bite the bullet and pay full price for a short-notice trip. As one travel expert admitted to Nation's Business, "You always pay top dollar to the airlines by making your plans, or changing them, at the last minute." But experts claim that companies can cut as much as 50 percent of their airline expenses through judicious timing of out-of-town meeting dates. Tuesdays and Wednesdays are cited as particularly good travel days for obtaining discount fares. Savings can also be realized by choosing mid-day or evening flights rather than morning flights. However, statistics indicate that morning flights are less likely to be delayed or canceled than afternoon or evening flights.

Other tactics that can be used by small business to cut their air travel expenses include the following: 1) If a company's business requires regular travel (a minimum of 40 flights a month on the same airline) between the same two cities, it may be able to secure a "city-pair" discount of up to 10 percent; 2) Business travelers who choose flights that include stops in a carrier's "hub city" can sometimes secure discounts; 3) Some airports have greater levels of competition—and hence, a greater likelihood of discounted fares—than others. Some metropolitan areas of the eastern United States support two airports within an hour's drive of one another, which gives business travelers an opportunity to explore this possibility; 4) Smaller, budget airlines may offer better fares (and service) than the giants of the industry; 5) Frequent-flier points can sometimes be utilized to register significant savings.

In addition to cost considerations, convenience is another important factor to consider when planning a business flight. To this end, usage of electronic ticketing increased dramatically in the 2000s. "E-ticketing" is popular with airlines because it enables them to register savings in ticket distribution and handling and simplifies their accounting procedures. It is popular with travelers because it enables them to go straight to the boarding gate, bypassing long lines at the ticket counter. Electronic tickets are identical to paper tickets in practical terms, as they provide each user with a reservation and a seat assignment. But airlines require photo ID before they will hand over a boarding pass, so make sure you have one on hand when going the e-ticket route.

Finally, savvy business travelers can take easy steps to increase their chances for a comfortable and successful flight. For example, early check-ins enable travelers to ask for seats in emergency exit rows, which have considerably higher volume of leg room than do the rows in the rest of the cabin. And frequent-flier status generally confers preferential treatment in several areas, including likelihood of receiving upgrades or new flights in the event of cancellation.

CAR RENTALS

As with other aspects of business travel, advance planning in securing car rentals can help reduce costs, sometimes by significant amounts. In addition to making advance reservations, business travelers should use discount coupons from travel agents, membership organizations, or airline frequent-flyer clubs when securing a rental car.

TRAVEL AGENTS

According to the American Society of Travel Agents (see "Frequently Asked Questions" on http://www.astanet.com/about/faq.asp#1), long before airlines were hard-hit by the events following the 9/11 terrorist attack, airlines began capping or reducing commissions paid to travel agents. The process began in 1995. In March 2002, U.S. carriers eliminated commissions altogether. As a consequence, travel agencies—which, up to that point provided a service largely paid for by the airlines—began to charge fees for services in order to stay in business. Fees have increased from around $13 per airline ticket in 2001 to $27 per ticket in the mid-2000s. The industry is also undergoing major restructuring, with many agents becoming specialists in destinations or specific kinds of travel. In the late 1990s they sold 80 percent of all domestic and 90 percent of all international airline tickets; in 2004, according to ASTA, they sold 51 percent of all airline tickets.

The upshot of these dramatic changes is that the small business, intending to take advantage of the skills of travel agents and to save on travel as a consequence must now undertake first to find the right agent for the job. With a good agent secured, the help of a professional in navigating through the maze of travel options will be eased for the small business owner—who can more profitably spend his or her time on the business.

TRAVEL DEDUCTIONS

Provided that the representative of the firm incurs his or her costs while engaged in "company business," many costs of business travel can be deducted. Travel deductions are permitted for the cost of transportation, whether by automobile, train, bus, or plane; lodging; meals; and other miscellaneous costs such as baggage fees, facsimile calls, dry cleaning, tips, and public transportation (bus service, taxicab service). Business travelers should note, however, that these miscellaneous deductions are only permitted if the person in question stays overnight.

Deduction rules for travel to foreign countries are somewhat more complicated, especially for self-employed business owners and major shareholders of small corporations. While many deductions still apply, the Internal Revenue Service (IRS) does have some additional stipulations; contact the agency for more information.

see also Expense Accounts; Standard Mileage Rate