Blog post

Your travel management company (TMC) should be more than just a company that transacts your travel. They should also be offering you strategic and tactical advice on how to get the best out of your travel management programme. Advising our clients about their travel spend and the opportunities to save money and time, are important aspects of Orbit’s travel management services. In this blog we have a look at buying behaviour and why it’s important to understand how your business purchases travel.

 

Understanding Buyer Behaviour

The analysis of buying behaviour is used to determine why, when, what and who is purchasing. Understanding this informs sellers or retailers as to where and when to market to their audience to encourage a purchasing decision. It also informs how to get the most value out of that purchasing decision i.e. what factors will drive a consumer to buy at a certain price point over another.

As we all know, demand and scarcity will drive price in travel just like any other product or service. Airlines, for example, know that business travellers will require travel early morning and late in the afternoon during the week - so naturally they price upwards at these times. Just like leisure travellers will pay more to travel on Fridays and Sundays and over public and school holidays.

 

The Best Laid Plans

Understanding the buying behaviour of your travellers or travel bookers can benefit your business. It’s useful to check with your traveller or, if you are the traveller, to consider how likely it is that plans will change. It’s worth asking the question as full flexibility can add on $60 to the base fare, and for flexibility on the day, $40. If this is coupled with a high demand flight time, such as early morning or late afternoon during the week, then fares will be considerably higher.

Another layer of savings can be found in booking travel in advance. This can create significant savings across all travel components, and again the most obvious example is airfares. All domestic carriers now used tiered fare types which places premiums on date and time of travel, flexibility and additional features such as baggage. For example, booking flights 8-21 days out from departure compared to booking it under a week to departure can result in at least a 20% differential in the price of the fare.

Let’s put this into a working example for a company that books 100 domestic flights per month. Committing to a seat only fare, rather than a fully flexible fare, would result in a savings of $72,000 annually. Add in the 20% savings if booked in the 8-21 day period before departure, and these savings would increase to an annual saving of over $86,400.

 

Ideas for Encouraging Better Buying

Given what we know about the cost savings of booking in advance and the difference in price for certain fare types, we get a robust picture of just how much the purchasing decision is impacting travel spend. And while certain travel must happen at short notice, and will also need degrees of flexibility, building in a level of consciousness to purchasing may help in controlling travel spend.

A step further would be to build consideration of these purchasing decisions into your company travel policy. For example, when purchasing more expensive fare types, the travel booker or self-booker would be required to provide a rationale for purchasing an ‘out of policy’ fare. Or consider adding a minimum booking notice to your travel policy to ensure more bookings are made in the 8-21 day period as opposed to short notice purchasing. This would give an even greater understanding as to how your business is making these purchasing decisions.

 

A World of Choice

So far, we have looked at airfares in terms of buying behaviour. But what about other components such as accommodation? In simplistic terms many of the same theories apply. Booking in advance, when capacity is low, will generally result in lower rates. There are also many more accommodation options available now. Serviced apartments and Airbnb are good examples of the alternative choices to the more traditional hotels and motels. Utilising preferred programmes via your TMC can also yield cost savings and consistency of costs, as the booking volume of the TMC means they can negotiate sharper rates for their clients.

Of course, there is an argument that these alternative options are more inconvenient in terms of location, ease of booking and amenities. But with solutions like Airbnb for Work coming to market, these providers are increasingly focusing their products to meet the expectations and needs of business travellers.

 

Want to know more?

Orbit World Travel can advise and provide you with the data to understand how your company is purchasing travel. We can also advise you on what the opportunities are to buy smarter and control your travel spend. Our travel technology also can help businesses make better purchasing decisions. Our Online Booking Tool, Orbit Online, consolidates alternative and more cost-efficient options throughout the booking process to encourage better buying behaviour. In addition, services like Orbit Re-price uses robotics to ensure we can get a better priced fare for our clients should it become available. And, of course, if it’s time to review your travel policy to encourage better buying behaviour, we can help you do that too.