Business Travel And The Bottom Line
It may cost a few bucks to go see a client in another locale, but there’s growing evidence to suggest that face-to-face meetings are far more effective in landing clients — and generating more revenue — than video chats and conference calls.
Anthony Gioeli has made some missteps over his career, but there’s one error this San Francisco-based executive will never make again: Slashing his business travel budget.
During the recession, the then technology company CEO cut travel expenses, as did many executives during that period, in order to save a few bucks. It turned out to be a costly mistake.
Back then, Gioeli and his team were bidding on a lucrative contract from a company in Taiwan. They held weekly meetings with the overseas operation via Skype and communicated regularly through email.
Everything seemed to be going well until they found out that a competitor won the business. Why did they lose out? “They made the effort to go there and meet them face-to-face,” he says. “We saved $2,000 by not going, but we could have made several hundreds of thousands more.”
Gioeli, who is now vice-president of sales and marketing at KeyLemon, a Switzerland-based technology firm, learned the hard way that business travel can’t be a discretionary budget item. Independent research echoes Gioeli’s personal discovery: the more a company spends on business travel, the more money they’ll make.
In a 2013 report, Oxford Economics found that companies that spent the most on business travel during the recession posted higher profits than ones that cut. It also revealed that for every dollar companies invest in business travel, on average, they realize $9.50 in new revenue and $2.90 in profits. As well, 57 percent of the business leaders that Oxford Economics surveyed said that cutting back on their budgets during the downturn hurt company performance while only 4 percent said it helped.
There’s a good reason why business travel has proven to be so important to a company’s bottom line. In-person meetings are far more effective in landing new business and maintaining relationships than Skype calls, conference calls and email, says Barry Wellman, a sociology professor at the University of Toronto and the author of Networked: The New Social Operating System.
Mr. Wellman has looked at the many different ways we communicate today and found that people take in a lot more information about each other when they’re talking face-to-face. “You get to hear them and see their body language, how they move, and whether they break your hand in a business grip or lightly touch it,” says Wellman. “Those things tell you a lot about a person.”
While video conferencing does make it possible to read people’s facial expressions and see a person eye-to-eye, it will never replace the old fashioned meeting. It’s simply a much more narrow form of communication, he says. It’s also more difficult to include the entire room in a conversation and “you miss the little whispers among people,” he says.
His research has also found that while technology is useful for maintaining contact with someone, most business relationships begin with an in-person meeting, often at a conference. If not, then it’s an email asking to meet face-to-face. “Conferences are the most preferred contact method,” he says. “Or someone will send an email saying let’s meet at the conference in a few months. It’s like setting up a first date.”
Despite the cost cutting that went on during the recession, most executives know how important face-to-face meetings are to business. Indeed, three quarters of C-suite members think that in-person collaboration is critical, while 82 percent felt they were better understood after in-person encounters, according to a 2011 survey by The Aberdeen Group, a Fort Wayne-based research firm.
The travel spending figures bare this out. Other than in 2008 and 2009, business travel has steadily grown over the past decade, with global travel revenues climbing by 90 percent between 2003 and 2013, according to the Global Business Travel Association (G.B.T.A.). U.S. business travel revenues jumped by 35 percent over that same time period. In 2014, total spending on business travel originating in the U.S. is estimate to have hit $274 billion, higher than its 2007 peak. That total should grow: come 2018, G.B.T.A. expects spending to hit $340 billion.
Stacey Hanke, chief executive of Stacey Hanke Inc., a company that helps executives improve their communication skills, is doing her part to boost travel spending. Face-to-face interactions are so important to her that she’s allocated 70 percent of her company’s budget to business travel. She points out that firms don’t sign contracts with corporations, they sign deals with people. “People buy people,” she says. “How can you influence someone if you’ve never met them?”
Hanke wracked up 400,000 air miles last year and says she’s on a plane at least once a week. While she does make use of online communication tools, she says it’s a lot harder to build trust with someone over the web — and trust is one of the most important aspects of a business relationship.
In her experience, people can only stare at a face on a computer for so long. Physically experiencing someone breaks down barriers and it allows people to socialize in a way they can’t over video chat, she says. “You can’t fake trust,” she says. “But that authenticity only really comes out when you can sit with someone face-to-face. You can’t hide behind a screen.”
Many companies are figuring out that business travel can be a competitive advantage too. Oxford Economics found that when people did not meet in person, only 23 percent of potential clients would become customers. The conversation rate jumped to 42 percent when there was a face-to-face meeting.
“That’s a huge difference,” says Adam Sacks, president of Oxford Economics’ tourism division. “If you’re choosing between two potential companies and one is willing to come and look you in the eye and one is remote, then that’s an advantage to the former.”
While Gioeli certainly understands this now, travel has helped him land business in the past. A few years before the recession Gioeli was bidding on a multi-million dollar piece of work and he was up against a larger operation that already had a contract with the company he was trying to woo. Once a week for six weeks, the tech executive would fly to the potential client’s headquarters to meet with different contacts. Ultimately, his business was awarded the contract because the client got to know him and not his competitor, which didn’t make nearly as much of an effort as he did.
Today, Gioeli travels about 100,000 miles a year and he’s typically on the road for a week to 10 days a month. His department allocates about 15 percent of its budget to travel and he’ll do what he can to maintain that level of spending if money ever gets tight again.
“You always need to figure out how to find money for travel, even if times are bad,” he says. “As I learned in 2008, competitors will always find the budget to make the trip.”