Implicit Costs You Must Consider in Business Travel
One of the most common practice within travel managers and purchase managers is fixing travel policies and budgets for flight tickets, hotel bookings and car rental services, forgetting completely all those additional and implicit costs that could raise during a trip and which may be difficult to predict but have a great impact on the company’s annual global travel spend.
1. Air tickets: companies use to fix rules regarding flight class categories, however, there are some secondary expenses usually not included in the initial travel budget, such as rapid changes in fuel prices, excess baggage charges (especially travelling with low-cost airlines when you plan to stay abroad for many days), or special meals’ hidden rates.
Tip for Travel Managers:
- Identify those travelers who used to travel for many days and suggest them to avoid low-cost airlines in order to take advantage of better travel and baggage conditions. Remember that the extra charge penalties could be more expensive than buying a ticket with a full-service airlines.
2. Hotels
Within the most common minor or implicit expenses charged by the hotels, the most relevant are the taxes (it’s quite common on OTAs that the VAT and the city tax are not included in the booking rate and the guest must cover them directly); the private parking; the use of facilities such as the fitness centre or the laundry; high-speed internet in the room (sometimes free wi-fi service is available only in public and common spaces) and the cost of international phone calls (in case of bad internet connection!). Moreover, the upgrade fees for room changes or the implicit cost of any cancellation raised from sudden changes in the travelers’ plans could increase significantly the amount of hotel costs at the end of the year.
Tips for Travel Managers:
- Look for the best rates available with all the taxes included and fix it as a best practice within the travel policy of the company. It’s crucial to know since the beginning how much you will really pay for that booking. In Mexico, taxes raise of 19% the booking rate per night.
- All the travelers planning to move by car should look for hotels which offer them free private parking. Paying a private parking for many hours or a whole night would be much more expensive.
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- The same logic applied to the internet connection. It’s better to choose a rate with wi-fi included in order to avoid unpleasant charges for phone calls and international roaming.
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3. Car rental service
Many organizations sign preferred rate agreements with car rental companies in order to incentivize the use of private cars instead of taxis or other ground transportation services which could be more expensive in some cities of USA or Europe. However, the overall cost of renting a car is often higher than the initial price. For example, there are some implicit costs like fuel penalties for bringing the car back empty, supplemental insurance plans (not included in the initial agreement between the company and the global provider) or the supplemental cost for choosing a car with GPS technology.
Tips for Travel Managers:
- Analyse the corporate agreement with the car rental company in order to include of all those insurance plans or car features that could be important for the employees using this service abroad.
- The penalty for leaving a vehicle with an empty tank could cost the company the double of the fuel price per litre. You should opt for pre-paying the gas tank instead of leaving the responsibility to the traveler.
Tip for travelers:
- Don’t wait for the monthly statement of your credit card: when you give a personal or corporate credit card as a guarantee for the rent of a vehicle, we recommend you to pay for the service with the same card in order to faster release the guarantee amount. Another way to accelerate this process is to ask the provider for a small charge of 1 MXN or 1 USD in order to speed up the process of the guarantee release.
I am co-founder at LastRoom, a travel startup based in Mexico City. LastRoom helps companies and business travelers cut their travel expenseswith the first cloud-based software tailored to SMBs, combining the best hotel content available on the Internet with high levels of corporate control, such as invoices’ reconciliation, reports and analytics tools.
