Fleet News

Guest opinion: Low-cost airlines – just what's in a ticket price?

'Human nature being what it is, we all have an idea of what a 'normal' price is, from what we should be paying as an interest rate on a mortgage to a glass of wine. Of course, there are glasses of wine and glasses of wine.' Betty Low, Editor, Business Travel World

It's not always comparing apples with apples and location must too come into it somehow. The glass may contain 5oz of the same Jacob's Creek Chardonnay but whether that glass is in a pub in Darlington or a five-star London hotel will affect your expectation of price.

Similarly, as Paul Dickinson, commercial director of Virgin Atlantic, said at the recent Guild of Business Travel Agents Conference in Shanghai: 'The low-cost carriers have changed expectations of what we should pay for an air ticket – £38 is the average seat cost on Easyjet.' For traditional carriers this has become a problem.

No-one queries that it is not comparing apples with apples and that the price on a traditional carrier includes some items (eg a meal) absent from the low-cost offering. The issue, however, is the gap in price – yes, you are getting more on a traditional carrier but are you getting that much more?

At the root of the question is value for money and it is one that anyone who sends people travelling on business must address. In the pages of Business Travel World, month after month we point out the savings in travel costs that can be achieved if travel purchase is both tracked and, when possible, combined to give buying clout. The argument is that the more business you put someone's way, the more leverage on the price you should be able to obtain.

But consolidating business towards one supplier does not necessarily deliver the overall value you might be looking for. Hotel locations vary. Just because a large chain has a property in Manchester, the location might not be suitable for all your travellers' accommodation purposes for all visits.

The accommodation a traveller needs for a stopover on the M6 is quite different from the lodging he or she may want during two days of sales visits in the city centre. Upping the volumes to one supplier might cut the room rate by several pounds a night but if that means adding £10 to the overall travel and expenses cost either by more miles or a taxi fare to a meeting, you could actually be adding to your total bill.

Some companies have addressed this issue by de-centralising travel budgets and decision-making responsibility to the actual budget holders.

The greater overall savings made by consolidating business might be being lost but there could be an overall gain in terms of individual executive or business unit efficiency and matching need to the purpose. For example, rather than looking at the room price, there could be a policy of a per diem allowance so travellers can make the trade-off between, say, accommodation and meal. The spend with various hotel groups could still be tracked and potential savings identified.

Whether these savings are better tracked via invoicing or credit card and reimbursal is also an issue for managers.

Although on the one hand billback sounds like it could benefit the cashflow, there are much higher costs associated with individual invoice processing than with card systems.

Today's modern card systems are not only a means of payment but are powerful data collection tools and can be used to identify accurately where travel expenditures are going. Accurate data can help you identify whether your travellers are getting value for money. Ultimately the travel choices you make must suit your corporate strategy.'

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