Companies can save up to 25% on Travel and Entertainment costs

Hong Kong companies’ operating costs could be reduced by a quarter if they placed greater emphasis on controlling travel and entertainment (T&E) costs, according to the 2001 Survey of Corporate Travel Management released by American Express Consulting.

Similar to the findings in the 1995 and 1998 surveys, T&E expenses remained the second largest controllable cost faced by businesses, after salaries. In 2000, the annual average T&E spend for companies in Hong Kong was HK$2,042,294 , representing a 29% increase over 1998 and nearly twice the average spending in 1995.

As in the 1998 survey, meals and entertainment continued to represent the largest share of the T&E budget. In fact, it accounted for 45% of the total T&E which represented just a 1% reduction from 1998. Air Travel remained second largest T&E spending category, totaling 30% of annual T&E compared to 25% three years ago.

Nevertheless, companies clearly recognized the importance of managing and controlling T&E expenses. More companies started to develop a comprehensive travel management program and implemented travel management best practices to manage T&E spending.

In addition, companies had also been adopting stricter guidelines since 1998. For example, 77% of air travel used economy class compared to 68% in 1998, as the percentage of business class air travel dropped from 27% to 18%. Similarly, 3 and 4-star properties accounted for 86% of hotel accommodations compared to 71% in 1998, which indicated fewer companies provided 5-star hotel accommodations for employees traveling on business.

“With the increase of T&E expenses under a slow economy, there is clearly a pressing need to better control and manage such expenses to improve the bottom line and reduce operating costs which are the priorities for many companies now,” said Mr. Jim Georges, Head of American Express Consulting, Asia Pacific. “While the economic environment is constantly changing, the best practices for T&E expense management remain unchanged. T&E costs can be better managed through three channels: strategic purchasing that minimizes the T&E expense; efficient processes that minimize the time spent on administrative tasks, and a formal policy that communicates a company’s requirements and expectations on T&E.”

Clearly, companies in Hong Kong have yet to reap the full benefit of an effective travel management program and key opportunities for improvement. For example, 92% of companies surveyed were still highly reliant on traditional booking methods; while only 7% of travel bookings are made using semi-automated or interactive booking systems.

In addition, the widespread use of manual accounting tools – defined as paper-based report submissions and approval processes – also hindered companies from taking advantage of automation tools that could streamline T&E expense processing and minimize administrative costs. Only 2% of companies in Hong Kong used fully automated or interactive expense processing systems.

More importantly, most Hong Kong companies have yet to designate a single travel management company for employee travel arrangements to ensure full compliance with the company’s policy. Only one in four companies employed such an arrangement and 46% of these companies still made bookings outside the designated agency. This clearly demonstrated ample room for companies to improve and opportunities to maximize both direct and indirect T&E savings.

“Having a single designated travel management company for employee travel enables companies to capture travel data that is vital to evaluating and directing the travel management program,” said Jim Georges. “This helps them negotiate preferred rates and implement programs for air travel, hotel accommodation, and car rental, thus achieving cost savings. It is truly a travel management best practice that companies should seriously consider and follow.”

American Express first published its Survey of Business Travel Management in Hong Kong in 1990, and since then has conducted triennial research on the management of business travel and entertainment expenses. 264 face-to-face interviews were conducted and surveyed between January and April 2001 on travel and entertainment expense management practices by an independent research firm.

American Express Corporate Services, a unit of American Express Travel Related Services Company, includes the American Express Corporate Card, Corporate Travel Services, and American Express Consulting assists companies in managing and controlling their business travel and entertainment expenses. As part of the American Express Corporate Services Group, American Express Consulting provides organizations with specialized support and assistance in all areas of expense management. It offers innovative, end-to-end solutions and a wide variety of products and services and customized in-depth program reviews which aim at assisting corporations in the entire process of transforming the expense management practices.