According to a newly released report by IdeaWorks and CarTrawler, airlines were on track to make nearly $93 billion worldwide in 2018 on the ancillary fees they charge for things like seat upgrades and checked baggage. The question is, do you know what portion of that is generated by your company’s travel program? Or is that a trick question?
While organizations certainly are aware that their total travel spend is creeping up because of these fees, because of the nature of how they are incurred, it can be extremely difficult to track them.
According to the recently published “Evolution of Air Distribution” study that American Express Global Business Travel (GBT) produced with the Association of Corporate Travel Executives, almost half (48 percent) of the 218 corporate travel managers surveyed say they are not monitoring spend on ancillary items. But it’s important to do so to avoid letting costs balloon out of control.
To help companies get started, below are some steps to gain visibility and control over these escalating fees. Although we’re specifically addressing airline ancillaries today, many of these tips apply to hotel and car rental surcharges as well.
1. Identifying the add-ons
The first step: Make a list of all the possible extras that are available to your travelers. That includes everything from checked luggage and upgraded seats to in-flight meals and entertainment as well as lesser-known charges, such as travel pillows and blankets and having boarding passes printed.
To have a complete picture of your air spend, also include fees for things like airport lounge access and expedited airport security access.
2. Tracking the fees
Most companies that track ancillary costs rely on data from corporate card and travel and expense management systems. To make this overwhelming process more manageable, we encourage you to give Premier Insights™, an integrated card and travel data visualization tool from GBT that provides a single-source view of your company’s travel program and can display total ancillary costs, a test drive.
Additionally, you may look internally and seek assistance from the finance department to put a system in place that helps identify and calculate these expenses.
3. Preventing leakage
Because many corporate online booking tools (OBT) do not yet have the capability to tack on ancillaries to a booking even when the global distribution system offers them, travelers must go directly to the airlines’ websites to make the purchases. This leakage makes it tricky to track ancillaries, especially if travelers are entering the amounts as “other cost” on their expense claims.
So you may wish to talk to your OBT provider/travel management company about what they are doing to close the technology gap. Some tools, like NeoTM, our smart online booking tool, currently can handle certain ancillary purchases (e.g., seat upgrades and checked baggage), so users do not need to book them elsewhere.
4. Negotiating with suppliers
We know you may experience some sticker shock once you do the math on what the company spends on ancillaries. But think of it this way: those staggering numbers can be turned into powerful negotiating material when meeting with your preferred suppliers come contract renewal time.
While it’s unlikely you will be able to get certain surcharges waived entirely (such as checked baggage fees), you may be able to push for other perks, like seat upgrades, passes for the airport lounge and priority boarding, to be included in your contract that will save the company money and satisfy travelers’ needs.
5. Establishing an ancillary policy
If your company already doesn’t have a formal policy on ancillary spend, now’s the time to create one. With New Distribution Capability making it easier for airlines to sell these add-ons, organizations need to spell out to employees which expenses are in and out of bounds.
Travel managers and other key stakeholders should review the fees on their ancillary list (see Step One) and decide which ones the organization will cover or not. Our recommendation: Strive for a nice balance between putting controls in place while still giving business travelers flexibility and options.
Because the ancillaries offered by each airline vary, you may have to adjust your policy according to carrier. As an alternative, you may decide to set a cap for travelers not to exceed instead.
6. Enforcing the policy
Of course, it’s one thing to have guidelines in writing and quite another to ensure travelers are following them. Travel departments must make the effort to educate and inform employees about policy adjustments. For best practices for getting the word out, check out this Atlas article on communicating your travel policy.
In the end, we bet employees will be intrigued to learn how much the airlines are making on ancillary revenue — not just so they are aware of how much it’s costing the company, but also to see how much is coming out of their wallets when traveling for leisure.