Ahead of corporate travel supplier negotiations, here's what you can do to prepare.
The travel and expense (T&E) line item is one of the largest controllable expenditures in a company’s budget. To effectively contain this line item while maintaining an optimized travel program, travel buyers must build the momentum necessary to negotiate with preferred suppliers.
On average, businesses devote 10% of their operational budgets to T&E, which means the benefits of reducing that spend can be significant. A strategic approach to travel supplier negotiations requires stakeholders to possess accurate data, an enforceable travel policy, and the ability to forecast future travel needs.
Review your travel program data
To make negotiations as productive as possible, travel buyers must come to the table with a solid foundation of knowledge. Without transparent insight into the current state of the company’s travel program as well as a clear vision for its future, negotiations will be difficult.
Additionally, travel stakeholders should prioritize solid communication with suppliers throughout the negotiation process to build the rapport required of long-lasting relationships. Responsiveness and a willingness to come to the table with an open mind are essential to relationship growth.
Prior to negotiations, there are two essential things travel buyers need to have in place:
- Program data: Stakeholders should come prepared with data pertaining to travel volume, current spend, future travel projects, spend break-downs by air, hotel and car, frequent city pairings and any other relevant program information.
- Traveller buy-in: Considering 20% of expenses fall outside of policy, suppliers want assurance that the company policy is enforceable and up to date. Traveller buy-in is essential to secure lucrative contracts.
In a managed environment, your TMC can provide you with a significant level of guidance and support to analyze your travel data, review policy compliance, and identify realistic opportunities based on your travel volumes.
Evaluate existing supplier contracts
Prior to entering into negotiations, consider major organizational changes on the horizon and factor them into future travel needs. It would be a mistake to negotiate based on current travel needs if those requirements are expected to change during the contract term.
Stakeholders should ask themselves:
- Do our existing contracts meet the company’s needs?
- How has travel spend changed since the previous negotiation?
- What would improve travel program performance?
- Are there opportunities to consolidate spend with a preferred supplier?
These questions will help determine who to approach during negotiations and how best to appeal to each preferred supplier.
Identify areas of mutual gain
Prior to negotiations, you need to understand the supplier’s perspective and their objectives in order to support mutual gains in the proposed agreement. Coming to the negotiation table prepared with benefits that appeal to both parties not only shows willingness to cooperate, but also reduces friction in the relationship.
For example, consolidating spend with a single supplier can unlock benefits for both parties. Volume is essential in corporate travel.
But what about small organizations that have limited volume? Or organizations with unmanaged travel? If your travel spend is lower, or you don’t have the data you need to put you in a strong negotiating position, working with a travel management company can still unlock savings benefits through exclusive discounts while ensuring you’re being proactive about data capture to prepare for the future.
Supplier negotiations can be stressful, but they’re more productive when you’ve done your research and understand what you need to do internally to maximize the effectiveness of your contracts.
Useful negotiation strategies include:
- Identifying and analyzing data prior to negotiations
- Developing an enforceable travel policy
- Evaluating suppliers and long-term cost effectiveness
- Understanding what is negotiable to increase contract value
- Being proactive to prepare for future negotiations