Secondary spend – has it made the cut from buzz to trend?

Posted in Blog
By Claudia Unger
Director, Research and Intelligence

Just a few years ago, traveler’s secondary spend behavior wasn’t on many travel managers’ radar screens. But today, unpacking that behavior to uncover—and minimize—costs is a hot topic at almost every industry conference. Here’s why secondary spend is more than a “nice to know” and how you can tackle it.

What is happening and why?

Mature travel programs with traditional spend categories (air, hotel and car rental) under tight control may feel they’ve reached the limit of their savings potential. But areas like dining, entertainment, ground transportation and taxis, and mobile communications are ripe for cost review and boast significant savings opportunities.

Those savings opportunities are linked to the proliferation of tools and technology that make engaging with travelers at just the right moment much simpler. With mobile apps and geo-tagging, the possibilities of influencing secondary spend are multiplying. For instance, you can now send a text message to your traveler arriving into London Heathrow to remind them that the Heathrow Express train will get them to the city center faster and cheaper than a black cab. You can do this with itinerary-based messaging (schedule text for traveler’s arrival time), or by GPS-based messaging (deliver text when traveler turns on their phone and transmits data from London Heathrow).

What can you save?

Actual savings potential depends largely on the trip destination and duration. For instance, for a single-day trip within the U.S. with no rental car, secondary spend could be as high as 19% of total trip costs. And of those you could save up to 30% by booking your ground transportation in advance and using a restaurant program or a deal of the day. Savings could be even higher if you switch from booked car services to public transportation!

On a trip from the U.S. to London, we estimate that your secondary spend (in this case dining, ground transportation and mobile roaming charges) would be close to 12% of the total trip cost. The percentage is smaller because airfare represents a much larger portion of costs for international travel. However, on a trip like this, travelers can save about 40% on secondary spend by making smart decisions.

How can you save?

One example already mentioned above is to send timely reminders by text or through a mobile app. Connect with your traveler when it’s decision time  and nudge them in the right (and cost-saving) direction.

Another way to save is through restaurant programs. Negotiate a deal with restaurant chains to get a discount for your company’s travelers, or sign up with already existing consolidators like Dinova. Allow travelers to use “deals of the day” to save on top-end restaurant and entertainment costs. But be aware that these are valid for a certain time only and might exclude peak times—and you don’t want to end up paying double.

To reduce mobile roaming fees, advise travelers to switch off internet usage when abroad as this incurs high charges. Encourage the use of WiFi, which is sometimes available free of charge in restaurants and coffee shops, at some hotels and at some airports (though generally only for a limited time). You might consider having road warriors opt for a multi-SIM card, which will give them local numbers in the markets they’re traveling in, allowing them to take advantage of the least voice and data options.

Where to start?

1.       Get to know your secondary spend categories and costs by looking at

expense reports and mobile phone bills

2.       Select the biggest buckets and ask yourself:

a. What saving possibilities are there?

b. How can you communicate these to your travelers?

c. How can you measure the savings within your company?

3.       Start small and involve your travelers in the process

a. If you have an intranet/ social platform, make suggestions on savings in

secondary spend categories and review feedback

4.       Use the feedback to gauge interest and a sense of ownership

5.       Once you have buy-in from (some) road warriors, roll it out across the company

a. Be sure to monitor the progress

6.       Start all over again with the next category!