After more months than we care to count, things seem to be looking up for business travel. But with the impact of COVID-19 likely to continue for some time, the economics of travel face scrutiny like never before. In fact, the time may be ideal for entrepreneurs and business owner-leaders to assess the real return on their investment in travel.
While the pandemic has been a game changer, efforts to calculate the ROI of business are nothing new. As far back as 2009, research and consulting organization Oxford Economics estimated that for each dollar invested in business travel, companies realize $12.50 in incremental revenue. Conversely, a business that eliminated business travel could anticipate a 17 percent loss of profits in the first year while expecting to take a full three years for profits to recover.
Fast forward to the 2020s, and making such a calculation has become more challenging. Along with the other complexities of modern business, new ways to interact have emerged that can offer viable options to traditional travel.
“Stakes are higher than ever for companies to maximize the ROI for every business trip or relocation,” Steve Black, CSO at Topia, a company specializing in global talent mobility. “Instead of an employee flying fifteen hours for a short meeting with a client or customer, companies will demand more ROI and a stronger business case.” At the same time, travelers may need to plan for longer business trips, schedule more meetings and pack more value in a given trip to justify the expense and the potential risk of traveling.
Yet while the cost of doing business by phone or online may be a fraction of the expense involved in attending in person, the undisputed value of conducting business face-to-face, person-to-person – especially as business recovers and competition heats up – may be more critical than ever.
“At the end of the day, it’s important to understand that this is an exceptional time and that at some point most of the old ways of doing business will return,” notes Katya Yerpo, international business and management consultant for Osprey Consulting. While current travel limitations make negotiations through digital platforms more socially and politically acceptable, that will never be the whole story. “Face-to-face negotiations will never go out of style since they’re the most effective way to do business in general,” she says. “And they’ll start to become necessary in certain scenarios again soon enough.”
Checking the Boxes
To make the most of travel for these and other business purposes, pause to consider these factors:
Checkpoint 1. How necessary is a given trip? Certainly all trips don’t offer equal potential. And as the restrictions imposed by the pandemic are eased, gauging the anticipated value of any trip may be even more important than in the past.
Karen Tiber Leland, founder and president of Sterling Marketing Group, believes that post-COVID business travel will go from something that a small business does automatically without thinking to a conscious choice. This means evaluating at what point in the relationship with the investor, customer or employee there is enough benefit in meeting in person to justify getting on a plane or train to go see them.
Such strategic judgments will necessarily include cost estimates. “While face-to-face negotiations are the best for building long lasting and trustworthy business relationships, they’re also the most expensive ones to carry out,” Yerpo notes. Each party will have to determine if the kind of business they’re doing demands a more personal approach, which may be preferred for delicate or large-scale negotiations. Or maybe it’s worth taking the risk of a less personal and less costly option, which might be best for everyday interactions that are more routine or smaller in scope.
Checkpoint 2. Is there a viable option to travel? Even before the pandemic, the expanding use of tools such as Microsoft Teams and Zoom was providing new options for communication and collaboration. But then over the past year-plus, businesses that relied on travel to generate sales were forced to resort to other forms of communication. Presentations, product discussions and contract negotiations were all accomplished remotely. Now that these options have become more commonplace, there are sure to be instances where they can substitute for conventional travel.
In deciding which option works best, the same considerations for determining the return on investment will apply that held true before the pandemic, according to Dr. Richard L. Weinberger, chief executive officer of the Association of Accredited Small Business Consultants. What effect will the particular decision have on the bottom line? If travel is initiated, will sales and net profit increase when comparing pre- and post-COVID periods? “The calculation can be quite simple,” he says. “What additional travel expenses will be incurred, and what additional revenue and net profit will be produced?”
In some cases, combining travel with online communications may be possible. “Having it both ways” may be a cliché, but Leland feels this approach can work well, especially in dealing with new clients. “I’ve learned
during COVID that I can use Zoom for the first piece of the work and it’s still effective,” she says. Then depending on a number of factors – including where the new clients are located and whether they indicate an interest in face-to-face interactions – a follow-up trip may pay dividends.
Cost & Effect
Checkpoint 3. Can you leverage trip expenses? Even with careful planning, costs for business travel add up. Of course driving expenses lower with cheap accommodations or cut-rate transportation may do more harm than good when it comes to overall efficiency, not to mention traveler readiness and morale. But targeted efforts to reduce the cost of a given trip may be worthwhile. Whether that means incorporating travel costs in contracts or combining what might have been two or three trips into one, advance planning to leverage expenses is almost always a good way to increase ROI.
A less impactful but still valid practice is the use of frequent flier points or other loyalty rewards. However use of frequent flier miles comes with its own challenges, notes marketing specialist Steve Belkin, author of the upcoming book, Mileage Maniac. Extra costs might be involved, for example, when awards only provide spaces at low-cost “saver” levels on flights and routes airlines don’t expect to sell out. That could result in an extra stop or two each way, potentially incurring extra hotel and food costs, airline-imposed fuel surcharges or assorted government airport and security taxes. At the same time, using awards can still work when overall cost savings outweigh expenses.
Checkpoint 4. What is the potential long-term impact? Going forward, determining ROI may involve looking at policy as well as the cost of individual trips.
“Now that the US is heading into a post-COVID period, a decision for many businesses is whether to return to pre-pandemic policies or introduce new policies while seeking to achieve pre-COVID sales and net profit goals,” Weinberger says. He reiterates that the deciding factor for any business decision, whether that’s travel, marketing, location, services or something else, is what effect that decision is expected to have on the bottom line.
Less tangible but perhaps also worth considering are some of the side benefits travel can bring. For example, provided travel meets the major objectives at hand, it can also serve as something of a morale builder for staff who enjoy it. In fact, a recent global survey from insurance giant Chubb found that more than four out of five business travelers (84 percent) say they cannot wait to travel
again for work, and nearly three out of four (74 percent) say they are less effective in their job due to the pandemic and severely limited travel opportunities.
Of course the real deciding factor for any travel, especially for individual entrepreneurs or small businesses, must be the potential return on the investment of time and money. Steps for assuring that a trip is worthwhile include setting objectives, establishing a budget, assessing relative positions and deciding strategy and tactics. In addition, good preparation includes studying the other party in depth for factors such as culture, insights and patterns, and being as ready as possible for the unexpected.
“When planning for business traveling, smaller businesses must keep in mind that in opposition to large corporations, any mistakes could ruin their financial position because expenses for a face-to-face negotiation are more significant,” Yerpo says. “That means whoever is carrying out the project must be more than ready for it.”