Close to a quarter of business trips are considered “low value” and most
of these trips can be predicted—and avoided—according to a new ROI framework
formulated by travel consultancy tClara.
According to the firm, led by industry veteran Scott Gillespie, The
Justified Business Trip model can determine the value of a business trip prior
to travel and help travel managers maximize the return on investment by helping
to prevent low-value trips.
Gillespie purports to calculate the “net expected value” of a business
trip based on three variables: a trip’s maximum justifiable cost, the value of
the traveler’s time and the estimated cost of the trip. This is then used to
determine pre-trip ROI (net expected value divided by the trip’s expected cost
and the traveler’s time value).
According to the company, the model can predict low-value trips with an
accuracy rate of approximately 75 percent, but the consultancy expects this to
improve with “more and better” data.
“No one has figured out a credible, scalable way to calculate the
post-trip ROI of a business trip. But we can—and should—estimate every trip’s
expected ROI before the trip is taken,” said tClara founder and CEO Scott
Gillespie, who was named among the people to watch in BTN Europe’s Hotlist 2023.
In a white paper released on today on the tClara website, the firm detailed
the model and revealed results of a study based on a 2022 survey of 407 U.S.-based
business travelers. The consultancy developed its model and applied the
framework to the survey data.
Among the findings highlighted in the study, standardized post-trip
evaluation criteria revealed that low-value trips realize only 7 percent of a
trip’s total net expected value. The assumption is then made that reallocating
travel costs from low-value to moderate- and high-value trips would increase a
travel budget’s total net expected value by 26 percent.
The model uses a standardized scoring system to assess the merits of
traveling before the trip is taken and then assigns a post-trip value rating,
which is a subjective value rather than a financial measure. Expected returns
on business trips vary greatly based on each trip’s attributes, with a trip’s
main activity and goal the most important factors.
tClara’s analysis suggests that between 25 percent to 30 percent of
business trips could be eliminated with little or no economic loss to the
company.
The white paper posits that “old-school decision methods are no longer
good enough” and with travel budgets under increasing scrutiny, both from a
financial and environmental perspective, “low-value trips can and should be
flagged before they are taken, leaving travel budgets to fund higher-value
trips”.
In the report, tClara acknowledged that the Justified Business Trip model
is vulnerable to abuse by ‘gamers’—those who would provide unrealistically high
estimates of a trip’s maximum justifiable cost—and stated that more accurate
data about travelers’ compensation, trip costs, and time during the trip
devoted to the trip’s goal would likely impact the net expected values and
pre-trip ROI for many of the trips analyzed in the study.
