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There¡¯s a commonly held belief that airfares continue to rise every year ¡ª even if the price of oil is dropping ¡ª and that the cost of last-minute travel follows suit. But the truth may surprise you. There¡¯s more to the cost of last-minute travel than meets the eye.

To understand the true?cost of last-minute travel, you have to crunch the numbers on how they affect your planning and bottom line. Fortunately, we¡¯ve got the data and have done the analysis.

SAP »ÆÉ«¶ÌÊÓƵ solutions process more than $130 billion in business travel and expenses annually. This report looks at the costs associated with approximately 30 million domestic round-trip airline bookings from 2018 to 2020. *Domestic is defined as a flight starting and ending in the same country.

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The true cost of air travel

While the total amount spent on air travel has increased significantly, ticket prices aren¡¯t the reason why. In fact, our data shows that between 2018 and 2020, the cost of airfare actually went down by $9 per ticket. In the past few years, airfare prices progressively decreased while fees continued to increase. In pandemic conditions, airfare tickets are plummeting, yet fees are increasing in order to ensure traveler safety.

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Average airfare by year

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So, you might be wondering why airfares seem so much higher these days. It¡¯s pretty simple: Airlines have been making up for the relatively flat ticket prices by charging incremental fees for services like extra leg room, checked luggage and onboard sales of food and beverages. Now, these fees cover things like personal protective equipment or additional luggage or cabin sanitization recommended by the committee, in order to standardize a way to ensure traveler safety. This ancillary airline revenue amounts to big bucks. In a recent , Ralph Colunga, thought leader, travel and expense at SAP »ÆÉ«¶ÌÊÓƵ?shared:

"Consumers are at a disadvantage....Unlike businesses, which have the leverage to negotiate away some of the nuisance fees, individual travelers have a lot less power. And they have limited alternatives.¡±

With more than $40 billion in airline revenue coming from ancillary fees, it¡¯s never been more important for managers to track these costs as part of the price of the overall flight. By creating policies and tracking employee spending, it¡¯s possible to avoid surprise charges and have a much clearer picture of travel spending.

Tips

• When considering travel options, travelers need to factor in the price of ancillary fees when booking. Fees to check bags, upgrade a seat and board early, or additional cleaning methods may add up to the price of a first-class ticket on some airlines, which the traveler would obviously prefer.
• Travel managers should seize the opportunity to revisit primary and secondary contracts, as prices fluctuate due to macroeconomic factors. Airlines are likely to discount fares but still may include fees for additional cleaning and safety services.
• The more volume your company gives an airline, the more leverage you¡¯ll have when negotiating rates, including ancillary and change fees.

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Planning window: Don¡¯t miss your window of opportunity

Even though we live in a completely connected society, advances in technology haven¡¯t really helped us become better planners when it comes to business travel. In fact, planning horizons have remained relatively stable over the past few years.

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Booking behavior of business travelers

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What¡¯s on the horizon?

The data indicates that planning windows aren¡¯t getting any wider. Which makes sense when you consider a fluctuating economy and the need to use last minute resources to close big sales, win new customers or address urgent issues in person.

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Cost premium: Last-minute or just in the nick of time?

Last-minute travel is one of those inevitabilities of life. We¡¯d all love to plan our trips far in advance ¨C but sometimes it¡¯s just not possible. So, if we accept that booking at the last minute is going to happen, we can begin to understand the impact of timing on the premiums paid and how to make the best of a less-than-ideal situation. We define ¡°premium¡± as the incremental amount paid over and above the average price paid for a ticket purchased more than 14 days in advance.

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Average airfare by booking window

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We all lead busy lives, and as time goes by, technology and business just keep moving faster. Which means our window for planning keeps getting shorter and shorter. But if a business traveler has the luxury of advance notice, the best bet is to book at least 14 days in advance of departure and, if that¡¯s not possible, at least 8 days out. Booking travel within a week or less incurs a premium that¡¯s considerably higher. But there¡¯s a plus side. If a traveler must book less than a week in advance, the cost savings will be negligible whether the flight is purchased six days, three days, or one day before the flight.

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Booking at least eight days in advance

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Tips

• By enforcing a travel policy that encourages employees to book at least eight days prior to departure, you¡¯ll be able to save an average of $159 per ticket.
• Booking a one-way ticket based on a known departure or arrival date can help optimize last minute travel costs. For example, in markets where lower one-way fares are an option and only the return date is unclear, it makes sense for the traveler to at least book outbound travel to lock in savings and book the return flight at a premium later.
• If there is a good chance plans will change, a traveler should consider booking refundable tickets, even on a non-preferred carrier. That way, the traveler will have the ability to cancel and eliminate change fees if a more desirable fare is found at a later date.
• Reward employees for consistently booking within policy and avoiding booking at the last minute.

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Time of year: Every season has its price

Timing is everything. It¡¯s how you close the big deal, negotiate new terms, pitch the next big idea, and/or address a serious concern that¡¯ll change the world. But to get there, you have to be ready to seize each and every opportunity. Which means employees have to be able to travel whenever, wherever. But that doesn¡¯t mean that savings opportunities don¡¯t abound.

As we¡¯ve already established, whether you book greater than eight or fewer than seven days before travel is a big factor in the overall price of a ticket, but so is the time of year. We know there are certain times of year, like summer and winter holidays, when airfares are almost always higher. But what¡¯s interesting is that the premium paid for last minute travel during these times is relatively lower compared to the overall cost of the flight.

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Average airfare by month: Booking window

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Percent difference in airfare between booking windows

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Tips

• When travel is flexible, travelers should opt not to travel during summer months with peak fares, especially if travel costs make up a large portion of your overall budget.
• If employees must travel at the last minute during peak summer months, they will spend less of a premium to travel last minute, which may make it easier to justify the cost.
• When booking large events, consider doing so during off-peak months or in alternative locations.

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Key takeaways: You can still save, even at the last-minute

Booking last-minute travel is just one of those inevitabilities of the modern business landscape. Regardless of whether last-minute travel is the result of true need or poor planning, there are ways to keep costs down and improve efficiency within your organization.

• Provide rewards for smart travel booking
• Offer ongoing education regarding the best practices for booking
• Establish and enforce travel policies
• Negotiate optimal rates with frequently used airlines and partners
• Use travel booking tools
• Configure settings within your travel booking tool to notify travel managers when employees are booking within a seven-day window
• Use data to identify behavior and target the areas that will provide the most financial impact
• Use mobile apps and self-service check-in kiosks to cut down on travel times

We¡¯re interested to see how the airline industry changes and adapts to trends in the future. With additional fees becoming commonplace, airline apps becoming more and more sophisticated, and gas prices continuing to fluctuate ¨C the only constant we can expect from this industry is change.

Learn more about balancing concerns about controlling cost and traveler safety and well-being in this BTN whitepaper.

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Shannon Mobley? contributed to this post.?