What’s A Business Traveler’s Time Worth?

By | June 2, 2017

U.S. authorities this week said an expanded “laptop ban” is “still on the table.” A prohibition on large personal electronic devices in passenger cabins on all transatlantic flights would decimate productivity. The International Air Transport Association estimated the impact at $1.1 billon annually. How did it come up with that number?

Moreover, do corporate travel managers work out how much productive working time travelers lose in transit? Should they? Such questions relate to reimbursement policies on premium class, Global Entry, airport lounge access and inflight WiFi. They call to mind the bigger-picture ROI of travel.

IATA’s $1.1 billion figure includes $655 million from the “loss of productive time of business passengers.” Those are defined as first- and business-class passengers on Europe-U.S. routes. Using a “conservative estimate,” IATA reckoned that half of them used personal electronic devices to work in-flight. They did so for five of an average nine hours per flight.

To convert all those hours into dollars, IATA relied on the U.S. Department of Transportation’s “recommended hourly values of travel time savings.” VTTS, in turn, is based on average U.S. worker compensation as measured by the U.S. Bureau of Labor Statistics. DOT’s 2016 number (based on 2015 data) for business air travelers was $63.20 per hour. IATA adjusted that up to $64.60 to account for the 2016 U.S. Consumer Price Index.

Industry consultants said companies should try to put their own numbers on traveler productivity but suggested it’s not a very straightforward exercise. Some found IATA’s approach interesting but took issue with the assumptions.

Why only premium-class travelers? It’s not comfortable to do so, but plenty of business travelers work on laptops in economy cabins. IATA said it was being conservative in an attempt to not overstate the potential impact. An analysis by an individual organization would likely include all its transatlantic business travelers, regardless of class.

Why five hours of lost time? Laptops or no, some travelers prefer to get as much shut-eye as possible en route to arrive refreshed, rather than working during the flight.

Why base hourly estimates on employee salaries? “Value is in the eye of the beholder,” said KesselRun managing partner Brandon Strauss. “I’d love to see more thought around how the value of an employee’s time should impact corporate policies, but there needs to be a lot more analysis than just $64 per hour multiplied by five hours.”

value of timeThe roughly $300 total is too low, Strauss said, because it doesn’t account for “the output of that work” and the “relative value” of that employee. In other words, if the value of that trip was “only” $300, he reasoned, the traveler shouldn’t go.

Consultant Scott Gillespie of tClara, who has helped popularize the term “traveler friction,” said companies “absolutely” should do some kind of calculation to value their employees’ time. Though he said IATA’s $64 per hour estimate is a reasonable basis for this analysis, he also argued that a business traveler’s time is worth more.

Rather than crunching salary data, Gillespie advocated looking at gross profit per employee. For many big companies, he said, that equates to a figure several times higher than an employee’s compensation. “You should look at what a road warrior is doing for the business,” Gillespie said, pointing to revenue-generating salespeople as an example. When time is lost, “you therefore have to look at what is not getting done.”

On the other hand, Andy Menkes of Partnership Travel Consulting noted, not all employees are profit-producers. He also pointed out that a senior-level exec who flies in premium class probably makes much more than $64 per hour. He said to gauge the value of time, companies should look at the demographics and specific compensation for their travelers, and the purposes of their trips.

PricewaterhouseCoopers explored this topic when Mark Williams was managing travel there in the 1990s and early 2000s. He said compensation was just one of three numbers considered. The others were the hourly rate at which the company billed customers and the average collection rate. The latter, pegged at about 80 percent of the billing rate, accounted for instances when clients didn’t pay in full or the engagement extended beyond any pre-arranged fixed fee.

Now partner at GoldSpring Consulting, Williams said the impetus at PwC was assessing whether flight connections made sense, economically, as a policy parameter rather than nonstops. “It didn’t,” he said.

Williams said he’s not aware of many companies that calculate the value of travelers’ time. He thinks they should, and the big question is determining which dollar amount to use. He suggested starting with the “fully loaded wage cost” (compensation, plus benefits and taxes) and adding some type of premium to recognize that an employee’s value is greater than his or her compensation. What that premium should be, exactly, would vary from one organization to the next.

Williams also pointed to the age-old question of whether, for the purposes of billing, travel time should be included. He said PwC didn’t charge for it unless employees actually were working in transit, while other professional services and law firms include travel time regardless, “even if they’re watching a movie.”

According to consultant Tom Ruesink, companies talk a lot about assessing trip value but he’s seen few do the “heavy analysis in-house as there are a lot of subjective factors to value.”

But Ruesink said companies usually think about such things when they examine class-of-service policies. “The biggest factor now is rest on long-haul flights,” he said. “Does a traveler get more rest in the business cabin and therefore can be more productive when they hit the ground? The cost of time discussions are usually much more observational and less quantifiable.”

Carlson Wagonlit Travel is one that has tried to put hard numbers on the concept, using worker salaries to do so.

In 2012 it introduced the Travel Stress Index. It determined that travelers lose an average of 6.9 hours of productive time per trip. That equated to $662 using an employee compensation benchmark of $96 per hour (including salary, benefits, etc.). According to CWT Solutions Group vice president Christophe Renard, the TMC settled on the weighted $96 figure by considering salary data by seniority level of surveyed travelers, the mix of those levels among travelers and their countries of origin.

Renard’s team has “run our TSI algorithm for some clients to assess the lost productive time of their travelers,” he said. “We used averages for salary data but indeed we can use a company-specific HR data feed to ensure this is a very accurate estimation for that company.”

IATA also estimated that an expanded laptop ban would mean a 9-minute increase in transatlantic travel times: five on departure (due to “the behavioral response of passengers to the additional screening requirements combined with the lost time that it takes to actually screen passengers on departure,” according to an IATA official); three on arrival (for travelers to retrieve their checked electronic device); and one for flight delays. IATA based those “conservative estimates” on observations from the initial laptop ban covering seven Middle Eastern and African airports.

Additional info: DOT has calculated the value of travel time savings (VTTS) on and off since 1997. It said it does so because that value is “critical” for assessing infrastructure investments and rulemaking initiatives.

For business travelers in general, DOT’s VTTS “is assumed to be equal to a nationwide median gross compensation, defined as the sum of the median hourly wage and an estimate of hourly benefits.” For 2016 (based on 2015 data), it was $25.40 per hour.

DOT recognizes that a “distinct wage is justified” when considering air travel (or high-speed rail). The latest government data on that comes from a 2001 U.S. Bureau of Transportation Statistics study. According to the data, the median household income for business air travelers at that time was about $105,000. That was 2.5 times greater than the overall 2001 median household income, as per the U.S. Census Bureau. Applying that 2.5 factor to the 2016 general business traveler VTTS resulted in an hourly business air traveler VTTS of $63.20.

It was $60.70 in 2015, $60 in 2014 and $57.20 in 2011. DOT calculated VTTS in 1997 and 2003 using a different methodology.

These are averages; DOT recommends applying a one percent increase in VTTS per one percent increase in the travelers’ income.

Airlines affected by the initial laptop ban, according to IATA, reported that about 15 percent of all flights were delayed by an average of seven minutes. Using DOT’s calculation of $47.10 for the average value of travel time for all airline passengers (adjusted upward to $47.20 for the 2016 CPI), IATA’s bottom-line annual impact for this component is $216 million.

The remaining $195 million impact in IATA’s $1.1 billion estimate relates to laptop rental costs. IATA assumed 80 percent of passengers normally carry large personal electronic devices, and that half of them normally use them during flights. It used a “conservative estimate” for tablet and laptop rentals, excluding delivery and insurance costs, of $18.50 per day.

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