Another Look at the Efficiency of Corporate Travel Management Departments

Abstract

In response to escalating business travel costs, many firms have formed corporate travel management departments to help control these expenses. This study examines how efficiently these departments are operating by employing a stochastic frontier technique in addition to a linear programming procedure. Both of these methods construct efficient frontiers that represent the minimum costs that need to be allocated to corporate travel given the number of trips that firms take. Any costs incurred beyond the efficient frontiers are deemed excess, and the firms are classified as inefficient. The results using both procedures indicate that the corporate travel management departments are relatively efficient. In a competitive market, it is expected that more firms will begin to use in-house travel management departments to help control the rise of travel-related expenses.