This Startup Lets You Pay Employees for Being Frugal on the Road

January 24, 2016, 4:58 PM UTC
Passengers walk through the terminal as they head to their flights at Reagan National Airport in Arlington, Virginia, December 23, 2015. More than 100 million holiday travelers are expected to travel in the US during the last weeks of the year according to the American Automobile Association. AFP PHOTO / SAUL LOEB / AFP / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)
Photograph by Saul Loeb—AFP/Getty Images

When you book a business trip, did you ever consider staying with your mom in Saint Louis, volunteering to take connecting flights from New York to L.A., or doubling-up with a coworker in your Chicago hotel suite? Why should you suffer such inconveniences when your employer’s policies permit you to travel non-stop and book $300-a-night suites without your buddy from marketing snoring in the next bunk?

Indeed, most workers have little to gain from going above and beyond to save company cash when the employer’s rules give permission to spend it freely. And one of the rare areas where employees still enjoy plenty of latitude, and relish pushing their expense accounts to the max, is travel. Employers recognize that severely tightening travel rules, requiring red eye flights and double-occupancy, is an extremely unpopular method of curbing expenses. So wouldn’t it be great if, instead of launching yet another dreaded cost-cutting effort, companies could rally workers themselves to find big savings—by offering what amounts to a generous benefit?

A New York firm called Rocketrip has developed a novel solution. It offers a product that guides its clients to substantially lower their travel costs by sharing the savings with their employees. “The theme is that when employees spend company money, they’re not spending it wisely,” says Rocketrip founder and CEO Dan Ruch. “Under our system, they’re motivated to spend the company’s money the same way they spend their own money.”


Here’s how the Rocketrip model operates. When a client signs on, Rocketrip uses its software to calculate what a trip booked by an employee would reasonably cost under the company’s policy on hotels and air travel.

“We need to know if they’re permitted to stay in five star hotels, and who are their preferred carriers, so we can give the client a fair and reasonable prediction of what that trip would cost with no motivation to save. That benchmark is the budget to beat,” says Ruch.

Say an employee books a trip from Chicago to San Francisco; he or she is permitted to take a round trip, non-stop coach flight that costs $500, and can stay four nights at a four-star hotel for $175 a night, for another $700. The trip comes to a total of $1,200.

Under the Rocketrip plan, the employee has a strong incentive to beat that budget. He or she gets to keep a big chunk of every dollar, as much as half, that falls below the $1,200 normal expense, or benchmark. For example, if the road warrior in question takes a connecting route through Denver that reduces the air fare from $500 to $300 and stays with a cousin in San Francisco instead of booking a hotel, the savings would come to $900. And the employee can pocket as much as $450.

According to Ruch, his clients shave around 15% from their travel budgets after signing with Rocketrip. For every $1 million in spending, employees get around $150,000, and the company saves a matching amount. (Obviously, a significant minority of employees keep spending as usual.) And Rocketrip collects 2% of their clients’ travel billings using its system.

“We’re motivating employees to take connecting flights and flying coach instead of business class on international routes,” says Ruch. “And it’s not being dictated to them. You get an army of employees who are motivated to save money because there’s something in it for them.”

Rocketrip, which was founded in 2013, has raised $8 million from a group of investors including Canaan Partners, Genacast Ventures, CrunchFund, and Y-Combinator. And so far, many of its clients are adventurous medium-scale enterprises, among them Opower. The Arlington, Virginia-based firm designs and manages software systems for public utilities. “We have 605 employees, and over half are active users,” says Charlie Mayer, director of operations and investor relations at the company. In 2015, its first full year on Rocketrip, Opower garnered $500,000 in savings, divided about equally between the company and its budget-conscious troops. “When I first saw the idea, I thought, this is interesting but I can’t imagine that it actually works,” says Mayer. “Well, it works. It’s selling itself, it’s like people are traveling on their own dime.”

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Savings are awarded as points that are loaded into employees’ Rocketrip accounts. Those points can be redeemed for gifts cards from various merchants, including Amazon and Best Buy. Instead of having employees pay taxes on this benefit, Opower pays it for them, reducing the number of points accordingly. Everyone from the engineers to the top brass find creative ways to cash in. “I saw that a young sales guy from Latin America was really racking up points,” says Mayer. “I said, ‘What are you doing?’ He says, ‘Staying with my mother when I go to Mexico City.’”

On a trip to San Francisco, Mayer and four other members of the top management team shunned a Starwood or Westin at $330 a night, and booked a house on Airbnb for $500, saving almost $6,000 for the week. In the city by the bay, another intrepid Opower employee stayed on a boat in one of San Francisco’s harbors, also found on Airbnb. It’s a return to the kind of frugal tricks you used to stretch your travel budget in college. Only this time, you can keep that bulging backpack at home.

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