Demand for Asian business travel is stabilising as reduced airfare growth drives the market, according to a new study.
The 2012 American Express CFO Research Global Business & Spending Monitor found that almost one third of senior finance executives at some of Asia’s largest companies expect to spend more on business travel this year, but just 5% anticipate spending at least 10% more on business travel. Fifty-one percent of finance executives in Singapore said they will spend the same or more on business travel compared with last year.
This trend is being driven several factors, including subdued growth of airfares. The latest American Express Business Travel Monitor data revealed that domestic fares in Asia have increased just 1% in the first quarter of 2012, while intra-Asia fares remain flat and fares to Europe dropped 1%.
This is driving regional businesses to look at maximising the sales opportunities provided by business travel, with 89% of senior financial executives indicating their plan to spend more or the same on business travel in order to meet with current and prospective customers. Among Singapore financial executives, 94% said the same.
Dr Carl Jones, Head of American Express Advisory Services for the Asia Pacific region explained that continued instability in Europe, slowing growth rates in specific markets within Asia and a slight uplift in the US economy have driven these fare trends.
“Companies in Asia Pacific are still shying away from doing business in Europe so airfares to this region continue to fall. Interestingly, fares to the Americas have increased 2% in the last quarter – the first quarter-on-quarter increase in the last six months. This is noticeably seen in the Australia to North American routes. It is remarkable to see the dramatic rebound (12%) in demand at the first shoots of economic recovery, as companies look to nurture business growth,” he said.
Despite the slight increase of domestic fares across the Asia Pacific region, airfares in Singapore decreased across the board. Singapore published fares fell 1% within the Asia Pacific region and 3% to Europe, Middle East & Africa.
“The reduced prices in Singapore are likely a result of slower economical development and increased competition within the region. Companies are still aggressively managing travel policy and this is being reflected in the overall demand that we see in the marketplace. Ongoing uncertainty with the sovereign debt crisis in Europe continues to erode confidence, and reduce airfare growth from the previous highs seen in Asia,” said Dr Jones.
“High fuel prices will likely stay and as travel continues to be a priority for Singaporean businesses, fares are likely to remain at these levels, albeit with a slower increase,” he added.
According to Dr Jones, companies expect that airfare prices will rise, and so are continuing to seek advice to garner the best possible contracts with suppliers.
“We have particularly seen companies showing stronger interest in reviewing whether their supplier contracts are well negotiated and well complied with. Alternatives to travel are being looked at as part of policy reviews, but companies know well that top line growths are usually driven by face to face sales meetings, particularly in the Asia Pacific region,” he concluded.