‘New look’ corporate travel sector emerges for 2010
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‘No pain no gain’ is generally a phrase used by those embarking on a new fitness regime, but could equally be applied to the recent experiences of the corporate travel segment where in 2009, after relative of ambivalence towards the management of corporate travel, businesses were forced to wake up and adopt ‘boot camp’ style work-outs for their travel budgets.
As a result of this enforced industry health kick, many organisations adopted stricter corporate travel policies helping the segment to emerge in 2010 in better shape than ever before.
Robert Bailey, President & Chief Executive Officer of Abacus International explains, “The world-wide economic downturn of the last year prompted a remodelling of the corporate travel segment. Whilst this extreme make over was painful, our estimates suggesting that bookings in the segment shrank by as much as 20 - 30%, the hardships of the period have had long lasting benefits, not least of which has been increased efficiency. This is particularly true in Asia where the adoption of travel management systems is a key trend not only helping to drive a return to healthy volumes of corporate bookings but is also ensuring that the segment will never be at risk of getting so out of shape again.”
2009 will be remembered as the year when the business trip was suddenly brought into question and justifications were required to defend almost any travel spend. Some businesses took the knee jerk reaction of halting business travel altogether while others placed their procurement managers and travel budget holders under serious pressure to reduce costs.
According to American Express Business Travel, the majority of companies throughout Asia Pacific made formal or informal changes to their travel policies in the last nine months, with this trend potentially continuing as businesses try to recoup further savings and improve their bottom lines.
For some, technology rather than the abolition of travel was the answer. Increasing usage of teleconference tools was reported by accountancy firm Accenture, declaring a return of 300% – 500% on monthly operating costs of its 30 Cisco TelePresence suites worldwide thanks to significant travel avoidance.
Similarly, traditional meeting facility providers such as hotel chains, Marriot and Starwood saw travel avoidance as an alternative source of income, stating that they would install telepresence technology in their meeting rooms to boost their meeting businesses as the world economy becomes more interconnected.
Yet despite enthusiasm for alternatives to travel, cutting spend completely was identified as a false remedy. Research conducted for Hilton Worldwide by National University of Singapore Business School’s organisational behaviourist and psychologist Dr Richard Arvey found that “the use of face-to-face meetings has a variety of valuable psychological as well as business outcomes. (Therefore)It is my belief, that eliminating face-to-face meetings as an option in communicating with employees would be a mistake.”
Despite this advice, cuts to business travel costs became a necessary evil in 2009 but as Brett Henry, Vice President Marketing, Abacus International explains, this may be a trend that has since run its course. “Speaking with procurement managers over the past few months across Asia, we have been hearing that they are not likely to cut spend any further as further cuts impact morale and business efficiency. Instead, procurement managers are improving their monitoring of travel spend and controlling of costs. Going forward, this will not only mean looking at the unit cost of individual trips, but the total cost of travel to a business across a given period.”
Knowing that there are savings to be made is one thing, but without the appropriate management systems in place it is almost impossible to collect sufficient data to see where, and how these savings can be made, particularly when a business is located across multiple locations and uses a selection of travel management companies and GDSs.
This where the increasing adoption of travel management can systems help as Mr Henry continues to explain “In Asia, travel agents still have the opportunity to take the lead in educating corporations about what well-run travel programmes look like. SAP’s mid market version is selling extremely well in Asia and as a result many companies who invested in this will already have a different mindset towards process improvement and travel as a procurement versus simply an expense item.”
Abacus GetThere is leading the charge in this regard, across the globe, working with procurement managers of global companies to develop programmes and processes to ensure employees select the best mode of interaction with customers, and select the pre-approved suppliers. In particular this is true of partnerships announced in the past 16 months between GetThere and leading expense providers IBM and SAP.
Grant Rattray Director of GetThere for Asia Pacific at Sabre explains further “GetThere’s new relationships with prominent brands such as IBM and SAP highlights how corporations are integrating travel procurement and enterprise resource planning (ERP) solutions into every businesses process. Going beyond end-to-end expense management, GetThere taps into a full array of enterprise-wide process applications including Business Workflow, Human Capital Management, Financial Accounting and Analytics. As a result, GetThere users can leverage their existing ERP investment to reduce indirect costs and improve efficiencies related to travel procurement. Ultimately enabling the procurement manager to go beyond the individual trip, to understand what they spend on travel as a company, and with whom.”
The adoption of such management systems and new working practices being utilised in the new ‘remodelled’ corporate travel segment is a positive trend likely to be retained as a standard practice for many businesses moving forward. Other corresponding new practices include more stringent pre-trip authorisation mandated by management to justify travel costs will carry through even when the economy recovers - making overall travel booking process more disciplined and tied to revenue.
And as business moves into the new financial year, it’s clear that for many, travel costs have been reduced. But despite this, for business to be effective, the corporate travel show must go on and volumes mush increase once more. That’s why positive projections along these lines are so welcome, including those of a global business travel study (funded by NBTA and Egencia) quantifying global business travel spend and growth which predicted that business travel growth to China & Japan would surpass U.S growth over the next 5 years; with India, Vietnam, Indonesia and Iran will experiencing dramatic CAGR over the same period.
Meanwhile, American Express believes that the cost of travel throughout the Asia Pacific Region will increase as the depressed pricing and discounting necessary over the last few months disappears. Jonas Borglin - Head of advisory Services for American Express Business Travel, Japan, Asia Pacific and Australia said “In 2009, the weakened economy contributed to a 7 percent reduction in business travel in the Asia Pacific region forcing travel suppliers to reduce prices and rethink strategies. Next year we expect a turn around as green shoots in the economy continue to emerge and companies return travellers to the road.”
Finally, In India, Aviation analysts and accountancy firm KPMG made predictions earlier this year of some increases in volumes of travellers in India. The country’s aviation industry is showing signs of recovery with carriers and experts predicting 10 per cent growth in passenger traffic against their earlier prediction of not more than 5 per cent.
So whilst no one would pretend that the impact on the industry of the last year was not immense, a silver lining on this particular cloud is starting to shine through. As Robert Bailey, President & Chief Executive Officer of Abacus International reflects “Whilst this year’s downturn has certainly slimmed down the segment, it has also represented a wonderful opportunity to take stock and make improvements that will shore up corporate travel segment to take on whatever challenges may be ahead. More importantly, the downturn has readied this segment for the recovery seemingly just around the corner. We have all felt the pain but now are perfectly placed to gain from the post work out glow, many, many times over.”
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