Through the end of last year and the beginning of this year, industry experts were bullish on business travel, with business travel predictions for volume and pricing nearing or exceeding pre-recession levels.

But a negative U.S. jobs report in early July, coupled with a Standard & Poor downgrading of the U.S. government in early August and ongoing economic problems throughout Europe, brought up the specter of a double-dip recession and put corporate travel departments on notice that growth might not continue at predicted rates.

To take an in-the-moment pulse on the potential effects of negative economic indices, AirPlus surveyed 152 corporate travel managers at the beginning of September about the state of their corporate travel budgets and plans.

The economic uncertainty was clearly reflected in the world of managed corporate travel. Survey respondents were nearly split when asked if they expected their company’s travel program to feel immediate pressure to control volume/costs in light of some economic indices and public sentiment about recovery turning from flat to negative. Nearly half – 47 percent – said yes, they did expect to feel immediate pressure, while slightly less – 41 percent – said no. Another 12 percent simply didn’t know.

Those who did expect to feel pressure to make changes were prepared to pull several cost-saving levers in the next six months. More than half anticipated stricter pre-trip approvals (58 percent) and shifting more travel to web conferencing or telepresence (56 percent). Significant numbers were also prepared to implement class of service restrictions on air (44 percent) or hotel (30 percent) and tighten other air policies (34 percent). Nearly one-quarter (23 percent) were even prepared to impose a temporary travel freeze.

Among the 19 percent who said “other,” several noted strategies revolving around stricter monitoring and adherence to policy and delaying or decreasing travel, although not an outright  ban of all travel.

It is in this uncertain economic climate that corporate travel managers begin 2012 corporate negotiations, balancing the potential for budget and volume cuts against anticipated rate increases.

For your complimentary copy of the results, please click here:

AirPlus_The Wire_October 2011

Additional Resource:

Advito Projects Higher 2012 Travel Prices

Airlines, hotels and car rental companies in the United States reported good to excellent recovery patterns as business travel hit an acceptable stride in the second quarter of 2010. These earnings numbers are supported by worldwide travel agency sales data from Airlines Reporting Corporation, which has shown an average increase of 21.7 percent over the first half of 2010 based on 7.5 percent higher domestic transactions and 11 percent more international transactions when compared to the same period last year. In an online survey of 80 travel buyers and suppliers conducted in late July and early August by AirPlus International, rates of optimism surrounding travel volume increases for the second half of 2010 showed some marked differences for buyers versus suppliers.

The majority of both groups projected business travel volume increases overall, and a larger percentage of buyers than suppliers actually expect to see increases in their company‘s business travel volume in the latter half of 2010 when compared to the same period last year. Suppliers, however, showed somewhat more optimism than buyers when asked about the specific rate of that increase.

Among suppliers responding to the survey, more than 52 percent expected to see travel volume increases overall, with 25 percent expecting a moderate increase of 5 to 10 percent. None of the suppliers surveyed projected increases of less than 5 percent for the period.

That figure contrasted markedly with the nearly 15 percent of buyers responding to the survey, who marked the slower growth category for their company‘s travel volumes. Buyers also differed from suppliers in the percentage that projected more aggressive travel volume growth. A slight percentage of buyers—3.3 percent—indicated volume increases of more than 25 percent, whereas no supplier was willing to go out on this limb.

Buyer and supplier projections were nearly in lockstep in the rest of the growth categories. About 25 percent of both buyers and suppliers indicated that business travel volumes would stay the same in the second half of 2010, when compared to last year. About 12 percent of each group projected a decrease in business travel volume.

For the 59 percent of buyers with positive projections, 33 percent identified sales travel as the focus of the growth. For another 33 percent, travel for new business development was taking priority. While sales travel is a logical area for business travel growth in a recovering economy, the surge in new business development may indicate a driving effort to explore opportunities in emerging economies in Latin America and Asia, where economic recovery has been swift.

In addition, the survey clearly showed that travel managers are feeling the pressure to demonstrate the return on investment for travel. Sales travel and new business development are the two areas where managers could most effectively make an argument for travel ROI by linking the cost of this travel to a company‘s overall revenue generation. Nearly 30 percent of buyers identified “pressure to show the ROI of travel” as their top pressure from upper management as business travelers get back on the road. This pressure was a distant second when compared to the 50 percent of travel managers who identified “pressure to find additional savings” as their top concern.

As a relatively new effort for travel managers, demonstrating travel ROI has clearly entered the main stream, but it is not likely to be an easy task. In particular, measuring the opportunity costs of not traveling and identifying the period for payback for trips taken, will continue to be a challenge to any travel managers tasked with an ROI effort. Is it worth it? The answer will be a resounding “yes” for the industry as a whole if the individual companies are successful at doing so.

Download the free PDF for full survey results.
AirPlus: The Wire August 2010 (PDF, 250KB)

Additional Resources:

U.S. Airlines Surge Back to Profitability

Marriott Preparing Customers for “Meaningfully” Higher Rates

The trend in business travel has remained unchanged for the past few years – Economy rather than Business Class. The reasons include the increasing, and indeed sensible, introduction of travel policies and the acute pressure to economize due to the recession over the past two years. Large companies were the first to react to the crisis; smaller ones followed soon after. However, saving money by booking Economy Class tickets does not necessarily show the whole picture of long- or short-haul flights. The health of the travelers and the potential opportunity costs must also be considered when booking a flight.

Duty of care

Companies must comply with their duty of care vis-à-vis their staff at all times, including during business travel. On one hand, health considerations that apply to certain groups of travelers, such as an increased risk of thrombosis, need to be considered. On the other hand, economic aspects must be taken into account. Will the travelers get enough rest during the flight to successfully conduct negotiations at their destinations? Can they make effective use of flight time to get work done?

Book the class of flight that suits the circumstances

When taking all concerns into consideration, at the end of the day it becomes clear that booking a flight is a mere question of weighing costs and benefits: negative negotiation outcomes resulting from stressful travel may entail higher costs for companies than Business Class flights. In this context it should, for example, be considered whether a flight is taken during the day or the night and whether the traveler takes the trip during his or her work hours but can neither sleep nor work due to lack of space.
Flight classes also make a difference in terms of travel-related concerns, for example, “time is money” applies to the Fast Lanes and priority boarding and deboarding that Business Class travelers enjoy. In addition, Business Class travelers have access to lounges, thus saving time and providing opportunities to make efficient use of waiting times.

A question of travel policies

Flight class bookings should not be based on corporate hierarchy level, but on distance travelled. However, not all long distances are the same – spending money for an Economy Class ticket plus a night in a hotel may also pay off. To ensure transparency and effectiveness, leeway in the interpretation of travel policies should be allowed. Travel policies should be clearly formulated and, if required, complemented by a world map indicating Economy and Business Class destinations. In addition, travel policies should be reviewed regularly and compliance should be strictly controlled.

Two years ago Anne Richter, a graduate of the Braunschweig/Wolfenbüttel University of Applied Sciences, conducted scientific investigations on classes of business travel. Her study titled “Travel Classes on Long-Distance Flights for Business Travel – Analysis of Travel Policies and Bases for Decisions in German Corporations” is available in German and can be ordered by e-mailing communications@airplus.com.

One of the factors reflecting Europe’s recovery from the economic crisis is the latest business-travel figures: in the first six months of 2010, the number of business flights taken by staff of European companies increased by three percent as compared to the same period in 2009. Moreover, the percentage of business travelers flying Business Class has also grown, from eight percent in January 2010 to 10 percent in June. This figure was last reached at the end of 2008, before the economic slump. In total, companies in Europe spent seven percent more on flights in the first half of 2010 than they did in the first half of 2009. These figures are from the latest AirPlus Business Travel Index, a survey conducted by the leading international provider of solutions for business-travel management, covering the first six months of 2010.

More than 16 percent of all business flights were intercontinental
While companies cut back on domestic business flights by six percent, the number of tickets to European destinations increased by five percent. Intercontinental flights saw the largest growth: 24 percent as compared to the comparable period last year. In the first six months of 2010, 16.4 percent of all flights were intercontinental; in 2009, it was only 13.5 percent. The increase in Business Class tickets and intercontinental flights also upped ticket prices: in January 2010, companies in Europe paid an average of 508 euros, in June it was 554 euros, a nine-percent increase.
The first half of 2010 also saw an increase in train travel. European business travelers bought seven percent more train tickets than in the same period last year. The average price was 96 euros – unchanged as compared to 2009 levels. Hotel stays and expenses also went up for European business travelers, 13 percent for each category in the first half of 2010. Rental cars were used 18 percent more than in the same period last year, and expenses increased by 14 percent.

One out of three travel managers anticipates an increase in air travel
In a survey of travel managers in 20 business-travel markets, more than 33 percent expected the number of flights to continue to rise in the next 12 months. By comparison, in 2009, the crisis year, only 21 percent of Europe’s travel managers anticipated the number of business-related flights to go up. A surge in hotel stays is expected by 25 percent of the travel manag-ers surveyed; 20 percent believe that train travel will increase; and 14 percent anticipate more car rentals.

The AirPlus Business Travel Index is based on the analysis of more than 100 million business-travel bookings per year made by more than 33,000 companies worldwide.

The airspace closing forced European business travelers to seek alternative means of transportation. Most travelers used trains and rental cars. During the entire week affected by the volcano ash, the number of purchased train tickets was consistently one third above average. The increase in rental car bookings was 17 percent higher. At the same time, hotel overnight stays rose by 19 percent. For restaurant meals, business travelers spent 15 percent more in the crisis week. These are the results of the latest AirPlus Business Travel Index, carried out by the leading global travel payment provider AirPlus International based on the current business-travel figures for Europe.

As flights were grounded during the days of the ash cloud, cancellations of flight tickets went up sixfold as compared to the average. However, the temporary close-offs had only minor effects on the general booking behavior of European business travelers – volumes were approximately the same as normal. Changes were noted regarding the time periods before the actual trips took place: in the crisis week, bookings were made at much shorter notice. This was particularly the case with business-class travelers. On average, they booked their flights just about one week before the take-off. In comparison: on an annual average, business flights in business class are booked approximately 14 days in advance.

The exceptional situation during the ash-cloud also affected average prices for alternative means of transportation  – as recorded in trains and rental cars. Business travelers rented 17 percent more cars, but paid 26 percent more. These figures reflect the short-term changes in usage behavior: above-average distances, longer rental periods and surcharges for one-way rentals. As a matter of course, business travelers also frequented gas stations more often and spent 18 percent more on gas.

In terms of train bookings, figures are similar: one-third more tickets and a plus in expenses of more than 50 percent. This shows that business travelers opted for trains as clear alternatives to air travel and covered comparably long routes by train. On 17, 19 and 21 April, they spent more money on train tickets than on any other day in 2010.

So, when product changes mean technology and processes must change who is there to help? In theory, the intermediaries should already be engaged in the issue and be working through solutions. Our survey results would seem to indicate that in many cases the intermediary or technology provider is able to create the solution before the customer sees a negative impact, as demonstrated by the 44% of buyers who were unaware of recent issues. Unless of course these buyers had not yet picked up on the issue on which they were surveyed.

Without engagement and collaboration it is clear that the end-user will continue to be presented with issues they must deal with which undermines the work of the supplier community, and in particular the airlines, to create choice and a sustainable model. This is best illustrated by an incredible 98% of buyers who believe that airlines and technology providers need to engage with the buyer community to ensure the unbundling innovation doesn’t continue to cause comparative fare issues.

With nearly 50% of buyers disagreeing with the view that airlines are acting positively to consumer wishes, this illustrates that the opportunity to use the existing environment to make positive product changes which are in line with buyer needs is truly at hand.

The ITM Research programme is supported by AirPlus and produced independently by the Institute of Travel & Meetings (ITM) www.itm.org.uk

Paul Tilstone, Chief Executive, Institute of Travel & Meetings

Norman Gage

Interview with Norman Gage,  Director of Business Travel, Advantage Business Travel

AirPlus talks with Norman Gage from Advantage Business Travel about the many challenges faced and awaiting the TMCs in the UK, new opportunities 2010 will bring, as well as his thoughts on New Year’s resolutions…

AirPlus: How do you look back on the past year, 2009? Has it taught us valuable lessons or has it stood in the way of progress for the BTM industry?

NG: The problem for the travel industry with last year was that it took some time before the impact of the country’s problems started to take affect, it hit about the middle of November 2008 and continued throughout the year. As a consequence we were looking over our shoulder and comparing a tough year with a good year right up to November 2009. Now we can more directly compare. However what has happened has happened, we should learn that budgets, forecasting, etc. should be based on sound judgment of the economic realities and not as a plus or minus on prior year performance.

AirPlus: What are the challenges that lay ahead for TMCs in 2010?

NG: I believe that 2010 will be another roller coaster of a year; it will be like riding it with one eye blindfolded, encountering more ups and downs and with tighter curves. The challenge will be trying to anticipate them in good time, to ensure the ride is as smooth as possible.

AirPlus: Year 2009 saw many companies reinforcing their travel policies. As the economy stabilises do you foresee travel policies becoming more relaxed or just the opposite?

NG: The financial pressures that have driven the pressure on compliance will not diminish during 2010, in fact it will get more widespread and it will get even tighter as the benefit to corporates becomes more apparent.

AirPlus: As a result of the corporate travel decline in 2009, many TMCs have looked at alternative ways to raise revenue. Do you see ancillary services developing as core business activities in 2010 and could you give some examples?

NG: The decline in travel spend should be analysed from three different angles, firstly the TMC: – since the abolition of commission, sales volume has had little significance to the TMC, who gains its remuneration direct from the client through transaction fees. The decline in transactions has been far less than sales volume decline. The corporate: – due to the airlines needing to fill seats, the average price on all routes has fluctuated, the canny corporate who does business with a TMC that is quick on their feet, has been benefitting from spot pricing. This phenomenon has grown in momentum and carries the more vogue title of “demand management”. And lastly the airline:- in the rush to attract travellers, airlines have slashed prices, even though they have, despite the outward signs, maintained a high cost structure, so the loss in revenue has affected them the most.

AirPlus: They say ‘beggars can’t be choosers’, and with travel budget cuts, many corporates had to
make do by replacing face-to-face meetings with conference calls. Do you think the budgets will increase/ decrease or remain flat in 2010, and what does the future hold for business travel?

NG: There is a lot of talk at the moment about bubbles, and at some stage during 2010 I believe that the conference call bubble will burst, we always hear when things go wrong at an airport, a hotel or on the trains, but the disciples of teleconferencing seem to sweep under the carpet the foibles of video conferencing.

AirPlus: Following the UK Government expense scandals, both public and private sectors are tightening their travel policies and looking at ways to become more transparent. In what ways can the corporates become more compliant? Should the TMCs be taking the lead role to drive compliance?

NG: The TMC should work hand in glove with their corporate clients to ensure that the corporate client’s aims and objectives on compliance are conceivable, believable and achievable, and that the TMC has the process in place to recognise any “maverick” traveller.

AirPlus: Do you see the increasing popularity of social media (i.e. twitter, facebook, LinedIn) merely as a fad or as a new way of communicating and networking with clients and partners? Do you
believe it can bring more business for TMCs?

NG: We discussed these types of communication with our business travel members back in July. They resoundly felt that twitter was a fad, facebook was great for personal use, but LinkedIn had distinct possibilities, by either creating networks for themselves to exchange news, views and ideas, or by setting up a network of say the Finance Directors of their clients, or the Marketing Directors.

AirPlus: What is Advantage Business Travel’s New Year’s resolution and what is your wish for 2010?

NG: When I read the question I immediately thought of two things, the first was that 80% of all predictions will not happen, and secondly a Chinese proverb along the lines of “Be careful of what you wish for “…

Download interview as PDF

On a European average, the global recession surprisingly did not cause notable shifts in  domestic, continental and intercontinental routes. Despite the decrease in overall volumes, the apportionment of business travel to the different destinations has remained virtually unchanged. This is the latest finding of a market research conducted by AirPlus, the leading international provider of travel payment and reporting solutions. The AirPlus Business Travel Index is based on the evaluation of more than 12 million annual flight bookings made by over 32,000 companies worldwide.

As a result of the global recession, companies around the world have reduced the number of business flights and lowered the booked service classes. Cutting down on the number of business trips is connected with another, little acknowledged development: the duration of business travel is increasing. In 2007, the global average duration for business flight trips was 2.2 days; in 2009, this share had increased to 2.4 days. This is the result according to the latest market survey conducted by AirPlus, the leading international provider of travel payment and reporting solutions.

The AirPlus Business Travel Index is based on the evaluation of more than 12 million annual flight bookings made by over 32,000 companies worldwide.

An increasing number of companies are bundling volumes with fewer airlines for their business flights. This is the result of the latest market survey conducted by AirPlus, the leading international provider of travel payment and reporting solutions. What experts have recommended for some time is now being more frequently implemented: companies are bundling their flight volumes and actively guiding their travelers towards a smaller number of airlines when purchasing flight tickets. An average company flies 12.3 different airlines for staff business travel; in 2008, the average was 13.7 carriers.  Further, the average was 14 airlines in 2007.

The AirPlus Business Travel Index is based on the evaluation of more than 12 million annual flight bookings made by over 32,000 companies worldwide.