In our last poll, we asked you: “To what extent has the economic downturn impacted events? Is your company reducing costs in the event sector?”. The answers are not surprising; this year, the event sector must save money as well, although these savings are affecting internal much more than external events.

Only 44% of our Internet users will be holding important external events. 33% said that they are holding important internal and external events, and only 22% said that they are only making minor changes in comparison with last year, with most events taking place as planned. None of our blog readers indicated that they were cancelling all events.

Julie Oliver, Managing Director

AirPlus talks with Julie Oliver, Managing Director of Business Travel Direct about ways of adapting to changes brought on by the recession and how to embrace the new opportunities that lay ahead for TMCs…

AirPlus: The British Chamber of Commerce recently announced that the worst of the UK’s recession is over – could this mean that we are nearing a possible happy ending to the financial drama that played out over the past year?

JO: I think it is a little early to say that the worst is over. While there is more positive news around, companies still need to see some concrete improvements before considering increasing their business travel expenditure. Overall our clients have followed the general trend of booking less air travel. Coupled with this we have seen an upturn in rail bookings.

AirPlus: In your experience what have been the most common cut-backs in business travel during this economic crisis?

JO: In common with the rest of the industry we have seen cutbacks in business travel overall. Specifically there has been a marked decline in air travel, especially in business class. Even when people have been travelling there has been a drop in the number of trips involving overnight stays at hotels and in car rental, or the purchase of more restrictive tickets.

AirPlus: In your opinion are the recent changes in booking behaviour a temporary measure to save costs, or are companies getting more serious about establishing and enforcing long term travel policies? How does it impact the TMCs?

JO: The shift from business class travel to economy class and no frills airlines had started before the recession especially for short haul flights and was being written into travel policies. The recession has highlighted the need for closer scrutiny of costs and I believe we will see more companies setting up travel policies to help them control costs and improve traveller tracking. I see travel policies as a positive development as they lay clear guidelines for both travellers and TMCs. Having an enforceable policy makes it easier for the TMC to monitor expenditure and, hopefully, deliver savings. In addition we can speed up the booking process by enabling travellers to make bookings through our online portal, which has the policy parameters loaded on it.

AirPlus: Companies that are enforcing travel embargoes may argue that their actions also benefit the environment. Are the topics around the environment and green products increasingly playing a role in companies’ travel policies since the recession?

JO: The environment was a key topic before the current crisis with many of our clients incorporating travel within the organisation’s overall green policy.

In recent times companies have been focusing on the bottom line by cutting travel rather than considering offsetting measures.  I think that once we are out of this crisis companies will once again look at how to make their travel ‘greener’ and perhaps we will see the current switch from flying to rail travel become a permanent measure.

AirPlus: Social media (i.e. twitter, facebook, LinkedIn, etc…) is increasingly being used by hotels and airlines as a way to reach and interact with customers. How do you view the role of social media in the BTM and to what extent can TMCs benefit from it?

JO: I think this is becoming more important not just for interacting with customers, but finding new ones.

AirPlus: Has the economic downturn created more opportunities for networking platforms and sharing the knowledge amongst BTM professionals, or has it brought fiercer competition and less interaction in the industry?

JO: I think as an industry we have always been great networkers and sharers of knowledge. I can’t talk for other TMCs but in times like these, there is much greater opportunity to really prove your worth as a strategic partner and that in itself brings a great amount of pleasure when you achieve the savings result and changes in behavior buying in line with what you’ve set out to do with your corporate nine months beforehand.

AirPlus: Looking into a ‘crystal ball’, do you see any major developments or changes which are likely to affect the current business travel landscape? In your view, what sort of changes are likely to take place?

JO: I think that one big change we will see is that there will be fewer TMCs as some will unfortunately go to the wall and some will merge with larger companies.  I think the crisis will also have forced change on TMCs as they have had to adapt and change the way they do business.

Business travel will come back as companies will need to travel again in order to secure new business and service existing clients. The big question is what form this travel will take. It may well be that the days of travelling in first or business class have gone.

AirPlus: What motivates Business Travel Direct in the current climate? What is your message to the other TMCs?

JO: Our main motivation continues to be the same: to provide exceptional service to our clients and continue to help clients secure maximum value for their travel budgets. We are also helped by our flexible approach which means that we are quickly able to adapt our service to offer what cleints need in fast changing circumstances.

Like other TMCs we are also looking at alternative areas where we can secure revenue. If we are not booking flights, then we need to look at other services such as airport car parking that we can offer. Travel avoidance is a big thing for corporates and as strategic partners we should be helping them with this, but we need to find a model that rewards us for the work we do when no services have been purchased.

My message to other TMCs is listen to your clients and make sure you are aligned with what they are trying to achieve.

The economic crisis is affecting travel management in every second company in the US and Europe. US companies are especially affected. A survey carried out by AirPlus in February and now published shows that due to economic problems, 63% of all American companies are being forced to change both their travel management guidelines as well as their business travel regulations. The effects in Europe are somewhat less serious: here, 42% of the surveyed companies report that the crisis is affecting the number and extent of their business trips.

Over 500 travel managers in the US and eight European countries were questioned.

The AirPlus study substantiates the first survey and its predictions concerning the affects of the crisis on business travel.  But it also shows that travel managers in the US and in Europe react quite differently to the crisis: while European managers seek to save costs by booking cheaper flights and hotels, US managers are reacting by reducing travel activities. Looking for more economic conditions for business travels is of secondary importance to them.

Particularly serious is that 19% of the US companies surveyed said that they could imagine doing completely without business travel in the future. In Europe, only 2% of companies consider such a reaction to be a suitable response to the economic crisis.

Is business travel a “victim of the economic crisis”?

One could easily get the impression that the media are often linking various activities that are not really related. Business travel, for example, sometimes comes under attack in economic circles as well as general news media.  At least, this is the tone of the article “Bankers: by all means take my tax and spend it on business travel”, which was published in the online edition of the London Times on February 17, 2009. According to this article, discussion on business travel will not only increase, but demands from politics and the media could lead to further underestimation of the significance of business travel – to the detriment of the desired economic recovery. Author Mark Frary names two arguments that underscore the importance of business travel for the hoped-for economic upswing:

1) Radical limitation of business travel will damage airlines as well as the hotel branch, both of which realize a great part of their profits from just this type of travel.

2) It endangers business relationships that are essential for business because personal contact is decisive for nearly all fundamental business decisions.

As a matter of fact, the Association of German Travel Management (VDR) is reporting that the financial crisis is “massively” affecting business travel behavior. While a German survey held in October 2008 showed that only 14% of respondees said that they were cutting all travel that was not absolutely necessary, this figure jumped to 32% in January.  The cuts are particularly dramatic when one analyzes international developments: According to a current AirPlus study, circa 40% of all travel departments of European companies and over 60% of all US American companies confirm that the crisis is negatively affecting travel management. However, a current survey by the AirPlus US team shows that over 80% have already reacted and changed their travel programs

The International Air Transport Association (IATA), whose members number 230 airlines worldwide (93% of all air traffic), has announced that the “abrupt decline” of business activities and international trade has caused a “massive drop in bookings”. The German news magazine DER SPIEGEL has now published current figures. According to the article, bookings in December dropped 13% in comparison to the previous month. Asia showed the greatest losses with a reduction in demand by one quarter; premium traffic in Europe plunged by 16%.

But apparently, savings measures that are too rigid overshoot the mark. “Business travelers are an indispensable component of the success of modern companies,” declares Michael Kirnberger, President of the VDR. Limiting direct customer contact could affect business just as disastrously as the credit crunch. In addition, at a higher economic level, business travel makes a significant contribution to added value, according to Kirnberger. A 10% drop in business travel would remove some five billion euros from the German economy alone. With an 11% market share of all international business trips, Germany is considered to be the market leader in the business travel area.   

Currently – or so it appears – companies throughout the world are looking for “new equilibrium” in the area of business travel. But in doing so, they should let themselves be influenced neither by politics nor the media. If so, they could end up making the same mistakes of those managers who contributed to the economic crisis: orientation solely to balance sheets, short-term profits and savings potential. The significance of business travel is seen only in the long term.

London Times: Bankers: by all means take my tax and spend it on business travel
DER SPIEGEL: current figures (German)
Current survey by the AirPlus US team