The global economic slump means that corporate expenditure on travel is now being scrutinised more than ever. Business trips – their frequency, length and levels of comfort – are all affected by the downturn.
Expectations are changing, with executives caring less about luxury instead they are concentrating on whether a trip delivers the basics for business overseas – fast internet connections in hotels, meals in rooms rather than restaurants, and public transport from the airport rather than limousine services.
Since travel is one of the top five components of corporate expenditure, it has been a natural target for cuts. This has implications for the travel industry, where there will be new winners and losers, as well as new ways of thinking.
Eurostar marketing director for the UK Emma Harris said: “There is almost an empathetic austerity going on now, where it’s seen as not okay to be staying in five-star hotels. It’s because of the message it sends out – it’s about showing your client that times are tough and you are adapting accordingly.”
Executives are now making fewer, shorter and cheaper business trips, according to research commissioned recently by travel technology firm Amadeus. Internal meetings have been hit the hardest there’s a shift from business to economy class, budget and mid-scale hotels are faring better, there are fewer trips for junior executives and only travel that is billed to clients is surviving scrutiny.
Premier Inn operations director Nic Brown said: “Business travellers are looking for value for money. We’ve moved away from the need for the trouser press, the mini-bar and the Jacuzzi in the room.”
Pricing has become a crucial tool in managing travel from all sides – the corporate, the travel management company and the industry. The major difference between this downturn and previous ones is that now it is a much more complex marketplace.
As the general manager at the Radisson SAS Portman Hotel in London Tim Cordon explained: “Where a hotel used to have four or five different rates, it is not unusual for a hotel to now have 40 to 50 different rates.”
With real-time technology solutions from the global distribution systems, airlines, hotels and other travel suppliers are now able to vary their fares rapidly – and in a volatile market this is making the booking process for travel buyers highly variable.
But as Emirates commercial manager UK David Parker explained: “If we weren’t changing our fares quickly, we wouldn’t be competitive.”
Losers in the economic downturn
- Four and five-star properties that are not flexible with their rates or those who are not able to offer variable prices to business travellers. It is all about effective yield management.
- Business travellers in this era of austerity are more likely to resent extra charges – especially unplanned, significant ones – whether it is for internet usage, water in the room or disguised taxes and charges. Upfront, all-inclusive costs may be easier to manage than modular ones depending on what clients use.
- Corporations that are not able to rein in business travel costs by enforcing travel policies, especially for senior executives.
- Corporates who don’t look to TMCs and travel suppliers for savings.
- Those in the travel industry who are not responsive to the needs of the austere business traveller. Moving quickly in this new environment will be crucial. International travel meetings have been slashed but domestic UK travel is still fairly strong.
- Overseas destinations, airlines and hotels that rely heavily on British business travellers.
