BTN Europe presents an overview of business travel and MICE predictions for this year
The expansion of India’s economy and infrastructure is putting corporate travel on a steep upward trajectory. Amon Cohen reports
If Kim Jong-un or anyone else with a professional interest in nuclear fission happens to be reading this article, BBT has some exciting news for you. Geologists recently discovered that the Tummalapalle uranium ore mine in India’s Andhra Pradesh state has even vaster reserves than originally believed – enough to work the mine commercially until at least 2050.
That makes the case for a site visit by anyone needing to lay their hands on a job lot of uranium ore rather overwhelming. The only snag until now has been getting there because, on a good day, Tummalapalle is more than seven hours’ drive from Chennai airport.
All that is changing. In April 2017, the Indian government launched a regional connectivity scheme which authorised five airlines to launch 128 new routes connecting under-served or unserved airports throughout the country.
One of those airports is Kadapa, which had been sitting pretty much inactive since opening in 1953. Now Kadapa has an air connection to Hyderabad, and there are plans for Chennai and Bangalore to follow soon. Kadapa is less than 90 minutes by car from Tummalapalle.
Global travel hot spotThe Kadapa airport vignette is just one example of how an improving air network is plugging India even deeper into the global economy. It also demonstrates why India is currently the hottest market in global corporate travel. According to the Global Business Travel Association, the country’s business travel spend leapt 11.4 per cent in 2016, more than any other nation, lifting India two places to become the world’s eighth-largest spender.
GBTA expects India to leapfrog another couple of places very soon. With a well-entrenched, business-friendly government and one-sixth of the world’s population, of which 65 per cent are below the age of 35, it is hard to disagree with BCD Travel India managing director Ajay Bali when he concludes: “Corporate travel is only going to grow in double digits for the foreseeable future.”
Domestic capacity shot up 16 per cent in the first half of 2017, while demand was up even higher at 19 per cent, according to IATA. There is much more to come. India’s government aims to treble flights and domestic passengers over the next three years, boosting the latter figure to around the 300 million mark.
“Airbus is delivering one aircraft to India every week for the next seven years,” says Vishal Sinha, chief executive officer of Carlson Wagonlit Travel India.
Much of the infrastructure is not coping, especially the airports at Mumbai and Delhi, which have no more spare capacity and are subject to chronic delays in consequence. “Business travellers from elsewhere in India prefer to fly via a third point – usually the Middle East – when they travel abroad, rather than connect through Mumbai or New Delhi,” according to the Advito Industry Forecast 2018.
“Other major airports face similar concerns. The majority of India’s 40 largest airports will exceed their designated capacity within ten years,” the report says.
A similar problem is evident in the hotel sector, where Advito estimates India has only two-thirds of the bed stock it needs. Low supply coupled with high demand inevitably means room rates have risen 5-10 per cent annually in recent years, with the steepest hikes again in Mumbai and Delhi. The introduction of a Goods and Services Tax of up to 28 per cent will not help matters for foreign visitors (see panel, below).
With both the volume and cost of business travel spiralling ever upwards, it is little surprise to learn travel management is also taking off in a big way.
“Any company spending in excess of US$1 million is now managing its air and hotel travel,” says Bali. “Huge growth in the Indian economy means businesses are finding it more important to manage their travel, especially those which are going on the stock exchange, for compliance as well as cost reasons.”
A complex marketFor multinational travel managers, India can be a complex market to deal with, in large part because they find themselves overseeing a mass of contradictions.
One person who has wrestled with a series of paradoxes is Yvonne Moya, who until September this year was director of global travel, event and fleet services for Unilever. Its subsidiary Hindustan Unilever is the largest fast-moving consumer goods company in the country. “India is a very different beast to manage,” she says. “They see themselves as part of a global programme, yet they still reply: ‘Yes, but we’re India.’”
Along with practically every other interviewee for this article, Moya uses the phrase “high-touch” to describe service expectation among travellers. “They expect a lot of service,” she says. One TMC exec puts it a little less diplomatically. “We have ordinary travellers, VIPs and VVIPs,” he says. “All our customers think they are VVIPs.”
According to Elyes Mrad, EMEA managing director for American Express Global Business Travel, India is “high-touch but price-sensitive. There is a mentality of shopping around. People are not aware of total cost of ownership and that they lose more money by shopping around. It’s the same in the West, but even more so in India, although this is diminishing.”
Much of this ‘shopping around’ is done not by the travellers themselves but by internal travel administrators and TMCs. The latter continue to serve corporate clients through implant offices on customer premises – an arrangement that has largely died out in Europe.
Yet another paradox is evidenced by the persistence of those implants. Self-service in the form of online booking tools remains at low levels in spite of India being a very tech-savvy country which has, if anything, embraced mobile even faster than the West. The reason for low uptake, and high service expectation, is that “labour is so cheap,” says Moya.
However, this situation is beginning to shift for several reasons. One is that while uneducated labour remains grindingly low-paid in India, literate and numerate workers of the type a TMC requires are increasingly in demand and becoming relatively expensive.
Generation mobileAnother catalyst for change, according to Ashish Kishore, India country manager for HRG, is that “the average age of the workforce in India is 25 and this younger generation is pushing for mobile.” Automated booking tools are also adapting better to the Indian market.
“The one we introduced is working pretty well now but it was a long journey,” says Moya. “It was a lot of work to add features such as one-way journeys and low-cost carriers.” Not all Western booking tools are ready for India, she adds, so shop carefully.
Moya’s mention of low-cost airlines also reveals how travel managers need to understand the distinctive structure of the supply network and distribution chain in India. Budget airlines account for 60 per cent of domestic flights, and generally are unavailable through global distribution systems (GDSs).
That can make booking them through an online tool problematic. For offline reservations, all the major TMCs say they have found ways to connect to the low-cost carriers, and use aggregation technology to compare GDS and non-GDS flights alongside each other, but it is certainly worth verifying the claims they make.
Nor do the GDSs have all accommodation needs covered. Western-style hotels are easy enough to book, but many domestic travellers stay in lower-priced, often lower-quality properties known as guest houses.
“We tried to bring them into our online booking tool, but many don’t have an internet connection or even a fax machine, so it is still something of a manual process,” says Moya. Those guest houses which do offer online booking are, in some cases, available through specialist aggregators, which TMCs access either directly via APIs or indirectly via a GDS.
Which TMC?As for which TMC to choose, all today’s big multinational players are there, and so, too, are a couple of extremely venerable names.
Global TMC Thomas Cook Travel Management was swallowed up by American Express in the mid-1990s, but the separate entity Thomas Cook India has continued to purvey business travel services since 1881. But even Cook’s strays into Johnny-come-lately territory compared with its rival, Cox & Kings. This company traces its roots to 1758, when one Richard Cox was appointed regimental agent to the Foot Guards in India.
Despite being more than a quarter of a millennium old, Cox & Kings points to where India may go next: as a global force in business travel. Earlier this year Cox & Kings became one of only two major shareholders in multinational TMC network Radius.
Meanwhile, another Raj-era name, Taj Hotels Resorts and Palaces (whose antecedents date from 1899), has gradually been extending its footprint overseas. There are also the first signs of Indian technology companies entering the international marketplace. Tech-led airline consolidator Mystifly is just one example. Perhaps the next chapter of the Indian business travel story is just starting to be written.
How the Goods and Services Tax affects travel programmesIndia introduced a goods and services tax (GST) on July 1, 2017, adding as much as 28 per cent to the bill for some services, including upmarket hotels. GST replaces a variety of unharmonised national and local taxes, so it’s not a new financial burden, but in most cases (economy air travel being one exception), the new rate being levied is higher than before.
GST is excellent news for companies with travellers based in India because, like value-added tax in Europe, registered companies can reclaim it.
“GST is brilliant for our industry,” says Ashish Kishore, country head for HRG India. “Now all clients know they can get the money back, it becomes a beautiful saving for them. They can save millions of rupees.”
However, it’s less than excellent news for foreign travellers – they cannot recover GST.
HOTELS0 per cent – Room rates below 1,000 rupees (£11)12 per cent – Room rates 1,000-2,499 rupees; non-air-conditioned hotels18 per cent – Room rates 2,500-7,500 rupees; air-conditioned hotels “that serve liquor”28 per cent – Room tariffs above 7,500 rupees; five-star hotels
AIR5 per cent – Economy class tickets12 per cent – Business class tickets
RAIL5 per cent
RESTAURANTS5 per cent – ‘Small’ restaurants18 per cent – All other restaurants, including luxury hotels
What will happen to air fares and hotel rates in 2018?
AIRDemand for domestic flights is expected to soar another 15 per cent next year according to the Advito Industry Forecast 2018. Normally, that would trigger fears of huge fare increases, but Advito predicts capacity will grow even faster, leading to modest fare increases at most, but more likely flat pricing.
Demand will push up on international routes by a more sedate 5 per cent, according to Advito. Once again, this will be matched by capacity growth from both domestic and foreign carriers. However, rising charges, such as airport fees, and a higher rate of tax on business class flights, could push up the total ticket price.
HOTELSWith both domestic and foreign demand surging, Advito tips rates to jump by between 3 and 5 per cent in 2018. On top of that, GST on hotels will generally be higher than the local hotel taxes it is replacing, so accommodation will be noticeably more expensive for foreign visitors next year.