Christophe Peymirat, the UK vp and managing director of Egencia, one of the world's largest TMCs, argues that corporate travel buyers can still enjoy some bargaining chips in 2010.
Major challenges confronted corporate travel buyers in 2009. The difficult economic climate prompted additional scrutiny of travel-and-entertainment spending and further tightening of travel policies to deliver much needed savings for businesses. But challenges also trigger opportunities and 2010 offers signs of optimism for business travel as economies stabilise around the world.
Our recent research report, 2010 Corporate Travel Forecast and Hotel Negotiability Index, examines the business travel environment for over 35 leading global cities in Europe, North America and Asia Pacific. For each market, an in-depth diagnostic was conducted covering macro-economics factors, industry specific behaviours, as well as supply and demand pressure.
At a high level, the research highlighted these driving trends for the corporate travel sector in 2010 for Europe:
- Short and long haul travel for top European business destinations will rise. Pricing for both Average Ticket Price (ATP) and Average Daily Room Rates (ADR) in top European business travel destinations is also expected to rise slowly.
- Growing business demand will begin to drive front of cabin travel, especially in finance markets.
- Hotels located in business hubs will also benefit from the increased demand. London lodging and average ticket price are set to rise 1% year on year from 2009.
- European markets have shown signs of positive growth. However continued economic uncertainty plus increased competition on routes, coupled with a stabilised oil price, down 30% year on year, have contributed downward pressure on European pricing in top business travel destinations.
Negotiating in 2010
European cities have shown signs of positive growth and business demand will begin to increase in travel especially in finance markets. We expect average ticket price increases in Europe will slowly rise, with Barcelona and Frankfurt leading at 7% and 4% respectively. London rates are expected to increase by 1%.
Additionally, recent airline capacity cuts, increased focus on carrier profitability and recent airline mergers, including the Delta/Northwest merger and the Air France/Alitalia consolidation, are also contributing upward pressure on ticket pricing for Europe.
In contrast, North American markets such as Philadelphia, Phoenix, San Diego and Seattle are set to see double-digits increases with San Diego leading the pack at 16%.
As air prices rise, the opportunity for extensive discounting wanes. Some carriers are being more creative around what they can offer, including upgrades, status matches and additional amenities like waived bag fees. However, the overall opportunity is limited, especially for travel programmes that have already consolidated their regional and global spend.
The negotiating environment for hotel partnerships is a different story and offers significant opportunity for the corporate travel programme that has the data, tools and flexibility to show value and then bring that value to a hotel partner.
Increased demand in business destinations has resulted in a slow increase in average daily rate (ADR). On the side of stabilising rates, financial and government centres, especially in Europe, will rebound more quickly after significant declines in 2010.
What do these global trends mean for corporate buyers?
Our Hotel Negotiability Index for 2010 suggests a mixed picture for corporate travel buyers in Europe. Negotiating in the European Union will be strongest in Amsterdam, Barcelona, Madrid and Milan and low in Berlin, Frankfurt, London and Paris. In Asia Pacific, strong opportunities to work with supply partners are likely in major destinations, especially in China and India.
Supply outlook will be weakest for the UK, France and Germany, contrasting to the US and APAC markets which will continue to maintain high negotiability during 2010. For Europe, the hotel negotiation opportunity for travel and business decision makers looks strong only in Spain, especially Barcelona and Madrid and also in Milan.
The US shows strong discount opportunities for corporate travel buyers in nearly every major North American city except Boston and Washington, D.C., where they should find moderate negotiating ability.
Travel Cost Saving Strategies
While 2010 does represent a mixed negotiating environment, travel managers will still benefit from stronger travel programmes and focus on ROI. 2009 has seen a distinct shift to mandated programmes and stricter approval processes. We see this trend towards proactive travel management increasing in 2010.
Premium travel has also been restricted or removed for many. Increased use of advance booking are here to stay as companies focus on refining their travel programmes to save costs.
Many organisations are also turning their attention to the next frontier of travel management - meetings and incentives. Businesses are assessing their meetings and transient spend to maximise corporate discounts, enhance employee security and drive greater focus on ROI throughout their organisations. This is an area that is worthy of stronger focus through 2010 and one that will become integral to a highly effective corporate travel programme.
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