Peter Taswell, vice president of global corporate payments for American Express, says travelling to emerging markets can pay off in the long-term for businesses
With any economic downturn, business expenditure comes under the spotlight as companies focus on ensuring that spending is managed effectively. For business travel decision makers this could spell tougher times. However in this recession we have seen a fundamental difference in how UK companies are approaching business travel as the world becomes increasingly connected.
American Express commissioned the Economist Intelligence Unit to review the business travel landscape. It found that in the UK business travel has increased by almost half (48 per cent), compared to three years ago. Of those executives who said it had increased, one in five (20 per cent) claimed it had risen by more than 20 per cent despite the economic downturn.
So what is prompting this continued investment in business travel? The key is an increased focus from British companies targeting growth in new international markets. Three years ago home country travel accounted for 32 per cent of business travel according to our research, however today that has now dropped to 20 per cent. Travel to other western European countries has also remained fairly steady; this region remains top of the international destination list but with travel declining overall by just 2 per cent over the same timeframe. This is hardly surprising given the economic climate across Europe. However what is interesting for buyers of business travel is the increased growth within emerging markets.
Three years ago UK business travellers were going to North America, the Middle East and eastern Europe. Today China has leapfrogged the Middle East and eastern Europe to become the number three international destination (behind North America) followed by Asia Pacific now coming in at number four.
The reason for this change in business travel direction is clear. When asked about the economic outlook for emerging markets, senior finance executives questioned in a recent American Express CFO survey considered the following markets to be performing better economically in 2013, compared to last year:
1. Brazil (64 per cent)
2. Asia - excluding India and China (58 per cent)
3. China (56 per cent)
4. India (56 per cent)
5. Russia (42 per cent)
While Brazil and India are yet to feature as top business travel destinations from the UK, it is surely only a matter of time. Particularly as the outlook on world trade growth is mirroring these findings and the UK government is promoting our nation’s capabilities on the international stage.
While these regions been identified time and again as where the growth will come from, for UK businesses understanding the growth opportunity often means travelling to those markets to build knowledge and create relationships. The top five reasons for business travel were cited in the EIU research as:
- Meeting new customers (35 per cent)
- Meeting potential customers (28 per cent)
- Attending conferences/networking events (25 per cent)
- Managing/appraising local operations (24 per cent)
- Meeting/training employees (15 per cent)
For business travel buyers understanding these drivers and supporting companies on their growth trajectory can also mean building new relationships and policies to ensure they are best placed to help UK companies.
BUSINESS SPEND IN 2013 / BENEFITS OF TRAVEL
Business travel spend continues to form an important part of company expenditure with nearly half (48 per cent) of UK companies surveyed by the EIU increasing their business travel compared to three years ago, rising to over two thirds (69 per cent) of UK companies when including those maintaining previous levels of travel. This prioritisation is reflected in the importance respondents place on business travel with 95 per cent of those surveyed identifying business travel as critical for profit.
The majority (86 per cent) of respondents said travel to different markets played a critical part in their executives’ understanding and knowledge of local conditions and challenges. Travelling to up-and-coming markets to learn more about growth opportunities can also be considered money well spent if the information and networking can open up new possibilities to a business.
For businesses that have not yet invested in travelling to emerging markets before, some considerations include:
- Having a preferred list of suppliers (hotels, airlines, car rental companies) and contacts on the ground is critical, preventing unanticipated costs from mounting up. This also allows for better negotiation on supplier rates.
- Offering additional services such as interpretation. The old adage of English being the language of business is less prevalent in some emerging markets
- Ensure the traveller is able to be supported with a company credit card, providing visibility and control of expenses and insurance benefits for the company and traveller alike.
Whilst the current economic outlook continues to impact spending in the UK, there is clear recognition of the value of international travel particularly to emerging markets. The positive impact business travel has on client relationships, sales and overall productivity is clearly at the forefront of business leaders’ minds, and a business travel buyer who understands their motivations can make themselves indispensible as the UK looks overseas for growth.