Business Travel Show Europe Kick Off, 23 February,
Global Travel Risk Summit Europe, May 2023,
3rd Annual Sustainable Business Travel Summit
SADLY, WELSH ELECTRICAL ENGINEER Sir William Preece is no longer with us – hardly surprising, since he was born in 1834 – but in departing this world 99 years ago in 1913 he saved himself a great deal of embarrassment.
For it was in 1878 that Sir William, working as a consultant engineer with what was then known as the British Post Office, roundly declared: “The Americans have need of the telephone, but we do not. We have plenty of messenger boys.”
Sir William neatly highlights for us the perils of making predictions. As the renowned economist JK Galbraith put it: “There are two classes of forecasters: those who don’t know, and those who don’t know they don’t know.”
Hats off, therefore, to the good and great of the corporate travel industry who, almost to a man (and woman), freely and openly admit they have little or no idea what 2012 might hold for our industry.
Take Anne Godfrey, chief executive of the Guild of Travel Management Companies (GTMC) for starters. “Noone – travel management company [TMC], buyer or supplier – really knows what will happen in 2012. The only thing we agree on is that we face an uncertain year,” she says.
Nevertheless, heeding neither the GTMC boss nor the lessons of history, there are still those prepared to stick their heads above the predictive parapet. HRG’s group commercial director Stewart Harvey is among them.
Harvey identifies three key trends that, he believes, will become increasingly important over the next 12 months and more. Companies, he says, are cutting back on short-haul travel, but spending freely on trips to Latin America and the Asia-Pacific region; and they are much more focused on pre-trip data and travel approval processes.
The third trend, which Harvey also expects to gather momentum in 2012, will come as welcome news for GTMC members at large.
“If I go back five, maybe 10 years, the average organisation looking to use a major travel management company was spending around £150 million a year on travel,” he says. “We are now seeing companies spending £20m to £25m looking for regional, multinational deals – companies with a smaller footprint and a smaller spend are increasingly trying to leverage what little they do spend.”
It’s a development with which Graeme Milne, general manager of FCm-owned Corporate Traveller UK, can readily identify – although he says it’s not just a case of getting more travel bang for the budget buck.
“It’s not merely a case of costs, but also the demand from SMEs [small- and medium-sized enterprises] for personal service from a travel management company that values their business,” he says. “Our average customer spend is £120,000 per annum. Most conventional travel management companies would find it difficult to prove value on a client of that size.”
Milne also sees yet more evidence of belt-tightening. “Clients,” he says, “will continue to downgrade from business class to premium economy and focus on carriers with frequent flyer programmes as they want to feel they are getting something extra in return.
“More clients will fly via routes where airport taxes are lower. APD [air passenger duty] is not the only tax to impact on business travellers – all taxes associated with air travel are high and clients are seeking ways to reduce costs if they can fly indirectly to a destination via an airport with lower rates.”
He adds: “We have seen a significant move towards downgrading the class of rail travel, in particular travel policies that no longer allow first class, which will continue into 2012.”
The need for savings will become greater over the coming year, because prices are only going to head north, says Christa Degnan Manning, director of American Express Global Business Travel’s Expert Insights research.
“As business travel is both an essential part of global economic performance as well as an enabler of business growth, we expect the combination of demand and effective travel supplier yield management to push up rates business travellers pay up across the board in 2012,” she warns.
Again, this may mean a sharper focus on the role of TMCs. Manning says: “As travel suppliers have learned their lessons of the past two recessions, managed travel programmes have to help companies strike the balance between increasing budgets to keep pace with price hikes and business opportunities, while reviewing policies and tools to support most cost-effectively the productivity of employees.”
Carlson Wagonlit Travel (CWT) is rather more circumspect. The company’s 2012 Travel Price Forecast predicts that while most average travel prices will rise, the increases will be largely limited to single-figure percentages.
“Travel buyers in most parts of the world are facing tough negotiations as the landscape increases in complexity,” said Nick Vournakis, vice-president of the CWT Solutions Group, which produces the report. However, echoing Anne Godfrey’s concerns, he adds: “At the same time, economic uncertainty continues in some parts of the world and has resurfaced in others, prompting increasing questions on exactly what 2012 holds in store for organisations and, by extension, for business travel.”
BCD Travel’s research subsidiary Advito is just as cautious. “Based on a provisional assumption that economic growth will continue in 2012” – an assumption that may already be past its sell-by date – “Advito expects business travel demand to continue to grow, too, perhaps by low single-digit percentages in North America and Europe, and medium-to-high single-digit percentages elsewhere,” the company says.
“Across all regions the price of travel will typically grow by four per cent to six per cent, but a little lower in areas of high capacity, and considerably higher – especially for hotels and meetings – in certain boom markets.”
Three of the world’s leading travel management consultancies have gazed into their 2012 crystal balls and published their prognostications – using widely different metrics and coming up with wildly different results.
IN EUROPE, the Middle East and Africa, American Express Global Business Travel says economy class short-haul ticket prices will remain flat or rise by up to 4 per cent, while short-haul business class tariffs will increase by 1 to 4 per cent. Economy long-haul prices will go up by between 2.5 and 5 per cent, and business class long-haul fares will increase by anything from 3 to 7 per cent.
Oh, no, they won’t, says Carlson Wagonlit Travel Solutions. Air ticket prices across EMEA – and across all classes – will rise by an average of between 2.1 per cent and 3.7 per cent. BCD’s consultancy division Advito begs to differ. It reckons economy class fares will go up by 5 per cent; regional business class fares will rise 3 per cent, while long-haul business class tariffs will increase by 5 per cent.
In the Middle East, economy fares will go up by 5 per cent (regional) and 4 per cent (intercontinental), while business class tickets will work out dearer by 3 per cent (regional) and 5 per cent (intercontinental). And in Africa, economy class fares will go up by 3 per cent, regardless of sector length, with business class prices increasing by 5 per cent (regional) and 4 per cent (intercontinental).
When it comes to predicting hotel price movements, the big three again choose to use different criteria, only this time it is Advito that goes for the relatively straightforward approach – the BCD company says hotel prices in Europe will rise, on average, by 2 to 3 per cent; those in Africa by 3 to 4 per cent; and those in the Middle East by 6 to 7 per cent. Across the Americas, it says, room rates will rise by 5 to 6 per cent, while Asia-Pacific hotels will raise their rates by 6 to 7 per cent.
CWT Solutions gives separate forecasts for the two halves of the year. Hotel prices in the EMEA region will rise by between 0.2 per cent and 0.9 per cent in the first half of 2012, and then by between 0.1 per cent and 0.8 per cent in the second half. North America’s average hotel rate rise is predicted to be in the 2.4 to 3.1 per cent range in the first half, followed by a second-half rise between 2.6 and 3.4 per cent.
In the Asia-Pacific region, hotel prices could waver between a 1.9 per cent decrease and 2.1 per cent increase in the first half, and remain static or slip back a further 0.9 per cent in the second.
The really bad news concerns Latin America says CWT Solutions, which calculates average daily hotel rates will rocket by up to 11.8 per cent in the first half of the year, and by up to 12.2 per cent during the second half. Worst offender is Brazil, where hotel guests could see bills rise more than 24 per cent in the first half and anything up to 34 per cent during the second half.
Poppycock and balderdash, says Amex, which splits its hotel forecasts into mid- and upper-range properties, and allows itself a healthy margin of error. Overnights in Latin America will increase by between 1 to 5 per cent (mid) and 2 to 6 per cent (upper), and the corresponding figures for North America are 2.5 per cent to 6.5 per cent (mid-range) and 1.5 to 5.5 per cent (upper).
In the EMEA region, mid-range hotel prices are expected to rise by between 0.5 per cent and 4.5 per cent, while upper-range prices will go up by 1 to 5 per cent.
Amex also disagrees with CWT’s assessment of Asia-Pacific hotel prices – it calculates they will go up by 6 to 10 per cent in both price sectors.
Then again, Amex says vehicle rental rates in the US – by far the world’s largest car hire market – will remain flat or drop by 1 per cent. CWT Solutions agrees they might drop by 1 per cent, but says they might also go up by as much as 2.5 per cent.
Advito, however, predicts a price increase of between 4 and 6 per cent. What’s more, it says European rail prices will go up by 5 per cent. CWT prefers a more conservative estimate: 3.6 to 4.2 per cent, while Amex clearly decided its number-crunchers had done enough work for one day, and made no forecast at all.
EARLY HOPES THAT THE European hotel sector bounce back might continue into 2012 now look unlikely to be realised, says Pricewaterhouse Coopers’ European Cities Hotel Forecast, which prefers the term “resilience” to “recovery”.
In major cities, room rates in Stockholm, London and Amsterdam are expected to show the biggest increases – at 9.5 per cent, 5.7 per cent and 4.4 per cent respectively, but public sector spending cuts will take their toll in Belfast, where average daily rates are expected to drop by 6.5 per cent.
In the US, hospitality industry number-crunchers at STR Global are predicting a 6.8 per cent rise, to US$109.16, in the average daily rate, and a 1.7 per cent rise in occupancy, which will still amount to only 59.5 per cent.
Travel management company Egencia says supply in the Asia-Pacific region is still insufficient to meet demand but, with new hotels coming on stream almost daily, the gap is closing. However, the company warns of further big room rate increases in both Hong Kong and Singapore.
JANUARY’S FARE INCREASES – regulated fares rises were capped at 6.2 per cent in chancellor George Osborne’s autumn statement – may have attracted the headlines, but the big rail industry story of 2012 won’t start until the following month and won’t end until mid-summer.
In February, the Office of Rail Regulation (ORR) is due to “offer guidance” to the governments in Westminster and Edinburgh on which rail projects should be adopted – and how much money should be set aside to pay for them – for the five-year period from 2014 to 2019.
The governments’ responses are expected some time over the summer, when the politicians will outline what they expect the rail industry to provide.
They are also obliged to send the ORR statements of funds available (SoFAs), spelling out how much subsidy the sector can expect from the taxpayer.
In an Initial Industry Plan (IIP), rail sector bodies, including the train operators and Network Rail, have said that with government support and investment, they could cut the cost of running the railway by £1.3bn per annum by 2019.
Those savings, the industry argues, could help reduce levels of subsidy.
THE WORLD’S AIRLINES are forecast to make a US$4.9 billion profit this year, $2bn less than in 2011.
The International Air Transport Association (IATA) suspects that much of 2011’s growth has come from residual confidence in a global economic turnaround. By the end of 2010, consumers were beginning to be convinced recovery was under way, but mounting uncertainties during the course of 2011 have dampened prospects for 2012.
“It looks like we are headed for another year in the doldrums,” says Tony Tyler, IATA’s director-general and chief executive. “With business confidence declining, it is difficult to see any potential for significant profitable growth.
“Relatively stronger economic growth will help Asia-Pacific airlines to maintain their 2012 profits close to 2011 levels at US$2.3bn. The rest of the industry will see declining profitability.
The worst hit is expected to be Europe, where the economic crisis means the industry is only expected to return a combined profit of US$300m. A long slow struggle lies ahead.”
For British Airways, International Airlines Group boss Willie Walsh has warned: “The main challenge for 2012 will be to offset increased fuel costs as our hedges unwind, against a background of potentially weaker demand.”
BBT's Mystery Buyer "On my 2012 wishlist, Ryanair agrees to talk to corporate travel managers about bulk-fare buying; the government agrees to re-open an investigation/enquiry into a third runway at Heathrow; Virgin Atlantic joins Star Alliance; as an industry we will be working on how to show ancillary fees on our online booking tools; hotels will offer more free wifithat really works; and the ITM will agree to lobby the government on a better deal for business travellers, including lower air passenger duty.”
Maurice Veronique, chairman and chief executive, The Appointment Group “The economy is going to continue to be very challenging and corporates will be looking at squeezing every penny out of their travel budgets. On a lighter note, I predict that an airline will be launched in 2012 that is ‘smoking’ only, allowing all the stressed-out executives to puff their way across the Atlantic.”
Graeme Milne, general manager, Corporate Traveller UK “I wish airlines could introduce new product across the whole fleet more quickly. There is still a massive inconsistency of product across airlines, which makes it difficult for business travellers. For example, when an airline launches a new business class seat, it can take up to two years to implement it fully, which means a business traveller never knows for sure what sort of seat he or she will get until they board the plane.”