Paul Tilstone, managing director of the Global Business Travel Association Europe, looks at monumental shifts occurring in the business travel landscape and suggests buyers and suppliers alike should embrace the changes, rather than try to block them...
In my last column, I highlighted the issues our distribution system (the Elephant) presents, not forgetting the benefits it brings us too, of course. So now we should consider the next big beast we need to watch out for in the business travel jungle – the Rhinoceros.
The Rhino represents market dynamics… charging at tradition. I’m not talking about the relatively short term market changes inflicted on us by the economic downturn (although we should recognise the impact that this environment will have created in the longer term too), but the more fundamental shifts in supply and demand which were already starting to take shape before 2009.
We have observed consumer behaviour dramatically changing. Travellers and buyers were demanding far more choice and, pre-2009, the markets presented the opportunity to provide it, allowing many new suppliers to ride on the success of providing new, niche products. Even those suppliers who collapsed during the economic crisis demonstrated, in many cases, a great opportunity in the face of changing consumer demand. It’s just their timing wasn’t good.
We all know that the rise of business-only airlines represented a real opportunity for a different airline model, but the initial carriers rode the wave of easy credit and paid the price. Perhaps others are sure to follow in the footsteps of the likes of Eos, Maxjet and Silverjet and it will be interesting to see the potential rise of European all business carriers like Open Skies.
But where there’s been obvious success in supply sector divergence is in the hotel and accommodation sector. Just think of the range of accommodation options which travellers can choose from right now – from really budget properties like Yotel where rooms are rented by the four-hour block for airport resting, to budget chains like Easyhotel, Ibis, Travelodge and Premier Inn with their city-centre budget rooms, to boutique hotels, chains, apartments, deluxe properties and even company investment options.
The business traveller is no longer a 5 star man or woman. They might use 5-star options for a long stay with meetings or somewhere in the developing world but budget accommodation on an overnight stay for an event in a local city. They may even use the spare room of an apartment booked on-line, if they are so inclined and big on social networking. The same applies to transport – they may use a “no frills” airline for Europe but Club Class for long haul. Essentially, we are moving to a multi-niche environment where corporate consumer demands shift with needs on a trip-by-trip or person-by-person basis.
Yet at the same time as this core supply sector divergence, we are witnessing changes in the intermediary sector too. These are being driven in part by procurement’s entrance to the market some years ago. Prior to this, the travel managers in all their forms focused primarily on service delivery and managing the process. The smart ones also negotiated, but procurement, like sales, were trained to use a variety of methods to focus on reducing cost.
The buyer now wants to see a reduction in the burden of contract management and an increase in the value of consolidating their expenditure. But many of them also want to see an increase in skills from those they consolidate with.
As a response, the intermediaries are either consolidating, both within sectors (such as travel management companies (TMCs) buying TMCs) and across sectors (TMCs buying meetings and events agencies) or specialising within sectors (rail, hotel booking agencies etc). Where specialisation occurs they are being driven to partner with others to ensure they can compete with the larger, consolidated beasts. This can only lead to greater consolidation in the long run as intermediaries with strong balance sheets see the opportunity in the specialist provider partners.
So, whilst all of this is potentially great for business, and consumer choice, how does the business travel manager/buyer go about managing such diverse traveller demands?
The answer, of course, lies in dynamic corporate travel policies and technology systems. These need to become much more customised and flexible if we are to take full advantage of this trend and maximise the service to the end customer, the traveller. We need to remind ourselves that whilst satisfying the finance department is still key, it shouldn’t be at odds with giving the traveller what they want and need.
As companies continue the trend of empowering their staff, and B2C technology increases the access of travellers to the options out there beyond the corporate fire-wall, it’s the business travelling consumer that travel managers need to be providing for…. like the suppliers who already are. There’s no point trying to block the path of a charging Rhino.
An extract from “Laws of the Jungle”, a Global Business Travel Association Europe presentation.To read the first instalment, click here.