The business travel sector should brace itself for another recession, a leading industry economist has warned.
Speaking exclusively to ABTN, Andrew Burnham, head of travel at accountancy firm Macintyre Hudson, said the next quarter would reveal the likely economic landscape for the industry in 2012.
“I feel the dangers of a double dip recession have increased significantly,” he said.
“The private sector has adapted and realigned itself after the 2008 contraction, but what's worrying is we look like we're revisiting the banking crisis.
“Political inaction in Europe has led the markets to be frustrated, and the pressure to be put back on the banks.”
Burnham's comments echo those of French economist Jacques Attali, who also warned business travel executives of a potential downturn.
Speaking at the Association of Corporate Travel Executives' Global Education Conference in Paris, he said all the signs were there that a “terrible global depression” was around the corner.
The likely effect on the business travel industry will be further consolidation, suggested Burnham, particularly among smaller travel management companies (TMCs).
“While margins are being squeezed you need a business model that produces £10 million of underlying activity to survive,” he said.
“I think there will be consolidation in the niche areas, where you perhaps don't have the critical mass to maintain the developments in technology and systems.”
TMCs closely associated with banking and finance and the public sector – local government and charities in particular – are most likely to “feel the pinch” in the coming months, said Burnham.
Burnham’s concerns for next year are also being felt by travel management companies, Anne Godfrey, the Guild of Travel Management Companies’ CEO, told ABTN.
She said TMCs have recently changed from being “cautiously optimistic to cautious for 2012”.
“They’re all waiting to see what October is like,” she said. “September was quite strong. For October those who have city accounts are a little bit concerned.”
Other sectors are doing “really well”, however, said Godfrey, in particular “manufacturing is quite strong” and “the public sector is holding up”.
Anthony Drury, American Express’ UK general manager, said he hadn’t seen any softening in business as yet.
“I’m not seeing anything that is giving any kind of alarm to start putting actions in place to mitigate the potential reduction,” he said.
“However, we are heavily on the front foot, with messaging around travel as a competitive advantage.”
The TMC is “educating travel managers that while you can cut travel to get a bottom line impact overnight, it may not be the smartest thing in the long term,” said Drury.
Jonny Shingles, Egencia’s UK managing director, told ABTN he remains positive for 2012, and expects to see a single-digit rise in business travel.
“Out of our top 30 clients in the UK only one has mentioned a partial travel freeze,” said Shingles.
However, “rigorous” enforcement of travel policies is important to Egencia’s clients, he said.
“While clients still feel it’s important to get out and see customers, there is an increasing emphasis on value for money. They want to see their pound of allocated travel spend go as far as possible.”
Peter Muller, ATPI’s divisional managing director, UK, France and USA, said the current positive trends seen in business travel make it difficult to advise clients about next year.
The marine, oil and gas specialist has “at this moment in time” not seen reflected in its figures or in customers’ travel patterns, “any fundamental drop-off in travel”, said Muller.
“Am I concerned? Naturally, yes, because there seems to be a lot of doom and gloom around. Are we seeing any pattern to indicate that trend is coming through? No. It makes budgeting for next year difficult.”
Nigel Turner, Carlson Wagonlit’s director of programme management for the UK and Ireland, also said he has not seen the current negativity around the global economy reflected in business travel.
“We’ve seen companies being prudent,” he said, “and some have decided to change policy or make aggressive targets of saving 30% in their spend. But, we’re not seeing it fall off the cliff as we did a few years’ back.
“Prudence and caution are the buzz words. People want to have greater compliance and greater control, but there isn’t any great stopping of travel. I think it’s probably the learnings from before that you can damage your organisation by not travelling.”