The value of business travel must not be underestimated, argues veteran business travel journalist Stanley Slaughter.
When the shutters came down on business travel in 2008-2009 after the collapse of Lehman Brothers, it would be fair to say that few expressed surprise. The world economy along with many thousands of companies were in dire trouble and business travel had to take the hit along with other branches of spending.
But a report this week suggests that there might be the case to argue that business travel should be treated more leniently next time the world economy slumps.
The World Travel and Tourism Council (WTTC) paper says business travel is a catalyst for global economic development. Some 500 business travellers, from the UK, US, Germany, Brazil and China, who were questioned by the WTTC said about half the people they met to discuss potential deals signed up after a face to face meeting, while only about 31% did so without such an encounter.
It is not often you see the crucial value of a one to one meeting put in such stark and easy to understand terms. This is valuable ammunition for travel buyers to protect their budgets in hard times.
The sad thing is that it is not really new. Negotiators and salespeople can tell you the solid value of face to face meetings as they encounter it every week. Suppliers can back that up. In mid-2009 in the depth of the fall in business travel, BA released findings from a poll which extolled the necessity of face to face meetings.
But too often such views are treated with caution, not to say scepticism, by the procurement boys.
The first group looks as if it is simply protecting its own nest while the second sound as if they are trying to drum up business to increase falling revenues.
But both are telling the industry a profound truth. Let’s look at some more statistics from the WTTC report. Chinese business travellers said that a face to face meeting dramatically increased the chances of pulling off a deal. These were 57% if there was a face to face and a mere 33% without such a meeting. Among UK business people, the chances rose from 30% to 45%.
The figures for not meeting face to face are if anything even more startling. The respondents said on average they estimated 38% of customers would switch to another business partner if face to face meetings did not take place. The respondents from all five countries were at or near that figure. If this is the case, the remark by the WTTC that cutting business travel budgets “poses significant risk” is a clear understatement.
The report’s soberly stated conclusion merely underlines the feeling: “Representative surveys across five diverse countries illustrate a consistent view that travel yields benefits in terms of sales, customer retention, partnerships, innovation and human capital.
“These perspectives are substantiated by statistical and econometric analyses which indicate an average business travel return on investment to sales of 10:1.”
This report raises three questions which need to be considered.
The first is that while the technology for video-conferencing and other types of virtual meetings has improved enormously, it is still no substitute for a handshake and personal attention. Virtual meetings have the uses but that should not be for winning new business.
Secondly if budgets have to be cut in times of retrenchment, the WTTC report immensely strengthens the argument that face to faces to acquire new contracts and thus enhance the health of the company should to some extent at least be ring-fenced. When you hear CFOs or their like boasting of 10% across the board cuts in travel spend, you know it is someone cutting not wisely but too well.
Lastly, if face to faces really do, as the WTTC says, bring in a ROI of 10:1 in terms of investment against sales, business travel becomes not a luxury but an essential part of a company’s activities. Most wise CFOs and procurement people know this already. But sadly there are still too many who do not appreciate its worth.
As such, the rise in profits announced last week by HRG is good news for the world economy. The global TMC said its pre-tax profits had risen by 16% to £32.9m. David Radcliffe, its CEO, said a “good year” for the company had been “marked by strong growth in revenue and earnings and supported by a strong recovery in global business travel.”
But what needs to be more fully grasped by the world’s companies is that, if the WTTC report is anywhere near accurate, it is business travel that promotes business rather than being something that should only be increased when the economy improves.