Abacus: ‘new look’ corporate travel segment emerges fighting fit for 2010

As a result of this enforced industry health kick, many organisations have adopted stricter corporate travel policies helping the segment to emerge in 2010 in better shape than ever before.

Robert Bailey, President & Chief Executive Officer of Abacus International explains, "The world-wide economic downturn of the last year prompted a remodelling of the corporate travel segment. Whilst this extreme make over was painful, our estimates suggesting that bookings in the segment shrank by as much as 20 - 30%, the hardships of the period have had long lasting benefits, not least of which has been increased efficiency."

He continues "This is particularly true in Asia where the adoption of travel management systems is a key trend not only helping to drive a return to healthy volumes of corporate bookings but is also ensuring that the segment will never be at risk of getting out of shape again."

It is the positive steps taken by the segment to improve their form and function that is leading to growing confidence that corporate travel is not only about to experience an economic turn-around but that a paradigm shift may be on the cards, changing the way in which the segment operates for good

2009 the year when corporate travel stood still

But before we reflect on where we are going, lets us consider where we have been. The economic decline of the last year caused every company to stop and think about how they do business, but perhaps one of the first victims of the downturn was the ability for business executives to travel freely. A simple business trip was suddenly brought into question and increasing justifications were required to defend travel spend.

Many businesses took the knee jerk reaction of halting business travel altogether and for companies who continued to allow travel, procurement managers and travel budget holders came under serious pressure to reduce costs and find alternatives. According to American Express Business Travel, the majority of companies throughout Asia Pacific made formal or informal changes to their travel policies in the last nine months, with this trend potentially continuing as businesses try to recoup further savings and improve their bottom lines.[1] [2] [3] [4]. [5] [6] [7]. [8]

The search for a 'technical' solution

For some, technology rather than the abolition of travel was the answer. Increasing usage of teleconference tools was reported by accountancy firm Accenture, declaring a return of 300% - 500% on monthly operating costs of its 30 Cisco TelePresence suites worldwide thanks to significant travel avoidance.

Similarly, traditional meeting facility providers such as hotel chains, Marriot and Starwood saw travel avoidance as an alternative source of income, stating that they would install telepresence technology in their meeting rooms to boost their meeting businesses as the world economy becomes more interconnected. Both hotel chains are currently working with various telco companies to add telepresence rooms into the various hotel properties worldwide.

Face to face meetings still matter

Yet despite enthusiasm for alternatives to travel, cutting spend completely is clearly not the solution. Research conducted earlier this year for Hilton Worldwide by National University of Singapore Business School's organisational behaviourist and psychologist Dr Richard Arvey made this point particularly well.

Dr Arvey found that despite the increasing presence of online alternatives to meeting face-to-face, there really was no alternative to personal contact, stating in his research summary "Given the existing data and research, it is clear that face-to-face meetings are used increasingly less frequently and that there are substitution effects via the use of computer aided communication devices. However, the data indicates that meetings do indeed matter, and that the use of such face-to-face meetings has a variety of valuable psychological as well as business outcomes. It is my belief, given these data, that eliminating face-to-face meetings as an option in communicating with employees would be a mistake."

Despite this advice, cuts to business travel costs became a necessary evil in 2009 but as Brett Henry, Vice President Marketing, Abacus International explains, this may be a trend that has since run its course. "Speaking with procurement managers over the past few months across Asia, we have been hearing that they are not likely to cut spend any further as further cuts impact morale and business efficiency, and anyway, an office full of disgruntled employees complaining that they cannot get out to meet the customers simply doesn't make for good business."

Mr Henry continues "Instead, what procurement managers are doing is improving their monitoring of travel spend and controlling of costs. Going forward, this will not only mean looking at the unit cost of individual trips, but the total cost of travel to a business across a given period. That's why increasingly; procurement managers are looking beyond online booking tools and seeking out tools that can provide them with a holistic picture of the travel process in their organisation."

Micro travel management for macro results

Knowing that there are savings to be made is one thing, but without the appropriate management systems in place it is almost impossible to collect sufficient data to see where, and how these savings can be made, particularly when a business is located across multiple locations and uses a selection of travel management companies and GDSs.

As Brett Henry explains this area is where the increasing adoption of travel management can systems help "In Asia, travel agents still have the opportunity to take the lead in educating corporations about what well-run travel programmes look like. SAP's mid market version is selling extremely well in Asia and as a result many companies who invested in this will already have a different mindset towards process improvement and travel as a procurement versus simply an expense item. Leading Corporate Travel Agents now have the opportunity to lead this change by elevating their conversations with companies beyond cost management; placing focus on their business objectives and how the travel agent can help the business optimise their overall travel program spend."

Abacus GetThere is leading the charge in this regard, across the globe, working with procurement managers of global companies to develop programmes and processes to ensure employees select the best mode of interaction with customers, and select the pre-approved suppliers. In particular this is true of partnerships announced in the past 16 months between GetThere and leading expense providers IBM and SAP.

Grant Rattray Director of GetThere for Asia Pacific at Sabre explains further "GetThere's new relationships with prominent brands such as IBM and SAP highlights how corporations are integrating travel procurement and enterprise resource planning (ERP) solutions into every businesses process."

He continues,"Going beyond end-to-end expense management, GetThere taps into a full array of enterprise-wide process applications including Business Workflow, Human Capital Management, Financial Accounting and Analytics. As a result, GetThere users can leverage their existing ERP investment to reduce indirect costs and improve efficiencies related to travel procurement. Ultimately enabling the procurement manager to go beyond the individual trip, to understand what they spend on travel as a company, and with whom."

Out with the old in with the new

The adoption of such management systems and new working practices being utilised in the new 'remodelled' corporate travel segment is a positive trend likely to be retained as a standard practice for many businesses moving forward. Other corresponding new practices include more stringent pre-trip authorisation mandated by management to justify travel costs will carry through even when the economy recovers - making overall travel booking process more disciplined and tied to revenue.

Recent research proves this too, with more companies than ever before are starting to turn to travel management systems than ever before according to a survey conducted by US publication Business Travel News, who found that nearly 60 percent of 2010 travel buyers have deployed pre-trip authorization, up by nearly 10 percentage points from 2009

Amongst those adopting travel management programmes, separate research has also found that stricter enforcement of travel policies through visual cues on company's online booking tools and a greater availability of flights and thus a wider range of prices. What's more, due to the increased productivity of internal travel staff, those same companies often also able to reduce their staffing by the cost of two full-time equivalents.

Knowledge is power

Savings go a long way past staff costs though. Knowledge is essentially power and so the insights provided through travel management systems can also help with negotiations over rates, loyalty discounts and even help with reviews of the relationships the procurement manager or indeed the corporate travel agent holds with specific hotels or airlines.

Brett Henry, Vice President Marketing, Abacus International explains, "Procurement managers have a great opportunity to work with suppliers to negotiate for contracts that are higher in value. Though the pressure may be on to squeeze your suppliers for a lower price, we have to keep in mind that a viable and long term relationship has to be a mutually beneficial one. When the economy turns around, you would want your suppliers to be on your side.

Proof of the importance of these kinds of negotiations comes from American Express, who recently estimated that as much as US$500m of corporate travel budgets was being wasted per annum on hotel spend. They discovered that as much as 22 per cent of all travel bookings were non-compliant with corporate policy mostly as a result of hotel programmes being inefficiently managed, enabling employees to stay at hotels of their own choosing, rather than at pre-agreed hotels on pre-negotiated rates.

Of course travel management processes and policies may ask a number of things of the traveller but the main recommendations are encouraging the business traveller to opt for cheaper flight options, chose a lower star rating of hotel or keep their business trip as short as possible or even taking 'red-eye flights' in order to avoid accommodation costs altogether.

Mr Henry continues, "Abacus has noticed procurement managers narrowing the number of suppliers they work with and taking a more long term strategic view to these relationships. Moreover, many corporate travellers are more open to travelling on lower cost alternatives than before for short-haul trips, balancing the Value-Comfort-Safety-and-Environment factors in order to enable them to continue to travel despite budget cuts.

Turn up the volume and yield some great results

As business moves into the new financial year, it's clear that for many, travel costs have been reduced. But despite this, for business to be effective, the corporate travel show must go on. That's why projections from Airbus suggest that recovery is in sight the aircraft manufacturer expecting sales of their corporate jets to rebound on the back of the fast growing Chinese market

A global business travel study (funded by NBTA and Egencia) quantifying global business travel spend and growth also predicted that business travel growth to China & Japan would surpass U.S growth over the next 5 years; with India, Vietnam, Indonesia and Iran will experiencing dramatic CAGR over the same period.

Meanwhile, American Express believes that the cost of travel throughout the Asia Pacific Region will increase as the depressed pricing and discounting necessary over the last few months disappears. Jonas Borglin - Head of advisory Services for American Express Business Travel, Japan, Asia Pacific and Australia said "In 2009, the weakened economy contributed to a 7 percent reduction in business travel in the Asia Pacific region forcing travel suppliers to reduce prices and rethink strategies. Next year we expect a turn around as green shoots in the economy continue to emerge and companies return travellers to the road."

Finally, In India, Aviation analysts and accountancy firm KPMG made predictions earlier this year of some increases in volumes of travellers in India. The country's aviation industry is showing signs of recovery with carriers and experts predicting 10 per cent growth in passenger traffic against their earlier prediction of not more than 5 per cent.[9]

Conclusion

No one would pretend that the impact on the industry of the last year has not been immense, leading to job losses, company failures and more. But a silver lining on this particular cloud is starting to shine through as some of this shake down seems to have been beneficial to the corporate travel segment, which as a result is now emerging stronger from the experience.

As Robert Bailey, President & Chief Executive Officer of Abacus International reflects "Whilst this year's downturn has certainly slimmed down the segment, it has also represented a wonderful opportunity to take stock and make improvements that will shore up corporate travel segment to take on whatever challenges may be ahead. More importantly, the downturn has readied this segment for the recovery seemingly just around the corner. We have all felt the pain but now are perfectly placed to gain from the post work out glow, many, many times over."