Counting the pennies

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There’s no getting away from it – money is tight and budgets are shrinking. We all have to do more with less, and despite the significant number of technologically-driven meeting solutions that have emerged, business travel remains a necessity.

There is just no substitute for that face-to-face engagement and the building of strong relationships.

But, how do you go about this if you have a limited travel budget?

This is the challenge facing many corporates, notwithstanding the fact that the travel budget often finds itself in the firing line.

“Travel is the first expense that suffers in cost-saving strategies, be it business or leisure,” says Guy Stehlik, CEO of BON Hotels, which is a South African operator with a large presence in Nigeria and additional hotels in South Africa, Namibia and Ethiopia.

To this end, Stehlik is predicting further cuts in the industry in the near future – not just in actual travel, but also in the length of stays, luxury options, flight and hotel classes.

He’s not alone in this assessment.

“South Africans are definitely pulling back on leisure and travel spend and going for more budget-conscious pricing,” says Miranda Evangelou, Sales & Marketing Manager at Faircity Hotels & Apartments, which has a portfolio of three and four-star hotel properties in and around Johannesburg and Pretoria. “Corporate companies are also cutting on conferencing and hosting more meetings on premises, although the international market is picking up as the rate of exchange counts in their favour.”

All of this cost-cutting is not confined to travel and is also finding its way into the conference space.

“We’re seeing conferences with fewer frills such as less entertainment, a reduction in gifting, simpler menus and cash bars being requested more often,” says Premier Hotels & Resorts Group Marketing

Manager, Christa Badenhorst.

All of this is playing into the hands of those suppliers who offer quality ‘select services’ products, whether it’s a mid-market hotel or low-cost airline.

“A general tightening of belts will continue indefinitely into the future and mid-market suppliers will benefit,” says Stehlik.

Whilst Stehlik’s BON Hotels offers a selection of mid-market properties, there’s no doubt that the bigger players in this space in South Africa are currently the City Lodge Hotel Group. The group has 59 hotels across Southern and East Africa, with the majority of these properties in South Africa.

City Lodge has a four-star brand, in the form of its Courtyard brand, but the bulk of its properties are made up of its City Lodge (three-star), Town Lodge (two-star), and Road Lodge (one-star) brands, so this group is primed to take advantage of any change or cutback in corporate travel policy.

No surprise, then, to hear group spokesman, Angus Macmillan, say that: “This segment of the market is definitely growing strongly as companies and business owners try to stretch their budgets as far as possible.”

That’s because, ultimately, that’s good business.

“Business travellers are very cost-conscious and any money saved helps strengthen their bottom line”, says Dawn Weir, Head of kulula work, the direct distribution channel of kulula (Comair Limited), specialising in corporate travel.

LOW-COST CARRIERS

So, how can you keep your business travel spend to a minimum?

Choosing to fly with a low-cost carrier is a good start. In South Africa, corporate travellers are spoilt for choice with kulula. com, Mango and FlySafair, whilst the rest of Africa has little in the way of ‘budget’ airlines.

Kenya has Fly540 and JamboJet, and then there’s fastjet. It is attempting to become the continent’s first, true Pan- African low-cost airline, and it has made strides since launching in 2012, although not without some challenges, particularly in turning a consistent profit. From its initial base in Tanzania, it now flies to South Africa, Zambia, Zimbabwe and Mozambique.

According to the fastjet manifesto, “Low-cost simply means we offer the lowest possible fares and allow you the option to choose pay-as-you-travel extras. If you won’t be carrying a suitcase, you don’t need to pay for it. If you’re happy to be assigned a seat at check-in, you don’t need to pay a pre-assigned seating charge. This flexibility ultimately saves you money and time.”

That’s music to the ears of the corporate travellers or entities looking to cut their travel spend, and the fastjet ‘unbundling’ model is very much in line with the modern-day trend to charge only for the flight itself, but with the option to pay individually for luggage, a certain seat etc.

“The days of business people not travelling on low-cost carriers are long gone,” said fastjet CEO Nico Bezuidenhout to IOL in 2017. “We saw it on Mango (Bezuidenhout’s former employer) as the profile changed from slops to suits. On a country-by-country basis the market changes – in Tanzania it’s a cost issue, in Zimbabwe it’s reliability, Mozambique will probably be both.”

Bezuidenhout references Mozambique, which became fastjet’s latest route in 2017.

All the stars seem to be aligned for fastjet to dominate the African low-cost space, but it hasn’t all been plain sailing. It needed to raise $44 million in 2017, with approximately a third coming from shareholder Solenta Aviation Holdings.

Fastjet also struck a branding deal with South Africa’s Federal Airlines, which is owned by Solenta, that will boost its presence in the country and possibly pave the way for the start of its own flights there some time in 2018, according to Bezuidenhout.

Speaking of the South African market, kulula says it is seeing increased levels of interest in its product from corporate travellers – predominantly the SMME market – to the extent that it has set up a business traveller division, kulula work, which tailor-makes corporate packages.

“Our kulula work customers are guaranteed the best fares of the day on kulula.com and don’t pay booking fees or for flight changes, only for the difference in fare and the airport taxes,” says Weir. “They are also offered competitive car hire and accommodation options.”

Ideally, though, says Weir, accommodation is unnecessary.

“A decent schedule that allows day-trip travel is a basic requirement for business travellers,” she says. “This eliminates overnight accommodation, which incurs additional expenses.”

Kulula work also offers support on invoicing and monthly reporting, as well as account management and access to a corporate reservations team, after-hours if needed.

MID-MARKET HOTELS

Also attempting to make an impact across the African continent in the ‘select services’ space is global hotel giant Hilton, which, in Africa, is arguably more well-known for its premium ‘Hilton’ brand. The group, though, has clearly identified an opportunity in the mid-market space and is in the process of rolling out 10-15 Hilton Garden Inns across the African continent.

Having opened the continent’s first Hilton Garden Inn in Tangier, Morocco in 2016, Hilton has identified sub-Saharan Africa as a key growth market, with Nairobi (Kenya), Lusaka (Zambia), Windhoek (Namibia) and Gaborone (Botswana) following Tangier in the pipeline.

“We feel there is a gap in the market for affordably-priced, internationally-branded accommodation in most major African cities,” says Mike Collini, Hilton’s Vice-President of Development in sub-Saharan Africa. “As key African cities become more accessible through increased air and transport connectivity, lessening of visa restrictions and investment in the infrastructure required to facilitate conferences and events, we are starting to see that demand go up and make mid-market hotels a viable investment proposition.”

The Hilton Garden Inn brand offers an on-site restaurant, social spaces in the lobby, modern rooms, a fitness centre, a business centre and free wi-fi.

There are also certain practical advantages when it comes to developing mid-market brands. They can be quicker and easier to develop and require less capital investment. A good example of this is the modular build concept which Hilton Garden Inn offers, and which is being implemented in the development of Hilton Garden Inn Accra (Ghana).

“This allows for a significant reduction in time and money in the construction process by importing pre-made materials,” says Collini.

As Hilton rolls out its Hilton Garden Inn brand across Africa, another group is also flexing its muscles in the mid-market space.

As already mentioned, City Lodge already has a significant presence in South Africa, and only more recently started taking its brands into the rest of Africa, starting with Botswana and Kenya. It then turned its attention to Tanzania and Mozambique, and in late-2017 opened a Town Lodge in Windhoek, before strengthening its presence in Kenya with the opening of a City Lodge in Nairobi in January of this year.

“After careful research in east, west and southern Africa, it was decided to go ahead with a targeted growth strategy in east and southern Africa,” says Macmillan. “By the end of 2018, the group will have seven hotels outside of South Africa – this will be a significant footprint. The focus is always mainly on servicing the accommodation needs of Monday to Friday business travellers – so future growth opportunities will have to have strong business travel credentials.”

LONG STAYS

Planning is essential to travelling on a budget. It can help to minimise the number of trips you need to take and reduce the number of days spent travelling. You’ll also avoid last-minute fares on air tickets by booking well in advance.

However, if you do need to spend more than a night or two away from home, you might like to consider staying in a serviced apartment instead of a hotel room. An ‘apartment hotel’ also makes sense if you’re travelling with colleagues – you can choose a multi-room apartment instead of paying for separate hotel rooms.

This has a material impact on the bottom line and is just smart business travel. This kind of thinking has led to the emergence of a couple of apartment hotel brands, mainly, again, in South Africa, where The Capital Hotel Group appears to have stolen a march on its competitors in the past six or seven years, and now enjoys a large chunk of market share. It has properties in Johannesburg, Durban and Cape Town and seems to be finding some traction in the corporate travel market.

Also in South Africa you’ll find Faircity Hotels & Apartments in Johannesburg, whilst much further south there is Quiver Tree Apartments in Stellenbosch, in the Western Cape. It says it receives about 70% of its website enquires from corporate travellers.

“We have made major inroads through corporate companies in Stellenbosch and deal with procurement offices in top 100 JSE-listed companies,” says General Manager, Jeanne Campbell-Miller.

Quiver Tree opened in 2015 with the aim of offering stylish, affordable longer-term accommodation.

“It’s all about optimising costs,” says Campbell-Miller. “Corporate companies and business travellers are looking for that ‘all-in’ cost, a ‘plug and play’, if you will. This is especially true with our large government sector. We look at how we can simplify everything and we’ve created accommodation that offers a base cost that includes all amenities and facilities for business travellers.”

LOYALTY PROGRAMMES

Another way to help keep your travel costs down is to join a loyalty programme.

By choosing a single hotel brand for your accommodation, you’ll accrue points and gain access to discounts and possibly even free bed nights. But if you can’t narrow your provider down to one, you’d do well signing up for all programmes out there, because many of them offer free benefits just for being a member, like free wi-fi.

When deciding on a loyalty programme, look not only at points earned per stay, but also consider how many points are required to redeem rewards. Often a high-earning programme is also a high-redeeming one.

Look, too, at which programmes are connected to your credit card provider. Some hotel chains even offer co-branded cards. This way, you’ll accumulate more points more often as your credit card spend is counted towards your total.

CONCLUSION

The days of automatically flying business class and checking into the closest five-star hotel are over – well, at least for the majority of the corporate travel market, with a much closer eye, now, on the bottom line and how one can get the most out of one’s corporate travel policy.

These policies are now a lot more cost-conscious than they’ve ever been, meaning we’re likely to be talking about the budget and mid-market travel spaces for years to come.

All of which means that those suppliers with relevant products are well placed to cash in and snap up the business travel of not only tomorrow, but also today.

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