While many corporates have taken a radical approach to cutting their business travel costs, Travel Management Companies have seen an unexpected upside to the recession.
Finally businesses are taking travel management seriously, one effect of the downturn that can be seen as a positive for us,” says Claude Vankeirsbilck, Chief Sales Offi cer at Tourvest Travel Services. The recession has caused corporate to look critically at their business travel requirements and overall spend in this area. Indeed, some companies have gone so far as to ban any travel altogether, a reaction which Vankeirsbilck believes cannot be sustained in the long term. “Business is about building relationships and the foundation of trust, both of which are better achieved face to face, which makes travel unavoidable. Already we can see that some companies have realised this and are easing up on the travel ban,” he comments. The trend here is clear. Three years ago, travel was not seen by businesses as a serious cost. Today, because of the state of the economy, travel costs are being carefully analysed and Travel Management Companies have an important role to play, by managing the arrangements and the costs incurred.
“2009 has seen less business travel taking place than in previous years. Where travel is happening, it’s subject to strict controls and measures,” Vankeirsbilck notes. In previous years, corporates generally didn’t keep a close eye on the amount of travelling done by employees, or how they went about it. For example, executives would travel business class on a two-hour domestic fl ight. Now, even the most senior staff travel economy class, regardless of whether they are travelling within the country or overseas. Travel takes place only if absolutely necessary and there is a major focus on cutting costs as much as possible. While the travel management industry is not regulated and there are no formal recorded statistics and fi gures, the BSP (Banker Settlement Plan) is an indicator of where the industry is today, as opposed to the same time last year.
Travel agents process their payments to the airlines via the BSP (note that this does not include other payments such as hotels, car hire, online transactions, coaches and transfers). Each agency is given its own BSP statistics which give an idea of its particular position in the market. These statistics indicate that the market is down by between 25% and 35% over the past year. South Africa’s Travel Management industry is characterised by global brands the likes of American Express Travel Services; HRG (Rennies Travel); Carson Wagonlit; BCD (Connex Travel) and Flight Centre. “We’re all competing for the same piece of the pie,” says Vankeirsbilck. “However, at present business travel is not a growing industry, so we’re not fi ghting against new competitors entering the market,” he continues.
Vankeirsbilck predicts that future trends will remain largely unchanged. “It’s unlikely that corporates will revert to the same levels of business travel that we enjoyed prior to the recession in the near future,” he opines. “Businesses will be looking for ways to control travel budgets and ensure that there are measures in place to evaluate travel procedures,” he elaborates. What of 2010? “If anything, 2010 will make business travel to South Africa more costly, due to lack of capacity,” Vankeirsbilck states. While it has been surmised that business travel may stop altogether over the four-week period of the 2010 FIFA World Cup, necessary travel will still need to take place, which willfurther drive costs and add to the pressure on the country’s available capacity. Vankeirsbilck predicts that there will be a spike in business travel directly before and after the event, to avoid travelling to and from South Africa over the duration of the 2010 FIFA World Cup unless absolutely necessary.
Furthermore, he believes that business travel is unlikely to show any significant upward trend until the end of 2010, when all the hype is over. “Business travel tends to mirror the economy and the sentiment around it,” he comments. In order to adapt to the weakened economy and to offer clients the efficient service they now require, Travel Management Companies have needed to make changes. Vankeirsbilck mentions that technology has been a key enabler for Tourvest. “Travel Management is by nature a labour-intensive business, which is reliant on people – and people come at a cost,” he states. “In order to help our clients manage their travel costs more effectively, we have invested in technology to make our processes more efficient, shifting people to core areas such as complex international travel. Tools such as self-booking, as well as improvements to our front, middle and back office have helped enhance our systems,”he explains. “Of course, this has not been without its challenges. Investment in technology comes at a cost, at a time when, ideally, most businesses are looking to cut costs,” he adds. Cutting costs has been a major trend over this period of economic downturn and one which has had a large impact on
Travel Management Companies. “This is a trend that has affected both our margins and our revenue stream. The first place corporates look to cut costs is to move their travel management in-house,” mentions Vankeirsbilck. “What most companies do not realise is that travel management fees amount to between 7% and 10% of the total trip, which is really just the tip of the iceberg. Thus, the opportunity for saving by cutting out the travel management cost is minimal. Instead, we advise companies to
look at the costs incurred through suppliers, such as flights and hotels,” he cautions. Moving the travel function in-house is not always the cost-effective solution it seems to be. Firstly, expensive technology is required. In addition, travel management is a complex, labour-intensive and time-consuming business. Vankeirsbilck maintains that the strengths inherent in thebusiness of travel management lie in the value it is able to bring to its clients in terms of managing spend and providing on-thespot assistance to travellers. “This is our core business, and by handling this function for our clients, we are giving them more time to focus on their core business.” Ultimately, Vankeirsbilck believes that the future for Travel Management Companies in South Africa is not easy to gauge. “Next year’s performance is reliant on where the economy goes. Travel trends and destinations reflect the economic environment. For example, trips to Europe make up 60% of South African business travel, as they are our major trading partners.” Other factors are also set to influence travel management trends. Environmental issues and pressure on corporates to ‘green’
their business practices are shaping many of the travel decisions made by companies in Europe and the USA. While South Africa is lagging in this regard, it is something that travel management companies should have on their radars. “If we are to take anything from these tough times, it will be that clients are finally able to see the value we provide,” says Vankeirsbilck. “It hasn’t always been easy to show clients where we fit into the picture, and to prove that using a Travel Management Company to manage the costs for you provides a saving in the long term. I think we have now reached that point, which is, in essence, a milestone reached for the industry as a whole.”