In any case, when questioned last September about their forecasts for the coming year, European companies were cautious about the future, adopting a wait-and-see attitude in the face of the effects of the recession. Next year, they face a twofold challenge: to contain their spending while continuing to be present on the markets, both to retain customers and to win new ones," predicts Régis Chambert, Managing Director of American Express Business Travel. On average, only 20 % expect their travel budgets to increase, 61 % to remain stable and 19 % to decrease. All in all, the business travel market should record a timid increase of 4 %. This could be broken down into a 2 % price effect and a 2 % volume effect. Key accounts will continue to consolidate their cost-cutting efforts, while travelling to continents where the end of the crisis is already in sight. North America and, above all, Asia.
This European study is the result of a telephone survey carried out between 8 and 22 September 2009 among the people in charge of travel budgets (purchasing directors, travel managers, etc.) in 336 European companies based in the following eleven countries: Belgium, Denmark, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain and Sweden: Belgium, Denmark, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden and the UK. According to the study, forecasts and optimism vary according to location. Some countries are anticipating an above-average increase in their budgets. This is the case for Germany, the champion of exports (33 % from its companies), the Netherlands (28 %) and Great Britain (23 %). On the other hand, Belgium and Spain are expecting a sharper than average fall, with 22 % and 24 % respectively. Between the optimists and the pessimists, France and the Scandinavian countries are reporting expectations close to the average.
Pending verification of these forecasts for 2010, American Express has taken a look at 2009. In the current economic climate, this network of travel agencies, also known as a TMC (travel management company), does not venture to give absolute figures for the business travel market, either in France or in Europe. Its forecasts are based on relative values. Including business travel, mission and representation expenses, the travel budget is expected to fall this year by 30 % in value terms, while the number of transactions in this sector is expected to fall by 15 % compared with 2008.
Stable structure of expenditure
All in all, 2009 will prove more difficult than expected. Contrary to last year's forecasts, 66 % of companies are reporting a fall in their travel budgets (a decline of 31 %) and 23 % are observing stability; all the same, 11 % of them are noting an increase of 23 %. For the vast majority of companies surveyed for this barometer (82 %), the economic recession is solely responsible for the serious contraction in their travel budgets. And for only a small proportion (10 %) did the introduction of a travel policy with a 'green touch' help to reduce expenditure.
Contrary to what they announced last year, sustainable development is no longer a priority. Only 18 % of companies admit to having implemented a green policy by imposing rail travel instead of air travel. Environmental concerns have very often been used as a pretext to tighten travel budgets, while preserving the social climate within the company," analyses one observer. As well as being less polluting, train travel also offers price advantages over air travel".
If we look at the various items that make up business travel, air expenditure continues to weigh significantly on the travel budget (80 %). As a result, as far as air travel is concerned, companies are no longer confining themselves to traditional airlines, but are turning to low-cost airlines as soon as they serve the main airports. As business class is being abandoned for reasons of economy, airlines are launching an intermediate class. As a result, from 1 April 2010, Air France will be offering a Premium cabin on its medium-haul network, with a seat offering more space, a choice of seat at check-in, catering adapted to the duration of the flight, assistance desks, etc.
With a score of 10 %, rail is the second most important item in a travel budget. This mode of transport is more developed in France than in the UK, where low-cost companies are very active. With the development of high-speed lines in Europe, this trend has been confirmed in recent years. The impact of the TGV Est and Eurostar intensified in 2009. Hotels (7 %) are followed by car rental (3 %).
Tighter controls on purchasing
When business travellers travel, it is mainly to visit customers and/or prospective customers. For the companies surveyed, travel enables them to maintain relations with existing customers or to develop new markets. The vast majority of companies see business travel as a necessary cost. The crisis is forcing them to consider the return on investment. Travel services inevitably involve expenditure. But given the volume of business they generate, in the medium to long term, they represent a real investment.
As a general rule, travel policies are becoming stricter. Particularly detailed, they include criteria as varied as travel rules in Europe (91 %) and outside Europe (90 %), online booking (89 %), employee safety, particularly through insurance and assistance (83 %), expense control (91 %) and means of payment (82 %). A fairly recent phenomenon, audio and videoconferencing solutions score well (71 %), well ahead of taking CO2 emissions and sustainable development into account (32 %).
As companies seek to optimise their expenditure, they tend to favour alternative solutions to travel. For example, to avoid intra-group travel, large companies are resorting to conference calls or video-conferencing sessions. In the countries of Northern Europe, almost 30 % of inter-group travel has been eliminated," continues Régis Chambert. But there's no question of using these telepresence solutions to win new customers or new markets, or to build customer loyalty: you can't develop a business if you don't travel. You can't develop a business if you don't travel, especially for small organisations. Faced with this crisis, companies have implemented drastic cost-cutting plans.
To optimise their business travel budgets, they no longer hesitate to look for the best fare at the time of booking. Régis Chambert continues: "This use of the 'best buy' as the first lever for immediate savings has two consequences: on the one hand, it runs counter to the rates negotiated under annual contracts, and on the other, it penalises the 'rear discounts' granted by suppliers such as airlines, rail carriers or hotels to corporate customers as part of their annual contract". Far from being insignificant, these 'rear discounts' can represent up to 30 % of the contract negotiated on an annual basis with a supplier. For the time being, major accounts are still waiting to negotiate 2010 contracts with their suppliers. The discussions are likely to be tough: as a result of booking at the best current rate and hunting for promotions, they have not necessarily honoured the purchase volume defined in the annual contract signed with their suppliers. Driven in particular by the consolidation of the airline sector, the globalisation of agreements, already initiated in 2008, is confirmed at 94 % for companies with budgets in excess of €20 million. This globalisation is occurring in the airline sector at 81 % (up 5 points) and in the hotel sector at 69 % (up 3 points). In addition to the leverage of the best fare at the time of booking, companies often book in advance or use restricted fares.
Optimised budgets
Travel policy is becoming an essential means of making savings: 89 % of the companies surveyed now say they have a single policy. There are two new developments: the use, as we have seen, of alternative solutions to travel with meetings by audio, video or videoconference, which are now being used by 70 % of them. The same is true of the rules governing conferences, incentives and trade shows. Until now, this Mice item, which accounts for 13 % of budgets, was still poorly controlled. This is tending to be less the case.
Once the travel policy has been defined, it still needs to be enforced. One effective way of doing this is to use online booking, if only because it creates a certain amount of guilt if the traveller exceeds the pre-established rules. On average, 60 % of companies say they use an online booking tool, an increase of 3 points on 2008. Of course, the bigger the travel budget, the more the online booking tool is used: 90 % in companies with a budget of more than €20 million, 65 % in companies with a budget of between €5 and €20 million, and only 53 % in companies with a budget of less than €5 million. And 95 % of them measure its performance, a score 10 points higher than in 2008.
Consolidated reporting
Companies are keeping a close eye on things: 94 % of them have procedures for controlling and monitoring travel budgets. To control them, they no longer limit themselves to "a posteriori analysis of expenditure of the accounting type". They are adding a priori checks, by carrying out "pre-reporting". At the intermediate level, the traditional "dashboard-style analysis and ongoing monitoring" come into play. At this stage, the use of embedded cards and corporate cards makes their task easier. Again to benefit from optimum visibility, companies are tending to move away from cash advances (26 % compared with 28 % in 2008) and direct invoicing to the travel agency (50 % compared with 59 % in 2008). On the other hand, they are placing more emphasis on business cards (47 % compared with 40 % in 2008).
Against this backdrop of tighter controls, companies in which the administrative and financial departments play an important role are giving priority to data recovery and consolidation. In 2009, 61 % declared that they had all the information they needed on their expenditure, compared with only 37 % in 2008. Unsurprisingly, statistics on air travel are at the top of the list, followed by those on car hire and hotel expenditure.
Playing an essential role, the TMC (travel agency network) is a privileged partner for the company, which judges it on a multitude of criteria: quality of service, cost control, consolidation of data, ability to demonstrate economic performance, application of travel policy. Not forgetting assistance with sustainable development.
