Opinion: Manage the unmanageable for a sporting chance in 2012

Opinion: Manage the unmanageable for a sporting chance in 2012

Simon Ferguson, UK and Ireland regional director at Travelport.

At the Business Travel Show in London earlier this month, I sat down with senior management from several leading corporate travel buyers to assess what the 2012 outlook was for business travel.

The economy is high on everyone's mind as its performance tracks so closely to that of business travel and instability in the Eurozone is becoming the chief threat to the UK.

Anyone believing we would not be impacted by a euro break-up need only refer to the Institute of Fiscal Studies, which predicts a two-year recession in the UK should countries start to leave the single currency.

Italy and the Netherlands last week both slipped into recession, and while the Greek bailout is welcome it is probably the signal for prolonged stasis from the major European economies.

Increasingly the business travel landscape in Europe looks split between the stagnant western and southern territories, and the higher growth eastern European economies.

Fuel prices look to be more stable in 2012. Every $10 increase on oil barrel price translates to a 3% increase on the price of an airline ticket. $111 seems to be the consensus oil price - better than the $120 peak of spring last year, but still enough to cause ongoing surcharges.

The corporate buyers on our panel at this month's show expected air fares to rise by between 3% and 5% during 2012. Hotel rates are similarly expected to rise as reduced capacity impacts as a consequence of the downturn.

So the total trip price is becoming increasingly difficult for corporate buyers and TMCs alike to calculate, as airline ancillary fees combine with inflationary pressures and tighter managed capacity.

The structural shift from premium to economy travel will continue - premium travel accounted for 7.5% of international travel in 2011 compared to 10% prior to the recession, as business travellers have responded to the need to economise.

However, despite being on average 5% more expensive than air and car, rail grew its share against both in 2011, and is particularly key in continental Europe and APAC. Business travel can expect steady, unspectacular growth throughout 2012, with the UK market expected to grow by 7% through to 2015, according to the Global Business Travel Association Foundation (GBTA).

However, the factors underlying this give cause for concern: inflationary rises in air and hotel prices were cited by many buyers as the reason for growth, a trend supported by recent GBTA figures which show inflationary factors as the top three out of five reasons for increased business travel spend from corporates.

In the same survey, cost reduction and tighter policies were cited as they key drivers for business travel. Therefore if 2012 continues to be challenging economically, the danger is that business travel will retrench to a defensive position within organisations.

Technology continues to be a key driver for corporates and TMCs. Increasingly travellers are looking for the same access to content and innovation in the business travel space as they experience in the consumer sphere.

From a content perspective this will lead to boutique and independent hotels increasingly sitting alongside traditional chains in the GDSs and corporate booking tools and budget carriers increasingly being displayed alongside scheduled air.
 
(Travelport's Universal API will pipe an additional 250,000 hotels from our Rooms & More product into TMCs from the 3rd quarter of this year).

Increased innovation in the mobile arena will dominate in 2012. There will be more smartphones than PCs globally by the end of this year, and harnessing this shift will be key for corporates and TMCs.

Expect mobile innovation to increase in the corporate booking tool arena, and mobile trip applications like Travelport’s View Trip Mobile to increase in sophistication.

And finally, it will be a big summer of sport, with the London Olympics dominating.

Studies on the impact of the Olympics on the previous three host cities show increased inbound travel to the tune of 4% for three years before and after.

Outbound business travel, however, tends to show a 10% decline in the months immediately before and after the games, combined with a huge spike in occupancy and hotel rates in the actual Games period itself.

Planning advance commitment for London rooms will be critical for travel managers, and the impact of the Games itself adds volatility to an already uncertain climate.

As one travel buyer put it: "We’ll just carry on managing the unmanageable and predicting the unpredictable." Looks like 2012 will be just another year much like any other.

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