In looking at the landscape of the overall business travel industry, it is clear that the issues of 2008 will continue to create new challenges in 2009. In addition to coping with the increasing costs associated with business travel initiating in 2008, travel management departments are feeling even greater pressure
from unprecedented market volatility and feeling the pinch of the building economic slowdown that is affecting industries across the globe.
As senior executives search for new savings opportunities, travel budgets have continued to draw attention as prime targets for cost reduction. At the same time, business leaders are recognizing the importance of viewing travel spending as an investment, rather than an expense, and paying close attention to its revenue-generating function and doing everything to maximize its returns.
Within a robust business travel program, meetings and events can represent a highly effective vehicle for value creation as they serve to build relationships with clients and colleagues through face-to-face interaction. However, these programs can find themselves on the chopping block if they cannot prove the value they provide and link directly with financial returns and ROI.
As we look ahead to 2009, the meetings industry needs to be mindful of how the overall business travel industry trends in the air and hotel segments will have a ripple effect on corporate meetings. Further, meetings practitioners should provide tangible proof of the significant financial benefits these programs provide in order to protect them from budgeting by identifying greater efficiencies through strategic meetings management techniques.
The Air Industry in 2009
Many forces are pressuring airfares for 2009, and the net result could be a cheaper base fare for North American flights. That is not to say the overall cost will decrease. As fuel prices rose in 2008, more airlines turned to unbundling fees for service, which used to be included in base rates. With this pricing model likely to continue, business travelers should expect to add up to 15 percent onto the price of a flight for checked baggage, on-board refreshments and other amenities.
While the expected global economic slowdown could lessen the growth rate of demand for seats on a plane, capacity cuts will also decrease the total number of seats available, making travel to some destinations more difficult. The resurgence of ticketing restrictions and minimum-stay requirements will also present new challenges in 2009.
Companies can affect the rate of increases by working with travelers to ensure greater compliance with negotiated contracts and travel policy. By taking a careful look at requests for travel, companies can also manage the demand to ensure that trips meet a set of criteria designed to protect the effectiveness of their travel program. These efforts, coupled with the slowing economy, are expected to keep increases to a much lower level than in 2008.
That said, meeting planners should heavily consider the cost of traveling to a destination when selecting a venue. By moving to smaller, more regional events, it may be possible to significantly reduce the air portion of a budget and increase the value created for each dollar spent.
The Hotel Industry in 2009
Selecting the market can also have big implications for the hotel portion of a meeting budget. The same issues and record fuel costs that drove airfares higher in 2008 also decreased the opportunities hotels in certain markets had to fill their rooms. This lowered demand could mean significant cost breaks at properties in second- or third-tier cities in 2009. These regional options are especially attractive, considering that the consistently stronger demand for top-tier cities such as New York, Washington, D.C., and Chicago continues to push rates higher.
In addition to traveling to less-common destinations, planners who consider a hotel in a lower-service tier could also realize additional savings. It is important to recognize the purpose and specific goals of each event along with the expectations of attendees to find a balance of convenience and affordability that will maximize savings while still maintaining the effectiveness of the event.
During negotiations, savvy planners can leverage their company’s transient guest program. Combining efforts on this front can deliver savings all around but also will increase the transparency of a corporate hotel budget, making it easier to demonstrate the return created by each trip.
Strategic Meetings Management in 2009
With the economy’s pressure on corporate bottom lines only expected to increase in the coming months, the focus already placed on travel and entertainment budgets will continue. To deal with this intense scrutiny, it is important to offer timely transparency into spending and realized savings within meetings.
As meetings continue to make gains in catching up to airfare and hotel as an actively managed piece of the travel budget, there is an increasing awareness of the savings opportunities that can be achieved through a well-managed meetings program. In addition to considering the effects of other travel verticals, planners in 2009 should consider a range of trends within the meetings industry as well.
For example, recently developed and enhanced technology is adding new options for meeting planners. While the value of a face-to-face interaction cannot be replaced, teleconferencing advances have made them a valuable addition to comprehensive meetings programs as a complement to existing travel and events. Again, it is critical to consider the goals of an event, but for some internal conferences, a virtual meeting can achieve the same objectives while conserving limited budgets for revenue-generating meetings.
Technology is also revolutionizing the way companies manage and plan meetings. As demand-management techniques gain momentum among the hotel and airfare verticals, companies will be employing the same strategies for meetings. New tools on the market will help planners keep track of spend and benchmark their savings against previous events and industry peers.
As the meetings market swings more to the buyer’s favor, similar to what we are expecting with transient hotel programs, there are many opportunities for companies to negotiate significant savings. Along with the benefits discussed earlier of combining transient and meetings data, hotels in regions where supply is outpacing demand will be looking for opportunities to earn business, translating into potential discounts and amenities upgrades for well-negotiated events.
As clients come to us looking for ways to both mitigate costs and maintain the frequency of travel, the role of a travel management company is to help them adjust and manage their travel programs in a disciplined way. A great first step is ensuring that meetings policy is included as part of the larger travel and entertainment policy. This will help companies make the most of negotiated rates, preferred suppliers and compliance initiatives, along with streamlining the approval process.
As the economic environment continues to change on a daily basis, companies can achieve savings by ensuring their travel policy covers a broad range of situations. It should take into account not only budgeting for the newly unbundled services from airlines, but also the activities associated with trips that may not have traditionally been considered a travel category. By redefining the scope of a policy, companies can expand their perspective and begin managing the package shipping, airport parking and even dining aspects of a meeting more effectively.
Ultimately, the best policy is only helpful when people are using it. Communicating new policies and educating travelers on what is acceptable from the company’s standpoint can go a long way toward savings for all segments of travel, from airfares to hotel stays and meetings attendance.
By incorporating the suggestions discussed here—from including best practices, optimizing policy and compliance strategies to leveraging technology that makes governance of policies feasible—companies can continue to achieve savings while creating significant value with their travel and meetings investment.
Herve Sedky is the vice president and general manager of American Express Corporate Travel.
