Creative Solutions Needed to Combat Rising Travel Costs

Despite a global economic slowdown, predictions indicate that corporate travel demand in Asia will continue to grow by more than 10% through 2009, according to BCD Travel’s 2008 Travel Program Survey which represents the views of 333 BCD Travel clients.

Insight on Corporate Travel, an analysis of and commentary on the survey results, reveals that increasing demand and escalating travel costs represent significant challenges for travel and procurement managers across the Asia Pacific region. For the second year in a row, “reducing total cost of travel” was cited as the primary travel program objective by the vast majority (97%) of respondents. With the cost of fuel at all-time high and representing an average of 32% of airline operating costs, up from 26% last year, travel managers have to seek creative and innovative ways to meet this objective.

Challenges in reducing costs differ considerably in Asia Pacific than more mature regions. Respondents cited lack of consolidated data and subsequent difficulty in supplier negotiations as the primary difficulties faced by travel managers in this region, compared to North American programs’ focus on policy compliance and meetings management challenges. Data consolidation is particularly complex in a region like Asia Pacific, where more than 55% of companies are using two or more agencies (compared to a global average of less than 40% and a North American figure of 17%).

“Maintaining multiple agencies reflects heavily relationship-based business culture priorities within Asia; increasingly, however, travel managers recognize that consolidation in their major markets is becoming a necessity,” said Roger Pfund, general manager and vice president operations – Asia Pacific for BCD Travel.

According to BCD Travel’s 2008 Travel Program Survey, travel managers in Asia identify their top priority actions for 2008 as:

1 – Enforce use of preferred agency
2 – Increase use of low cost carriers
3 – Increase travel policy communication
4 – Change in hotel tier
5 – Enforce use of preferred suppliers.

“China and India are driving demand in Asia,” added Mr Pfund. “Demand in Singapore continues to be strong, as this is where many regional functions sit. Other emerging markets like Vietnam, Korea and Taiwan are also adding to demand as companies look to these markets for business expansion opportunities. We expect this growth to continue as most travel is intra-regional and is only marginally affected by the US slowdown.”

Managing this increasing buoyancy means Asia’s travel buyers need to reconsider the definition of “savings” with regard to managed corporate air programs. Because of market price inflation, it is unrealistic to expect improved negotiations and program design to lead automatically to year-on-year reductions in average fares.

BCD Travel recommends the following actions for program managers:

• Keep a close watch on market changes in schedule offerings, pricing and corporate discounts
• Analyze the impact of market changes in travel spend and evaluate realistic alternatives to control costs
• Continuously look for policy compliance and preferred vendor improvement opportunities
• Highlight incremental corporate discount savings and market inflation avoidance provided by guaranteed fares
• Evaluate and implement realistic policy changes and travel volume reduction.

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