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Expected to lead the world next year in gross domestic product growth, China, India and other emerging economies in Asia likely will witness the first strong signs of business travel recovery, according to travel suppliers, international organizations and anecdotal reports.
Markets in the Middle East, Africa and Latin America also are expected to achieve relatively high GDP growth, according to an October report issued by the International Monetary Fund, and already have shown indications of air traffic recovery. "The global economy is expanding again, and financial conditions have improved markedly," according to IMF. "Emerging and developing economies are further ahead on the road to recovery, led by a resurgence in Asia. In general, emerging economies have withstood the financial turmoil much better than expected based on past experience."
These observations follow research conducted this year by IHS Global Insight and the National Business Travel Association, sponsored by Egencia, which determined that the highest expected business travel growth rates through 2013 will occur in the emerging markets of Asia, the Middle East and Latin America.
Meanwhile, transatlantic airline routes recently have shown signs of recovery. Europe, however, appears to be the laggard among global regions, with continued declines in airline traffic and either small GDP growth or another year of GDP declines.
"We're seeing pretty slow corporate activity in Europe, whereas we're seeing stronger activity in Asia-Pacific," according to Travelport president and CEO Jeff Clarke. For October, Travelport GDS bookings year over year were up 3 percent in Europe, 6 percent in the Americas and 11 percent in Asia-Pacific. Globally, October was the first month of the year to show a year-over-year improvement.
In September, Airports Council International began marking a positive trend in global airline passengers. "We are not just seeing 'less worse' results, but some clear signs of new growth in selected domestic markets," according to a 2 November statement from ACI director general Angela Gittens. "Domestic traffic results in China, Brazil and India are leading the global upswing, and the Asia-Pacific and Latin America-Caribbean regions dominate September traffic results with increases in domestic traffic of 12.5 percent and 16.2 percent, respectively."
ACI also reported a 6 percent increase in Asia-Pacific international traffic during September, and British Airways executives this week told The Transnationalthat Asia-Pacific likely would show the first strong signs of a rebound.
Starwood Hotels & Resorts CEO Frits Van Paasschen in October told analysts that "unlike other recessions, the U.S. consumer will not lead the global economy out of this recession. Other regions, particularly China, but also India and Africa and over time South America, will play a larger role."
InterContinental Hotels Group CFO Richard Solomons this week told analysts that "economic stimulus packages" in China are positively impacting the lodging market, enabling the company to secure financing for new hotels. "The government made a call in China to pump liquidity back into the market, and, as we know, they were very effective when they made the decision," he said. "There is obviously ongoing activity in terms of construction."
According to American Express Business Travel, "Clients expect China will lead business travel recovery. Investment by global companies and local companies in China should increase over the next 12 months." More specifically, 72 percent of 180 surveyed organizations that do business in China expected to invest in the country during the next twelve months, according to Amex. Surveyed in August and September, 60 percent of respondents said they have or will add staff this year.
"As we look forward to 2010, we see quite a bit of activity already in China," according to a statement attributed by Amex to Fair Isaac managing director Tony Kieffer. "Measures taken by the Chinese government to liberalize some landing policies and the stimulus package have resulted in tremendous numbers of loan activities and many new projects. This directly increases the need for our staff to travel."
"Travel managers and other experts" interviewed for a white paper produced by AirPlus International and the Association of Corporate Travel Executives "already observe some growth in Asia and in sectors which have been hit less severely by the recession, including pharmaceuticals and chemicals."
Meanwhile, a plurality of attendees polled at the ACTE conference in Praguelast month indicated the Asia-Pacific region would gain the most in terms of business travel increases coming out of the recession. HRG chief executive David Radcliffe at the conference said his company expects to handle a double-digit percentage increase in Asia-Pacific volume.
"The hardships of the period have had long-lasting benefits, not least of which has been increased efficiency," according to a statement attributed to Abacus International CEO Robert Bailey. "This is particularly true in Asia, where the adoption of travel management systems is a key trend not only helping to drive a return to healthy volumes of corporate bookings but also ensuring that the segment will never be at risk of getting out of shape again."
Encouraging Signs In The Americas
British Airways executive vice president for the Americas Simon Talling-Smith told The Transnationalthat in Latin America, Brazil stands out as an encouraging market in Latin America. ACI attributed "strong results" for airline traffic in Brazil partly to "economic stimulus programs."
Air Canada's Latin America traffic in October was up 9.6 percent year over year, its highest growth rate of any region. Continental Airlines (9.1 percent) and Delta Air Lines (6.1 percent) also reported positive traffic trends on Latin routes. American Airlines' 0.6 percent decline was the smallest for any region in which it operates.
Air France KLM's total Americas traffic dropped 4.4 percent, less than the declines measured for Europe and Asia. BA's traffic to the Americas region in October was up 2.3 percent.
"Because to some degree the collapse in premium traffic was triggered by the collapse of Lehman Brothers--it was very much a trigger event, you could literally see it overnight--people have assumed that this is a transatlantic problem on the back of a problem in financial services," said BA CEO Willie Walsh, speaking this week in New York. "In fact, when looking at global networks, transatlantic has performed better than average, although everywhere in the network has been hit."
Walsh cited International Air Transport Association figures, which globally showed a nearly 19 percent decline in premium traffic for the first eight months of 2009. For the North Atlantic specifically, the decline was about 15 percent.
Corresponding with IMF's predictions for slow 2010 GDP growth at best for many European economies, air traffic trends within Europe remain weak. In August, premium traffic in the region was down 27 percent year over year. British Airways executives described a "structural shift"in the short-haul premium business as corporate travelers appear unlikely to move back to front cabins.
Air France KLM's European traffic in October was down 5.5 percent year over year, its largest regional decline. BA's U.K./Europe traffic was down more than 4 percent during the same timeframe.
Specifically in the United Kingdom, third-quarter air, car and hotel transactions by Guild of Travel Management Companies members were down at least 15 percent on average, according to Air & Business Travel News.
"The rebound in Europe is likely to be slow," according to IMF's report. "Financial market conditions in the region have improved, but the largely bank-based financial system will take time to fully resume its intermediating role. Tight credit conditions will limit private investment, and rising unemployment will weigh on consumption, even as public support will need to be gradually withdrawn. Emerging Europe will need to adapt to much tighter external financing constraints. The recovery may be more sluggish than expected if conditions in the financial and corporate sectors get worse and if unemployment rises faster than currently anticipated."
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