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Major multinational corporations operating in Africa are challenged to implement managed travel programs fast enough to keep pace with the rapid growth in the region. The maturity of the African corporate travel market is about 15 or 20 years behind the United States, and about 10 years behind Europe, according to Carole Graaff, travel commodity specialist for Ericsson South Africa. But development of travel management in Africa is expected to happen quickly, she said during a presentation at the Association of Corporate Travel Executives' May conference in Miami.
Demand for air travel in Africa during the first six months of 2007 grew at 10 percent, second highest among all world regions behind Asia, according to the International Air Transport Association. Favorable economic conditions and improving air links with Asia and the Middle East have apparently helped spur demand. Business travel has fueled a large portion of the increases, according to regional tourism offices. Though pan-African data is lacking, business travel in South Africa expanded 26.9 between Aug. 2006 and Aug. 2007, according to South African Tourism.
Amid such growth, companies like telecommunications equipment and services provider Ericsson face challenges related to data, infrastructure and security. The company's managers noted that air transactions for Ericsson's sub-Saharan operations increased by 100 percent from 2004 to 2006, and the growth shows no signs of slowing.
Ericsson's sub-Saharan Africa unit covers 43 countries and a combined population of 586 million people. The company's fixed-line and mobile operations are concentrated in three regional hubs in South Africa, Nigeria and Kenya. In South Africa alone, Ericsson has an annual corporate travel spend of $11 million. The company spends another $4 million a year on travel for the remainder of the region, said Sally Rademaker, manager of the sourcing market unit in sub-Saharan Africa for Ericsson South Africa.
"There is not much time to prepare for all that is coming our way in the travel industry," Graaff said. Ericsson has "just about one year" to prepare its markets and regional suppliers for the transparent financial relationships and back office systems needed to support the travel programs.
"Some of these markets don't even have a [bank settlement plan] representative," Graaff said, specifically citing Nigeria and Zambia. "It's extremely difficult to enter into relationships in these markets where there is no support.".
Obtaining consolidated data reports from suppliers also is difficult, Graaff said. Commissions for air travel vary, depending on where the ticket was purchased, so reports often are separated by airline and by currency, creating an "absolute nightmare" of paperwork, she said. Efforts to standardize reports are rarely successful because suppliers may disregard their instructions, issue reports in the wrong format, or use the correct format for only a few months, Graaff added.
Relationships with local travel management companies are often complex, Graaff said. Oftentimes, after negotiating a corporate discount with a travel supplier, Ericsson will discover that its agency partner has pressured the airline or hotel for additional financial incentives. "If we find out that there has been pressure, and the suppliers are very quick to tell us, then it's breach of contract and we make that very clear" to the agencies, she said.
Ericsson has a global corporate card agreement with American Express, but in Africa the agreement is difficult and expensive to maintain, Graaff said. Many hotel properties that claim to accept Amex prefer to accept Visa or MasterCard and pressure travelers to settle their bills that way, she explained. However, Amex provides superior data reporting, Graaff said, so Ericsson travelers are advised to settle their hotel bills early and insist on using their corporate cards.
Partly the result of these challenges, educating travel suppliers is a top goal for Ericsson's travel management operations in Africa. One strategy the company has adopted is to maintain a database of standard contracts, which some suppliers are willing to accept in exchange for business, Graaff explained. Ericsson also looks for "innovative partners" willing to attempt more mature business practices, including transaction-fee pricing.
Loading rates from global hotel chains into global distribution systems generally is not a problem in South Africa, but is sporadic through the rest of sub-Saharan Africa, Graaff explained. Domestic chains often are completely unfamiliar with GDSs and domestic airlines are rarely listed in them. Even when content is available in a GDS, it can be outdated and unreliable, she warned, leaving passengers stranded when their expected flight had been cancelled weeks before.
A number of other challenges must be overcome in the African market to facilitate the growing demand for business travel, including cultural diversity across countries and a general lack of expedited service, Graaff said. Accessing many locations within the region also is difficult as air service is often unreliable or sporadic.
Security is another challenge, added Ericsson's Rademaker. Spotty air safety, regional wars and pandemics all pose serious risks to corporate travelers. Over the past decade, Africa accounted for only 4 percent of all global air traffic but 25 percent of all air accidents, according to IATA.
Addressing such concerns, Ericsson uses an intranet site to advise travelers of relevant political, travel and security risks within the region. The travel department also relies heavily on site inspections, and blacklists suppliers that do not meet safety standards.
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