Asia/Pacific Prices Expected To Soar By Year-End
<B>Asia/Pacific Prices Expected To Soar By Year-End</B>
By Angela Spiegel
Demand for business and leisure travel in Asia, coupled with increasing price hikes and a slowing economy, will make it more expensive to travel to the region by the end of the year, according to industry insiders.
"The combination of increased demand, higher fuel prices and controlled growth in airline capacity and hotel room supply will translate to higher travel costs in 2001," said Howard Allen, head of American Express corporate services sales for Asia/Pacific, referring to the latest "Trends and Forecasts for Asia/Pacific Corporate Travel Management Report" by American Express.
"Asia/Pacific international passenger growth is expected to have one of the highest rates in the world, averaging 5.6 percent per year for 2000-2004," he said.
Allen said the report showed that, similar to many other areas in the world, travel and entertainment spend was also the second or third largest controllable expenditure a business could have in Asian countries. The region accounts for 20 percent of the world's US$400 billion spend on travel and entertainment. Allen said that regional average airfares would rise between 4 percent and 6 percent by the end of 2001, compared with 2000, depending on class traveled.
Meal costs would go up by about 2 percent, negotiated hotel rates would increase more than 10 percent. The price hikes would be due to demand for business and leisure travel increasing, as is economic activity in the region.
"In addition, the domestic passenger growth forecast of 7 percent for Asia/Pacific countries is significantly higher than the world average of 5 percent," Allen said, but added that only China, Japan, the Philippines and Taiwan were forecast to experience more international passenger growth than in 2000.
Allen said the prediction that hotel room rates would increase 10.9 percent was a turnaround on 1999 and 2000, when corporate rates decreased by 10 percent and 4 percent, respectively. Also, the 2 percent increase in meal costs would be less than last year's 3 percent increase, but the same as 1999's increase.
Car rental rates were expected to keep pace with local inflation, though Allen did qualify this rosy picture of growth. "It is worth noting that the economic slowdown in the United States may have an impact on the Asia/Pacific region," he said.
Geoff Carmody, director of Canberra-based Access Economics, said there was no doubt Asia was entering a period of slower economic growth. How deep the slowdown goes, and how long it lasts, depends on how the economies of the United States and Japan fared and, in some cases, on internal governance factors. "Global economic interdependence is not only well and truly here, it is growing," Carmody said.
Such economic concerns are in the forefront for many corporations and travel management companies in Asia/Pacific. Jenny Tan, vice president of global procurement services for travel at Singapore-based Citibank, said that due to an increased emphasis on cost control from the economic slowdown, there would be fewer trips this year.
"We are expecting more justification from staff prior to travel, though the number of people traveling may stay the same," said Tan, who also is the finance representative on the Asia Regional Council of the Association of Corporate Travel Executives.
Ernie Tan, regional manager for strategic sourcing at Standard Chartered Bank in Singapore, is about to select a single travel agency for all countries in Asia except North Korea, effective in June. Each country had its own travel agent, which complicated reporting, he said, adding that the new arrangement will help to improve reporting and reduce costs. Like his colleagues, Tan expected flat, or only small growth in business travel this year. Singapore-based Mark Fun, head of corporate services at UBS AG, said controlling costs, even travel costs, is not new for the bank.
"Early this year we received an initiative from management to really look at costs and see what we could look at in terms of savings, and travel was one of the biggest ones," he said. "The economic outlook is a little bleak and instead of waiting for things to happen, we are taking the initiative to be proactive."
Travel management companies confirm clients are asking them to help them trim costs.
Peter Choo, managing director at BTI Singapore and chairman of the Asia Regional Council of the ACTE, said for some companies cost-cutting had manifested itself in mandates to fly with lower-cost carriers and stay in lower-cost hotels.
Olivia Chye, general manager at Carlson Wagonlit Travel in Singapore, also has been approached by clients keen on tightening their belts.
"Buyers basically are looking for more and better programs from their agents, and they are looking at their hotel spend," she said. But economic slowdowns don't always translate into less travel. The fact is business must go on. It's a point that Les Galbraith, vice president of corporate service sales at American Express in Sydney, capitalizes on.
"While the leisure travel market in Asia was severely impacted by the Asian crisis, corporate travel was more protected," Galbraith said. "We saw airlines opening more business class seats and actually increasing prices for business tickets during the crisis as a way of maximizing revenue from the one part of the market that remained strong.