Torsten Kriedt
Prompted by economic volatility and client demand for the latest trends, BCD Travel's consulting arm Advito last week released the first quarterly update to its 2010 industry forecast. Corporate travel demand overall experienced a double-digit increase in the quarter ending today, "but demand levels vary significantly across regions," and reflect a "two-speed recovery" in advanced and emerging markets, according to Advito. Economic and travel markets of Asia-Pacific, Latin America and the Middle East are growing faster than more advanced markets in Europe and North America, according to the data. Advito now expects higher Asia-Pacific airfares, a "drop in regional business class airfares in Europe" and further drop in average daily hotel rates in key markets due to growing supply amid a slow recovery. Advito revised downward its average daily room rate forecasts for eight countries: Brazil, China, France, Germany, India, Spain, the United Kingdom and United States. Driven by a 12 percent jump in traffic and 7.3 percent rise in available seat miles in the Asia-Pacific region, Advito expects airfares to increase more than previously projected. Asia-Pacific intercontinental fares are projected to rise 6 percent for business class and 4 percent for economy. Intra-regional fares are projected to rise 2 percent for business class and 5 percent for economy. In Europe and Africa, Advito now expects a drop in regional business class airfares. In the Middle East, "heavy capacity increases will leave carriers struggling to fill seats" as fares remain flat. Advito vice president of innovation and intelligence Torsten Kriedt spoke to The Transnationalabout the latest forecast and other multinational travel management trends. An excerpt follows.
In what world region are you seeing the largest air increases this year?
The highest increases, if you look at airlines overall from a cost-per-mile perspective and from an average ticket price perspective, are higher in Latin America in both business and economy class, then in Europe even though we see increases on an intercontinental perspective. We don't have a major variance. None of them are two-digit increases.
Is the demand you are reporting pent-up demand or sustained recovery?
It's a catch-up to what I see as a healthy balance between trying to keep costs down, and enabling the business to do business. When you look at purpose of trip, absolutely the client-facing trips are increasing demand. Internal meetings or product meetings are typically only key drivers for growth if they are part of a major acquisition or merger integration; otherwise it's purely client-facing or revenue-generating meetings that are spurring demand now.
Are you seeing any increases in class of service travelers are flying, a relaxation of tighter travel policies that emerged over the last year?
The interesting thing is that everybody was talking about tighter polices, but actually we didn't see a lot of down-tiering happening either from a hotel perspective or cabin-class perspective. Policies were not really reduced, probably because actual average room rates, as an example in the luxury or upper-upscale segments, converged more into the upscale segment, so there was no need to down-tier; they could have actual cost savings without the need to down-tier. This trend is changing slightly again. If you look at business class usage, it's increasing again for intercontinental [flights]. The guilt factor on the traveler side--even when policy didn't require it--is reducing, so they're traveling more intercontinental business class again. However, for intra-regional European travel you can almost see business class dying out. You can almost see airlines giving up on that specific class.
What other trends are you seeing?
We should watch the exchange rates even more carefully. From a budget perspective, some organizations are not meeting their budgets because they looked at predictions on a local currency prediction rather than exchange rates. I still believe in the overall budget predictions. The other thing we see happening more is dynamic procurement--the ability to play the market to complement existing programs. That is true across the segments. It's really managing the program up until the date of departure, making sure you're getting the best deal within the policy and framework, but also making sure the traveler and company get the best deal out there. It's the price assurance component. It's also renegotiating hotel contracts and on an ongoing basis bringing new hotels into programs or at least getting a good rate at hotels that travelers use. Buyers have their overall program in control, but they also want to tackle those spend items that are typically outside of a managed program due to an emergency situation where a traveler had to upgrade or rebook. For example, if travel patterns show that a company typically needs more rooms in Chicago when the weather is bad, block those rooms upfront and make them available when a traveler calls in distress [to better manage costs]. Last year was when global consolidation was really huge--you could sense that in the requests for proposals. Many companies still have national programs and are now moving to the next level of consolidation, regional rather than the big bang of global. That is happening across the globe. We can see that the trend is to have two or three regional programs. If they have North America and Europe under control, they're now moving to regional consolidation for Asia-Pacific and Latin America. Some are now bringing North America and Latin America together. It really depends on the maturity of the program.
Why did you issue this update to your annual forecast?
We decided to go to a more regular review cycle. We do this internally once a month anyway. Our clients are asking, "What do you see out there, what's happening?" The market overall needs more reviews, formal updates and predictions moving forward, especially as we move more into a 12-month running forecast. It's also less of a time crunch for the procurement people in the July-August time frame when they're starting their negotiations again or even when they have to set their budgets. They're not waiting for our October forecasts if they can at least look at the July forecast. Then in October they can get the validated rolling 12-month forecast for the year to come.