ANALYSIS: 1 December 2008

A crucial question facing the industry

At the Carlson Wagonlit Travel seminar on Corporate Social Responsibility (CSRCorporate Social Responsibility: A concept whereby companies and organisations form policies for the good of society. Responsibity is taken for the impact which an organisation's activities have on, for example, customers, employees, shareholders and the environment. It also entails a duty of care towards its employees.) in London last week,   one of the questions discussed was what effect would the adoption of green principles have on the level of travel.

The same question was posed, although in a different way, at the joint forum of the Belgian Association of Travel Management (BATM) and the Association of Corporate Travel Executives (ACTEAssociation of Corporate Travel Executives: A non-profit association that represents the global business travel industry. It provides executive-level educational programmes and carries out independent industry research. Its members come from all areas of business travel - from corporate buyers to suppliers. Provides members with a forum for sharing ideas and also offers independent advice. ) in Brussels on Thursday (November 27).

Here it was the concept of value management, a relative newcomer, which seemed to challenge the need for, and therefore the level of, travel.

Add in two other, potent factors, the global economic downturn and the advances in technology for travel alternatives like video conferencing and you have what some in the industry now regard as a crucial question: will there be less travel in the future?

In past times the answer would almost certainly have been a resounding "No" and there is the evidence to back this. Industry and therefore business travel has always bounced back after economic downturns, some would say it has come back stronger than it was before. These downturns have included a Gulf War, the SARS scare, 9/11 as well as the normal cyclical economic setbacks. Why should this time be any different?

There is a further argument. The West may be suffering a downturn and with it demand for hotels, car rental and airlines in the region has dropped. But other parts of the world are not in the same boat. The hotel business is holding up well in Russia and business travellers from the Middle East are still flocking to financial cities like Geneva as before, to give two examples.

There will also always be some level of business travel. At the CWT event, Jonathan Shopley, executive director of The CarbonNeutral Company, said: "There is underlying amount of business travel that will never be replaced."

But travel is one of the first things that corporates cut or even freeze during the bad times. This seems to be happening as usual in the current bad times. But this time, there is a feeling that things are a little different. There are three factors at work here.

 This is the first downturn when CSR and associated green issues have been so high on the corporate agenda. There is pressure on boardrooms, often not least from their employees, to reduce the company's carbon footprint. This could be through using train rather than plane when possible, using video conferencing or webinars instead of travel or, again, simply by undertaking fewer trips.

The second is the advances in technology which have so improved the quality of video conferencing. At that same CWT event, Caroline Allen, regional director for northern and east central Europe and Russia for ACTE, spoke of the "dawning of the video conferencing age." While there were still technical hitches, some video conferences felt like you were in the same room as the other participants," she said.

Finally there is the concept of value management which, in travel terms, requires companies to assess the value of a trip, basically its return on investment (ROI). This is an advance on the earlier concept of demand management which looked at whether travel could be reduced by using alternatives, like video conferencing. This takes this stance further by urging companies to ask just what do they get out of each trip.

In Brussels, there were few if any buyers who actually measured this in terms of cash. That is the trip cost so much, we got a contract out of it for so much, so therefore the trip was worth it. It is more likely that data is not being collected or at least analysed in this way but that could be just a matter of time.

If controlling costs remain a given at most corporates, it would look like pressure for CSR/green agendas, the advance of video conferencing and the enforcement of  value management could all give companies a plausible reason to keep travel on a reduced scale after the downturn ends.

But this depends on what companies and individual executives see as the irreducible level of travel - the trips that must take place in order to carry on business. They are likely to include employees sent out to maintain company products and travellers sent out to start new relationship or to win and seal new business. They may not include meetings between people from the same firm or training sessions. It is going to vary from company to company.

How this will settle after the downturn has moved into an upturn is consequently difficult to guess. But the process has already started. David Radcliffe, ceo of HRG, in his presentation of his company's result last week said that his clients were still travelling, "albeit in many cases they are travelling differently."

But there is a number who believe that the outcome will be less travel. This includes senior TMCTravel Management Company: An agency which manages business travel for a company. executives.

Paul Tilstone, ceo of the UK and Ireland Institute of Travel Management (ITM) presents what he feels is a minority view.

"This is THE question and I think my view is probably not the same as most others.  I think we are entering a  perfect storm which will challenge our usual decision making patterns and that this, combined with a greater emphasis on duty of care in the future, will see more people globally travelling, but travelling less per person than they were and in higher classes ultimately. 

" In other words, trips will reduce in real terms against world growth, but travel costs will not decrease at the same level as those who do travel are taken greater care of - this is all post slump of course.

"Most people think we will return to pre recession levels but I'm not so sure.  You only have to look at the professional services company who invested $3.75m in VDC and has saved $6m in just six  months to see the writing on the wall. 

"Now of course, using VDC probably drives business and increases travel as well....but not to the same level."