What lies ahead in 2012?

This year's outlook is particularly uncertain, and people are unwilling to predict the unpredictable. But Bob Papworth finds some business travel experts willing to stick their necks out

Sadly, Welsh electrical engineer Sir William Preece is no longer with us – hardly surprising, since he was born in 1834 – but in departing this world 99 years ago in 1913 he saved himself a great deal of embarrassment.

For it was in 1878 that Sir William, working as a consultant engineer with what was then known as the British Post Office, roundly declared: “The Americans have need of the telephone, but we do not. We have plenty of messenger boys.”

Sir William neatly highlights for us the perils of making predictions. As the renowned economist JK Galbraith put it: “There are two classes of forecasters: those who don’t know, and those who don’t know they don’t know.”

Hats off, therefore, to the good and great of the corporate travel industry who, almost to a man (and woman), freely and openly admit they have little or no idea what 2012 might hold for our industry.

Take Anne Godfrey, chief executive of the Guild of Travel Management Companies (GTMCGuild of Travel Management Companies) for starters. “No-one – travel management company [TMC], buyer or supplier – really knows what will happen in 2012. The only thing we agree on is that we face an uncertain year,” she says.

Nevertheless, heeding neither the GTMC boss nor the lessons of history, there are still those prepared to stick their heads above the predictive parapet. HRG’s group commercial director Stewart Harvey is among them.

Harvey identifies three key trends that, he believes, will become increasingly important over the next 12 months and more. Companies, he says, are cutting back on short-haul travel, but spending freely on trips to Latin America and the Asia-Pacific region; and they are much more focused on pre-trip data and travel approval processes.

The third trend, which Harvey also expects to gather momentum in 2012, will come as welcome news for GTMC members at large.

“If I go back five, maybe 10 years, the average organisation looking to use a major travel management company was spending around £150 million a year on travel,” he says. “We are now seeing companies spending £20m to £25m looking for regional, multinational deals – companies with a smaller footprint and a smaller spend are increasingly trying to leverage what little they do spend.”

It’s a development with which Graeme Milne, general manager of FCm-owned Corporate Traveller UK, can readily identify – although he says it’s not just a case of getting more travel bang for the budget buck.

“It’s not merely a case of costs, but also the demand from SMEs [small- and medium-sized enterprises] for personal service from a travel management company that values their business,” he says.

“Our average customer spend is £120,000 per annum. Most conventional travel management companies would find it difficult to prove value on a client of that size.”

Milne also sees yet more evidence of belt-tightening. “Clients,” he says, “will continue to downgrade from business class to premium economy and focus on carriers with frequent flyer programmes as they want to feel they are getting something extra in return.

“More clients will fly via routes where airport taxes are lower. APDAir Passenger Duty (UK only): An excise duty charged on the carriage of passengers flying on an aircraft with an authorised take off weight of more than ten tonnes or more than twenty seats. Due when the aircraft first takes off on the passenger’s flight and is payable by the aircraft operator [air passenger duty] is not the only tax to impact on business travellers – all taxes associated with air travel are high and clients are seeking ways to reduce costs if they can fly indirectly to a destination via an airport with lower rates.”

He adds: “We have seen a significant move towards downgrading the class of rail travel, in particular travel policies that no longer allow first class, which will continue into 2012.”

The need for savings will become greater over the coming year, because prices are only going to head north, says Christa Degnan Manning, director of American Express Global Business Travel’s Expert Insights research.

“As business travel is both an essential part of global economic performance as well as an enabler of business growth, we expect the combination of demand and effective travel supplier yield management to push up rates business travellers pay up across the board in 2012,” she warns.

Again, this may mean a sharper focus on the role of TMCs. Manning says: “As travel suppliers have learned their lessons of the past two recessions, managed travel programmes have to help companies strike the balance between increasing budgets to keep pace with price hikes and business opportunities, while reviewing policies and tools to support most cost-effectively the productivity of employees.”

Carlson Wagonlit Travel (CWT) is rather more circumspect. The company’s 2012 Travel Price Forecast predicts that while most average travel prices will rise, the increases will be largely limited to single-figure percentages.

“Travel buyers in most parts of the world are facing tough negotiations as the landscape increases in complexity,” said Nick Vournakis, vice-president of the CWT Solutions Group, which produces the report.

However, echoing Anne Godfrey’s concerns, he adds: “At the same time, economic uncertainty continues in some parts of the world and has resurfaced in others, prompting increasing questions on exactly what 2012 holds in store for organisations and, by extension, for business travel.”

BCD Travel’s research subsidiary Advito is just as cautious. “Based on a provisional assumption that economic growth will continue in 2012” – an assumption that may already be past its sell-by date – “Advito expects business travel demand to continue to grow, too, perhaps by low single-digit percentages in North America and Europe, and medium-to-high single-digit percentages elsewhere,” the company says.

“Across all regions the price of travel will typically grow by four per cent to six per cent, but a little lower in areas of high capacity, and considerably higher – especially for hotels and meetings – in certain boom markets.”

This article was first published in ABTN's sister title Buying Business Travel, the award-winning magazine for company travel & meetings buyers and arrangers.

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