Eastern Europe - tougher than expected?

Just how well is the advance of business travel management going in Eastern Europe? There can be little doubt that things have moved forward considerably since 1989 and the beginning of the end of the Soviet control over the region.

Marko Vidic, managing director of TQ3 Travel Solutions in the Czech Republic, told the discussion on Eastern Europe at the recent ACTE conference in London that travel management had expanded "extremely rapidly" there since 1989.

But that session in a nearly packed room threw up reasons for both optimism and pessimism.

The optimism is in the ground gained in the last decade. All major travel management companies, including American Express, Carlson Wagonlit Travel, BTI and TQ3 are well established in the region, as are smaller ones like Radius Travel.

The bigger locally-based agencies without an international partner are seeking one, according to Jolan Babarczi, managing director of BTI Hungary.

Technology, which started from scratch, has also made great advances, with many companies, especially in the SME band, looking into self booking tools.

Larger companies, Ms Babarczi said, are looking to outsource, for top grade MI and analysis and a "best practice" strategy to control and manage travel and spend.

But between the upbeat assessments, another picture was also emerging which might just have repercussions.

Eastern Europe is a diverse region of more than 20 countries and many languages, currencies and cultures. Attitudes to business travel management differ, just as they do between Sweden and Spain. With different cultures, rules will also differ.

It is also a fragmented market, like Italy (although not on the same scale). The Czech Republic has some 176 agencies while there are 270 in Hungary. Some work on commissions, some, usually the bigger ones with international partners, work on management or transaction fees.
There is no Billing and Settlement Plan (BSP) at all in the region, forcing agencies to work with up to 25 different airlines - the costs must be horrendous.

Martina Eggler, CWT's vp for sales and account management in Eastern Europe, said agents often had to deal with four internationals CRSs and three or four domestic ones.

Technology was limited – not all of it worked and many agencies could not afford it.

Similarly there was limited use of credit cards, partly because many locations could not accept them and partly because salaries were too low to command an individual card.

But what also emerged, perhaps more tellingly, was the smallness of the market. Mr Vidic said: "If you look at the number of transactions, the Czech Republic did just a little bit more than Siemens in Germany." 

There are just 10m people in the Czech Republic and a similar number in Hungary. Poland has about 38.6m and Romania 22m but most of the others have a population of under 10m. Until Russia (143m) and the Ukraine (47M) are more integrated, Eastern Europe is going to remain a small market and one that is fragmented.

This is not a continually attractive proposition, especially when far larger markets are now becoming available.

It was Thomas Faller, group travel manager of ABB who struck the most cautious note about development of travel management in Eastern Europe. ABB was happy with its arrangements in the region but its focus was now thousands of miles away in India and China.

These two vast markets offer potentially far greater rewards than Eastern Europe. India has a population of 1bn and China 1.3bn.

There are nearly as many people in Mumbai, India's business centre, as in the Czech Republic and Slovakia combined and more in Shanghai, China's main business city.

"Things are pretty much in place in Eastern Europe," Mr Faller said. "But now the focus is on India and China. You have to follow trends. Companies are re-locating, mostly to China.

"Just look at how many people are flying to China. You can't get a seat on a plane."

If the focus is now far more fully on the Far East and the sub-continent, then Eastern Europe may suffer and its up to now rapid progress may slow down.