AirPlus International Travel Management Study A comparison of international trends, costs and planning of business travel.

Transcription

1 AirPlus International Travel Management Study A comparison of international trends, costs and planning of business travel.

2 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 A total of,00 travel managers from global business travel markets were surveyed for the AirPlus International Travel Management Study. Real travel management is here to stay. Four percent even said it has had a positive effect, meaning they are among a small minority who are actually travelling more, perhaps as a result of acquisitions. Yet there is evidence throughout the study of the tough economy having a different sort of positive effect: it is making many companies much more professional about their travel management, such as in more comprehensive use of travel policies. Mexico United States Brazil South Africa United Kingdom Netherlands Germany Austria Switzerland France Spain Italy China Singapore Australia Dear Reader, Welcome to the fifth edition of the AirPlus International Travel Management Study. Each year we survey,00 travel managers on the state of their corporate travel programs. The respondents are based in countries and cover every continent, so it is arguably one of the most comprehensive and authoritative research into corporate travel on the planet. When we started work on this year s study, we expected the results to look very different from earlier years. That has proven to be correct. The economic crisis has transformed the marketplace from when we launched the study back in 200. However, it is important not to exaggerate this transformation. When we asked respondents how the economic crisis has affected their organization s business travel, 44 percent said it has had a negative effect, but a larger number ( percent) said it has had no effect. Just how deeply these practices have taken effect varies significantly according to level of spending on travel. The economic crisis is causing higher spenders to cut back more on travel than smaller spenders, but the big spenders are also using more professional tools and processes including policy, negotiated agreements and analytical tools to help them achieve exactly that. However, there are also issues where travel managers for smaller spenders seem happier than their larger competitors, such as their elevated role and status within their businesses. We at AirPlus have learned a lot from the study too. Our big hope is that next year s study will show travel resuming its long-term upward trajectory and that the improved professionalism in travel management so evident in this year s results has become established as normal practice. Richard Crum President and CEO AirPlus International, Inc. October 2009

3 4 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Index About the study This survey was conducted in spring 2009 by the international market research company 2hm on behalf of AirPlus International. A total of 00 travel managers at least 00 in each country were surveyed in: Australia, Austria, Brazil, China, France, Germany, Italy, Mexico, Netherlands, Singapore, South Africa, Spain, Switzerland, United Kingdom and United States. Companies were categorized as low, medium or high spenders on travel according to which country they were in. For example, in Germany, low spenders were defined as spending 0.2 m 0.m annually, medium spenders 0. m 0 m and high spenders 0 m-plus. In the US, low spenders were defined as $ 0.2m $ m, medium spenders $ m $0 m and high spenders $0 m-plus. The interviewees The interviewees in the survey are all called travel managers, although they often have a different official job title. The majority ( percent) of those participating in the study are personal assistants or secretaries. Forty percent work for senior management and 2 percent are in a travel department, with others working in departments such as finance and purchasing. What position do you hold in your company? % Other 9 % Head of Department 0 % Management % Personal Assistant / Secretary 6 Executive summary 0 Effects of the economic crisis 9 A negative impact but not for everyone 0 Big spend, big pain 0 Environmental efforts unaffected 02 Trip volumes and travel spend Travel managers forecast fewer trips but... 4 Globalization remains an engine of growth 4 Air - a mixed outlook 6 High spenders lead the cost-cutting 8 Negotiated agreements come back into fashion 0 Status of travel managers and travel management 28 Business travel professionalism is rated average 28 Travel managers want more flexibility 29 Is there enough senior management support? 29 Roles vary according to level of spend 29 Travel managers lack time to do their work 29 Less than one-quarter of working week spent on travel Getting the cost-versus-care balance right Finance and procurement to strengthen their influence Conclusion % Consultant 0 Travel policy 20 Implementation shoots up 20 High spenders lead the way 20 Policy set to become even tougher 04 Travel management programs and processes 2 Cost-cutting remains the number one priority 24 Use of special analytical tools on the rise 24 Is enthusiasm for offsetting carbon emissions stalling? 26 Travel managers set to take over meetings management

4 6 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Executive summary Has the current economic crisis had effects on your business traveling? How much of your working time do you spend on travel management? 44 4 countries USA United Kingdom 69 Germany 7 6 Austria France Italy Spain 48 South Africa 22 7 China 60 7 Netherlands Switzerland Singapore 8 9 Australia Mexico 7 Brazil 46 Travel managers tighten their control A growing number of organizations agree or somewhat agree that centralization of travel programs will intensify (8 percent). A growing number are also analyzing their business expenses (82 percent) but only 4 percent use special tools for their analysis, although this is up from percent last time segments Low 9 24 Medium High Up to 00% Up to 7% Up to 0% Up to 2% Negative Effects Nearly no effects Positive Effects A mixed response to the economic crisis Contrary to what might be expected, a slim majority ( percent) of travel managers say the economic crisis has had nearly no effect on their organization s business travel. However, 44 percent say it has had a negative effect and 4 percent say it has had a positive effect. The negative effect has been greatest for high spenders on travel (4 percent). The major consequence for those programs which have been affected is less travel. Trip numbers to decline? For the first time ever in the AirPlus International Travel Management Study, the number of respondents who expect trip numbers in the business travel market to fall ( percent, up from 8 percent last time) exceeds those who think it will rise (2 percent). However, an even larger number (40 percent) believe there will be no change. This trend is broadly the same across all types of travel except rail, where many European companies expect to see growth. Higher hopes of cutting costs The proportion of travel managers expecting to spend more on travel has slumped from 8 percent to 2 percent, while those expecting to spend less have grown from 0 percent to percent. No change is expected by 9 percent of respondents. Rail proves an exception The number of travel managers expecting lower air costs has risen for the first time since the study started, from 8 percent to 2 percent. Looked at another way, only 2 percent think their hotel costs will increase, down from 4 percent last time. Meetings & conventions are seen as the best opportunity for cutting spending. Once again, in Europe, rail is the only area of travel spending where more think costs will go up than down. Negotiated agreements make a comeback Corporate deals are on the increase, with hotel deals (signed by 74 percent of respondents) leading the way. For the first time, more companies have car rental agreements (7 percent) than air agreements (6 percent). Companies toughen up on policy The number of respondents whose organizations have introduced policy for all aspects of travel has shot up from 7 percent to 70 percent. This trend is much more prevalent among high spenders on travel (89 percent) than low spenders (7 percent). Of those businesses which have a policy, 9 percent check compliance and 8 percent think their policies will become tougher the highest figure since the study began. Optimism on green issues There is little change from last year in the number of companies which have introduced or plan to introduce financial offsetting of travel-related carbon emissions (2 percent). However 68 percent of respondents agree or somewhat agree that climate protection will increasingly be taken into account in travel programs and 76 percent say the economic crisis has made no difference to any green-friendly aspects in their existing programs. Travel management professionalism rated as average Most respondents rate their professionalism in travel management as average, but self-evaluation is higher among high spenders. When asked what is the one thing that would most improve their jobs, the most common answer is flexibility in selection, in other words having the ability to choose the best price on the day (24 percent). Small spenders take less time to manage travel Respondents who are smaller spenders manage travel for employees within their department, compared with 0 employees for medium spenders and employees for high spenders. Respondents working for low spenders also spend far less of their working week dealing with travel: 74 percent spend less than a quarter of their time on it, while the equivalent figures for medium and high spenders are percent and 4 percent respectively. Travel managers feel frustrated A substantial minority feel a number of frustrations about their travel management work, including lack of time (7 percent), too many obligations without rights ( percent) and a lack of attention and arbitrary procedures (46 percent). Balancing support for travelers with controlling costs is also an increasing challenge for 69 percent.

5 9 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY Effects on the economic crisis Bigger spenders have been impacted negatively more than smaller ones. Summary Although 44 percent of respondents believe the economic crisis has had a negative effect on their organization s business travel, even more ( percent) say it has had no effect. There are significant variations from country to country, including within regions, and bigger spenders have been impacted more negatively than smaller ones. Travel managers say economic problems have not deterred their efforts to make their travel programs more environmentally responsible. A negative impact but not for everyone The dramatic consequences of the global economic crisis are clearly evident throughout this study not least that, for the first time in its five-year history, more travel managers expect trip numbers and travel spending to fall rather than rise. However, this year, AirPlus International has also quizzed travel managers specifically about how they have changed their travel programs in response to the recession. The answers confirm that there has indeed been change but perhaps that change is not as widespread as some might think. Asked how the economic crisis has affected their organization s business travel, 44 percent say it has had a negative effect, yet percent say it has had nearly no effect. A tiny minority 4 percent believe it has had a positive effect. Significant variations by country These answers are a reminder of the dangers of generalizing about an economic trend. For example, although the downturn has hit every country, GDP growth has remained positive in some markets, such as China. Indeed, it is China which has the lowest number of respondents reporting a negative effect on their business travel: just 22 percent. What is also clear is that not only do the figures vary country by country, but it is even impossible to make regional generalizations. In Asia, for example, Singapore is one of the markets hardest hit, with 60 percent reporting the recession causing a negative impact on travel. Similarly, in Europe, those acknowledging a negative effect range from 28 percent in Germany to 6 percent in Italy. Has the current economic crisis had effects on your business traveling? Negative effects Nearly no effects Positive effects How did the importance of travel management geared toward climate protection change for your company through the current economic situation? Decrease Stay the same Increase segments Low Medium High segments Low Medium High

6 0 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 The majority of travel managers say climate change considerations have not been affected. Big spending, big pain There is also variation in the figures when analyzed by size of travel spending. The proportion of low-spending and medium-spending respondents for whom there has been a negative impact is 44 percent and 4 percent respectively. However, for high spenders it is 4 percent. Superficially, this suggests that larger, more inter national companies are suffering more than their smaller competitors in the economic crisis. This may be true in many cases, but an additional possibility to consider is that larger companies have carried out more stringent reviews of their travel programs. In turn, this could make them more likely to conclude that a proportion of their employees trips are unjustifiable and can be eliminated. Employees in smaller companies are often said to feel more responsibility for their organization and therefore less likely to spend money on unnecessary travel regardless of the economic climate. An ill wind blows some good It may seem surprising that even a tiny proportion of companies believe the recession has affected their business travel positively. However, for a few organizations, this counter-cyclical benefit is genuine. Examples of businesses that do well in tough times include insolvency practitioners, while other companies which might see a spike in travel include ones that have acquired failed businesses. The main consequence: reduced travel Respondents were asked to rank in order of importance five potential effects of the economic crisis on their travel programs. Across all countries, the average order of ranking was:. Less travel 2. Direct cost savings. Tightening of travel policy 4. Shorter trips. Complete adjustment of all travel Less travel was ranked number one in seven countries and direct savings number one in a further five, while tighter policy was most important in the USA and Germany. Environmental efforts unaffected There has been much speculation about whether the economic crisis would halt the recent major trend for companies to attempt a reduction of their carbon footprint caused by business travel. On the evidence of this study that fear has not been realized. The overwhelming majority of travel managers (76 percent) say climate change considerations in their travel program have not been affected. This figure needs to be put in perspective, because answers given in Section 4 of the study suggest most companies still lack an environmental aspect to their program. Perhaps more significant an insight is that while 0 percent say the economic crisis has decreased their work on climate change in their programs, exactly the same number say it has increased. This reflects the existence of two schools of thought about how Green issues affect travel programs. One believes it pushes up cost, for example through contributing to offsetting schemes or through excluding certain suppliers which fail to meet environmental standards. The other believes it pushes down costs because a green attitude encourages elimination of unnecessary trips, leading simultaneously to reduced spending and reduced carbon emissions. It would appear that the philosophy of combined financial and environmental prudence is particularly popular among larger spenders, of whom 6 percent say the economic crisis has increased emission reduction initiatives. This contrasts with a figure of 9 percent for both low and medium spenders. The finding confirms a survey published in April 2009 by business Travel News, a US publication focused on business travel. Its survey found that the proportion of buyers considering environmental issues in their programs was 9 percent, up from 29 percent the year before.

7 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY Trip volumes and travel spend percent of the interviewees expect volumes to fall. Summary Those expecting trip volumes to increase have slumped from 7 percent to 2 percent, while those expecting volumes to fall have risen from 8 percent to percent. However, they are outnumbered by those expecting no change (40 percent). There is a similar pattern for expectations of travel expenditure, with high spenders the most likely to be cutting back. Negotiated agreements with travel suppliers are on the way up, especially for hotels (up from 6 percent to 74 percent). Some travel managers forecast fewer trips Although the questions in this section were not expli citly about the economic crisis, the answers illustrate the profound effect it has had on corporate travel programs in Asked what they expect to happen to trip numbers and travel spending, the shift in answers from previous years is by far the most dramatic in the history of the AirPlus International Travel Management Study. Yet, as was the case for questions specifically about the economic crisis in the previous section, the downward shift is not as radical as some may have predicted. For the first time ever, the number of respondents who expect trip numbers in the business travel market to fall exceeds those who think it will rise. Among the nine countries which have participated in the study since its inception, 4 percent tip volumes to fall over the next 2 months, compared with 0 percent last time, which was itself a record high. Among all countries in the study, expectations of a decline have shot up from 8 percent to percent....but even more expect no change (or even an increase) Yet all of this means that two-thirds of travel managers do not expect a fall in travel volumes. Among all countries, those expecting no change have risen from How will the number of business trips develop in the future? countries USA United Kingdom Germany Austria France Italy Spain South Africa China Netherlands Switzerland Singapore Australia Mexico Brazil Decrease Stay the same Increase

8 4 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Number of business trips will Business travel spend will Business travel spend will Business travel spend will Decrease Stay the same Increase Decrease Stay the same Increase percent to 40 percent. On top of that are 2 percent of businesses which actually tip travel volumes to climb - although this is well down on the 7 percent expecting an increase last year. Among the study s original nine countries, the previous lowest figure for those forecasting a volume increase was 4 percent. Globalization remains an engine of growth The figures emphasise once again that although traveling less is ranked as the most common response to the economic crisis, it is by no means a universal consequence. As discussed in that section, a very small number of companies are traveling more as a direct result of the recession. In addition, it appears that some businesses are stepping up or, in a much larger number of cases, maintaining travel in spite of the recession. As has emerged clearly in this study since its inception, globalization of business is a powerful force behind the expansion of corporate travel. These figures suggest globalization is a long-term trend which has not been fully negated by the current downturn. It might explain why two of the most rapidly expanded economies of the past decade are the greatest optimists that travel will continue to grow. Thirty-eight percent of Brazilian respondents expect more trips, while in second place is another so-called BRIC (Brazil, Russia, India and China) country, China ( percent). Countries where few travel managers expect a volume increase include France ( percent) and Switzerland (4 percent), the latter perhaps reflecting the major problems experienced by the financial sector in recent months. Air a mixed outlook Asked to forecast volume growth within their own organizations for different aspects of travel, a broadly similar but marginally more optimistic picture emerges. Airlines will be cheered to learn that although the number of companies expecting their air trips to grow is at an all-time low of 26 percent, those expecting their flight numbers to fall are not much higher at percent. Instead, the largest group expect volumes to stay flat (40 percent). Among those countries most convinced they will start flying more are Germany (40 percent) and China ( percent). It is possible some of these respondents feel travel is unlikely to be cut any more than it has been already in their organization and therefore volumes can only move in one direction. However, there is little evidence of this thinking in other countries where few are expecting air growth, including France (6 percent) and Austria (9 percent). Once again, there is some evidence that smaller companies will lead the way in a travel revival, with 26 percent of low spenders and 27 percent of segments Low Don t know / no answer Decrease Stay the same Increase Medium High medium spen ders forecasting air growth, while for large spenders the figure is only 20 percent. Hotels BRIC markets more optimistic No other travel sector has as many travel managers predicting growth as for air, yet in all cases the most popular prediction is a flat market. Regarding hotels, for example, 22 percent are tipping growth (down from percent last time), while 46 percent expect little change and 29 percent say they will use hotels less. There are significant variations market by market. Five of the countries actually have more travel managers forecasting greater use of hotels than less use. These include not only Brazil and China but Germany (2 percent up, 9 percent down), the UK (0 percent up, 27 percent down) and the Netherlands (2 percent up, 22 percent down). Flights Car rental a gloomy forecast Car rental also shows a big change in fortunes from last time, with only percent of respondents expecting to increase their transaction levels. Those anticipating a decrease have risen from 9 percent to 27 percent. Hotels Decrease Stay the same Increase Car rentals Train trips Meetings and conventions Other costs Rail continuing growth in Europe The global rail figure is of limited value because trains are little used by corporate travelers outside Europe. Of the eight countries in Europe featured in the study, around half expect no change in their rail usage, while no fewer than five countries (Germany, Switzerland, the Netherlands, France and Spain) have more travel managers forecasting a growth in use of rail than forecasting a contraction. There could be several factors behind this trend, including rail being in some cases a cheaper option than air, environmental advantages and the continuing improvement of the European high-speed rail network. It is noteworthy that the biggest vote of confidence in rail is in Spain, with percent forecasting an increase and only percent a fall. Domestic travel in Spain was revolutionized in 2008 with the full opening of the high-speed line between its two major cities, Madrid and Barcelona. Meetings hit hardest of all? Looking at the ratio of those predicting decreased use to those predicting increased use, the travel sector which has been hit hardest is meetings & conventions. Only 7 percent think they will hold more meetings,

9 6 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Number of business trips will Do you negotiate with service providers to get special corporate rates? Decrease Stay the same Increase No Yes Flights Hotels Car rentals Train trips Meetings and conventions Flights Hotels Car rentals Train trips Meetings and conventions while nearly twice as many ( percent expect volumes to drop. However, those expecting no change are once again the largest group (47 percent). Last year, it was the other way around, with 9 percent expecting upwards movement and only 8 percent downwards movement. TARP dents volumes in USA One interesting country to note here is the USA, where 4 percent, the second-highest of all markets after Singapore, anticipate their meeting volumes will drop. This reflects the double-hit the meetings industry in the USA has been taking in recent months after some well-documented stories about recipients of the Troubled Asset Relief Program (TARP) financial aid staging lavish events for their employees. Not only did this lead to federal authorities issuing strict restrictions on meetings for TARP recipients, it has also made companies which have not received state handouts reluctant to spend on meetings for fear of media exposure and adverse shareholder reaction. Spending forecast follows similar pattern to trip volumes Generally speaking, forecasts for how much organizations will spend on travel are similar to their predictions for growth in travel transactions. Those expecting to spend more on travel overall have slumped from 8 percent to 2 percent (though yet again this figure is higher than might have been thought), while those expecting to spend less have grown from 0 percent last time to percent. No change is expected by 9 percent of respondents. Among the nine countries which have participated in all five editions of the AirPlus International Travel Management Study, the 2 percent forecasting lower spending is by far the highest level ever recorded. It is also the first time the proportion of travel managers expecting to spend less has risen. High spenders lead the cost-cutting A breakdown of figures by size of travel spending is also revealing. Whereas 0 percent of smaller spenders and 2 percent of medium spenders believe they will spend less on travel, the figure for high spenders is much bigger at 46 percent. Last year, it was the opposite: larger spenders were noticeably more convinced than smaller spenders that their travel expenditure would rise. Whether the reversal has happened because higher spenders have, by definition, a greater need to spend less, or because they have more resources and manpower to control and reduce spend, is a matter of debate. The answer may be both. There has been evidence in both Europe and the USA that bookings through multinational travel management companies (TMCs), which tend to handle larger spenders, have fallen more sharply than through smaller, domestic TMCs, which generally handle smaller clients. Why don t more companies expect to cut travel spending? Two factors are likely to make companies spend less on travel in the present economic crisis. One is a fall in number of trips. The other is a fall in the cost per trip, thanks to dramatic reductions in pricing by airlines, hotels and other travel suppliers. Bearing this in mind, one might think that large numbers of companies would be optimistic of reducing their travel spending even if they do not anticipate a reduction in volume of travel. The study findings do not support this assumption. Looking at air expenditure, for example, it is true that 2 percent expect to spend less, up from 8 percent last time, but this figure is almost identical to the percent expecting their volumes to fall. Conversely, there are some markets where expectations of price rises exceed expectations of volume rises. For example, only 4 percent of travel managers in the USA believe their company will take more flights, but 2 percent think their air budget will rise. Whether these fears are justified is a debatable point. American companies have been disproportionately affected to some extent by back-door fare increases through the imposition of ancillary charges such as baggage fees. On the other hand, since the first AirPlus International Travel Management Study, the USA has proven consistently more fearful than other countries of price increases, in boom times as well as in recession. Air reversing a four-year trend Many travel managers are clearly confident they will spend less on air travel. Among the nine countries in the study since inception, percent believe their costs will fall, reversing four years of declining belief in their ability to cut spending. Hotels becoming cheaper for many Hotel spending is also set to fall, with 2 percent expecting their hotel budget to increase, against 4 percent last time. Among the study s nine original participants, the proportion expecting to spend less has shot up from 7 percent to 28 percent, while those expecting to spend more have fallen from 0 percent to 2 percent. As with air, the USA shows concern through more respondents forecasting rising hotel costs (27 percent) than rising hotel volumes (20 percent). China is a similar story. It features across all sectors as one of the biggest believers of a rise in both costs and transactions, with the former usually going up more than the latter. For hotels, for example, 26 percent think volume will rise and percent believe price will rise. Car rental rising hopes for savings Air and hotel, the big-ticket items in most travel budgets, are proving to be the major concerns in tough times as well as in years of good GDP growth. A much smaller

10 8 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Negotiated agreements come back into fashion. Do you negotiate with airlines to get special corporate rates? Do you negotiate with airlines to get special corporate rates? 42 9 No Yes No Yes segments Low Medium High proportion (6 percent) are expecting increases in car rental costs, down from 0 percent last year. Conversely, 2 percent think they will save money, up from percent last time. Rail spending heading up, not down Looking only at Europe, rail is a major exception to the trend in other sectors, with more travel managers in seven markets (the exception being Austria) expecting their rail bills to rise rather than to fall. For example, percent of French travel managers expect to pay more and 2 percent less, while 22 percent of German travel managers expect to pay more and percent less. Meetings more chances to reduce costs As was the case for volume, meetings & conventions is the area of travel spend where the largest number expect to cut costs (2 percent, up from 0 percent) relative to those expecting an increase (7 percent, down from percent). Since these figures are broadly in line with volume forecasts, it suggests spending cuts will be achieved mainly through reducing numbers of meetings rather than cost per meeting. However, if volumes continue to fall, this will be an excellent time to drive through negotiated corporate deals with meetings suppliers. Negotiated agreements come back into fashion The last AirPlus International Travel Management Study, written just as the travel industry was noticing the first signs of recession, predicted that tougher economic times would lead to suppliers signing more corporate agreements. That forecast has come true, according to the study figures, with a growing proportion of travel managers confirming they have deals for air, hotel and car rental. Hotel deals lead the way One distinct trend is that the gap between the number of travel managers with hotel deals and the number with air deals has widened. Last time, 6 percent of respondents had hotel agreements and percent had air agreements a difference of 2 percent. This time, 74 percent have hotel agreements and 6 percent have air agreements a gap of 8 percent. Also of note is that for the first time more companies say they have car rental deals (7 percent) than air deals. Hotels are showing renewed interest in winning corporate business following a dip in the previous AirPlus International Travel Management Study. Polled near the peak of the demand cycle for accommodation, the previous study revealed a fall in corporate agreements as some hotels concluded they could push up revenues by limiting lower-yielding bookings from business customers. Influence of the low-cost carriers? Examples of countries with what may at first seem a surprisingly low proportion of air deals are the UK (4 percent) and Germany (40 percent). One explanation may be the success of low-cost carriers in these markets. Since few corporate travelers fly in business class on short-haul routes any longer, and budget airlines do not offer negotiated agreements, the need for deals is reduced. Higher spenders sign more contracts However, the most critical factor governing the likelihood of having an air deal continues to be size of travel spending. Only 4 percent of low travel spenders have an airline agreement, but this figure rises to 8 percent for medium spenders and then shoots up even more steeply to 86 percent for high spenders. In part, this reflects the superior negotiating power of the larger companies, but, as will be explored in the next section, it also correlates closely with many more large spenders having travel policies. Although more companies have deals with hotels than any other travel suppliers, there is considerable geographical variation here too. No fewer than 87 percent of American travel managers say they have a hotel deal but the figure drops all the way down to 6 percent in France. Variation according to size of spending is not as pronounced as for air, with 7 percent of low spenders, 74 percent of medium spenders and 84 percent of high spenders all having negotiated agreements. This is probably because there is generally more competition in any one market among hotels than among airlines and also because even fairly small companies are likely to have sufficient buying power in one or two locations, such as where their headquarters are based. except for meetings One area of travel spending where the number of corporate deals has declined is meetings and con ventions, down fractionally from 8 percent to 7 percent. This could be a warning that the trend of recent years for some companies to manage their meetings spending strategically is running out of steam. With resources tight in so many companies, it could be that allocating a member of staff to tackle meetings spend and hammer out deals with meetings suppliers has become harder.

11 20 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY Travel policy More than half of the respondents expect their policy to become tougher. Does your company have a specific travel policy that is available to all employees? How do you think your company s travel policy will develop in the future? Summary There has been a surge, presumably driven by the economic crisis, in organizations introducing policy for all aspects of travel, up from 7 percent to 70 percent. High spenders are more likely to have a universal policy (89 percent) than medium spenders (7 percent) and particularly low spenders (7 percent). For the first time, more than half of respondents (8 percent) expect their policy to become tougher. Implementation shoots up The study results suggest that the economic crisis has persuaded companies to become much more serious about travel policies. The number of respondents whose organizations have introduced policy for all aspects of travel has shot up from 7 percent to 70 percent. Some of this gain is accounted for by companies introducing a policy for the first time. In other cases, it reflects a more widespread use of policy because the number of respondents saying they have a policy for some but not all aspects of travel has fallen from 4 percent to 8 percent. The countries where employees are most likely to have to conform to a policy (either for all or some aspects of travel are Australia and Switzerland (both 89 percent), while a more laissez faire attitude prevails in Italy (8 percent) and Spain (9 percent). High spenders lead the way One of the strongest determinants of whether an organization has a travel policy is the size of its travel spending. While only 7 percent of low-spending companies have a policy for all aspects of travel, this figure jumps to 7 percent for medium spenders and 89 percent for high spenders. Conversely, only 6 percent of high spenders have no policy (although it is perhaps surprising that any large spending companies at all lack a policy), rising to 6 percent of medium spenders and 4 percent of low spenders. Clearly, the more a business spends on travel, the more necessary it is to have a policy to control that spending, and it could be that some smaller organizations, where most personnel know each other, are more likely to trust their travelers to do the right thing. However, when one compares the strong correlation between level of spending, existence of policy and existence of negotiated agreements, it appears that having a policy provides tangible benefits, including the ability to persuade suppliers that travelers can be steered towards them through a negotiated agreement. Implementation backed up by monitoring There is a danger of organizations introducing polices but failing to follow up through monitoring compliance, but this pitfall is rarely fallen into, according to the study responses. It shows that 9 percent of businesses with a policy do check compliance. Once again, evidence that policy is followed through in this way is important for securing the best possible deals with preferred suppliers. Policy set to become even tougher After consistent responses for the past three editions of the study, the number of travel managers who expect their policy to become tougher over the next 2 months has shot up, rising above the 0 percent mark for the first time. Fully 8 percent expect to tighten policy and only percent think it will become easier, while 8 predict no change. It is another indication that the economic crisis is leading to more efforts to control and manage travel spending No Yes, but not for all areas Yes, for all areas Does your company have a specific travel policy that is available to all employees? segments Low Medium High 6 89 No Yes, but not for all areas Yes, for all areas no change They will be easier They will be tougher

12 2 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY Travel management programs and processes Cost-cutting remains the number one priority. Summary Reducing travel costs is the top priority for a travel manager, something that remains constant in both good and bad economic times. Almost two-thirds of organizations have centralized travel programs. Although 82 percent of respondents analyze their travel spend and 4 percent use special tools for the purpose, their appreciation of the benefits of these tools is falling. Introduction of compensation payments for travel-related carbon emissions has flattened, but 68 percent think climate protection will become more important in travel programs. Cost-cutting remains the number one priority It will come as no surprise to learn that, when asked to rank five travel management tasks in order of priority, cutting travel costs is considered the most important job in all countries covered in the study. Respondents give their top priority a score of, their second priority a score of 2, and so on. Using this simple system, cutting travel costs achieves an average score of.8, far ahead of the second-ranked priority - supporting travelers - at.2. However, while one might expect reducing travel costs to rank highest at a time when corporations are cutting costs in all areas, this is not a new priority. Controlling expense has consistently been the number one priority in nearly every country in all five editions of the AirPlus International Travel Management Study. Last time, its average ranking was also.8. There is some variation by market. The UK s average score for cutting costs is., meaning only a handful of British businesses see any other task as a top priority. At the other end of the scale, China ranks it at 2.4, only a little ahead of its second priority optimizing internal process on 2.8 percent. This suggests Chinese companies are still battling to establish a managed travel program on numerous fronts. Gaining control through centralization Most organizations are attempting to consolidate their travel programs, with 6 percent saying they manage travel centrally and 6 percent locally. These figures are similar to last time. High-spending companies are considerably more likely to centralize (7 percent). that looks set for growth The trend for centralization looks likely to intensify, with 7 percent agreeing travel will increasingly be controlled at company level or globally, and a further 2 percent somewhat agreeing. This is the overwhelming view in all countries, with Germany being the least enthusiastic a relatively low 69 percent. The figures suggest centralization is coming back into favor, perhaps encouraged by the economic crisis and the need to ensure supplier agreements and other money-saving initiatives are being optimized throughout the organization. Last time, a forecast of more centralization dipped from 66 percent to 6 percent in the nine countries which have participated in the study since inception. This year, it is back up to 70 percent. Once again, the belief that centralization will intensify is most marked among high spenders (8 percent, compared with 74 percent for medium spenders and 68 percent for low spenders). Businesses analyze their expenses The growing seriousness of companies in regards to actively managing their travel programs also emerges in a question about whether they analyze their business travel spending. This time, 82 percent

13 24 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Most companies analyze their business travel spending but the use of special tools is still relatively low. Do you use special analytical tools or software to evaluate your business travel costs? Do you use special analytical tools or software to evaluate your business travel costs? 4 48 No Yes No Yes have answered yes, up from 78 percent last time. Here too, as might be expected, levels of analysis are greatest among high spenders (9 percent). Use of special analytical tools on the rise In spite of these large numbers, the use of special tools to analyze travel data is still relatively low, although the proportion which say they have such tools has jumped from percent last time to 4 percent. Usage by higher spenders is significantly greater at 6 percent, compared with just 6 percent for small spenders....but appreciation of their benefits is declining However, although this rise might encourage providers of travel data analysis tools, it is clear they still have some work to do to communicate the value of the technology they provide. Asked whether they agree or disagree with seven possible benefits of using tools, the proportion of travel managers who agree has slipped in all cases. For example, only 7 agree or somewhat agree that data analysis tools identify compliance with travel policy, down from 6 percent last time. Support for the seven benefits is fairly consistent, but the one which draws the highest combined level of agreement and partial agreement is that tools optimize cost transparency (62 percent). In all cases, belief in the value of tools is greater among higher spenders. For example, 66 percent of high spenders agree or somewhat agree that tools help control quotas negotiated with preferred suppliers, compared with 6 percent for both medium and low spenders. Is enthusiasm for offsetting carbon emissions stalling? The study provides mixed news about the influence of environmental considerations on corporate travel programs. The percentage of companies which make CO2 emission compensation payments for their travel has risen from percent to 9 percent. However, the percentage intending to install such a system in the next 2 months has slipped from 7 percent to 4 percent. These figures are too insignificant to state with confidence that the move to offset emissions is running out of steam, but there is no evidence of it gathering momentum either. Offsetting is most popular in Mexico (8 percent) and Spain (26 percent) and lowest in Germany (7 percent) and Austria (9 percent). Last time, the USA was the least interested country but that has now changed (2 percent). Bigger companies are also clearly more committed, with 26 percent saying they pay compensation for emissions and another 9 percent intending to do so, compared with 6 percent of low spenders already taking this approach and another percent proposing to do so. Larger companies are more likely to have corporate social responsibility programs in place and also tend receive greater ethical attention from investors, non-governmental organizations and other pressure groups. Better news for environmentalists However, it is worth remembering that environmentalists consider offsetting travel-related emissions far less important than reducing travel, which creates fewer emissions in the first place. In that respect, they will be encouraged by the data in Sections and 2 confirming trip volumes are down and, in many cases, likely to fall further How important are the following five areas of travel management in your company? Reducing travel costs Introduction of travel policy guidelines Supporting traveler as well as possible Optimization of the internal processes Reporting on costs for the management countries USA United Kingdom Germany Austria = most important / first mentioned area of travel management, = least important / last mentioned area of travel management 4 segments France Low Italy Spain Medium South Africa China High 6 Netherlands Switzerland Singapore Australia Mexico Brazil

14 26 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Budgets will be increasingly controlled on company level or globally Do not agree Somewhat agree Agree segments Low Medium High Green campaigners will also be encouraged that 48 percent of respondents agree and 20 percent somewhat agree companies will increasingly take climate protection into account in their travel programs. Only 24 percent disagree. These figures are similar to last year. The largest dissenters are Germany, where 42 percent disagree with the proposition, and Austria (8 percent). Travel managers set to take over meetings management Section 2 provided limited evidence that meetings programs have not made much headway during the economic crisis, but help may be at hand through travel managers taking over meetings and event management tasks. Almost exactly half of respondents (49 percent) agree and another 9 percent somewhat agree that this will happen. Among those in the eight European countries and the US which have been featured in the study since inception, the proportion who agree or somewhat agree has risen from 9 percent last time to 67 percent this time.

15 28 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY Status of travel managers and travel management Travel mangers want more flexibility. 29 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 The amount of business travel in a company an important indicator for travel management efficiency Average number of supervised employees of a travel manager Self-evaluated level of professionalism (Scale from lowest 0 to optimal0) Summary Travel managers generally self-evaluate their professionalism as average. Those at smaller-spending companies are responsible for managing the travel of only employees, a figure rising to 0 employees for medium spenders and for high spenders. Significant minorities of travel managers continue to be frustrated by lack of time for their job, lack of rights and lack of attention from the rest of the organization, yet 82 percent say travel management is valued within their organization. Finance and procurement are overwhelmingly expected to become more influential departments in the travel management process. Business travel professionalism is rated average A new question in this latest edition of the AirPlus International Travel Management Study asks travel managers to evaluate the level of business travel professionalism in their own organization. Answers are graded into four categories of professionalism: minor, average, superior and uppermost. Perhaps unsurprisingly, self-evaluations of professionalism improve in proportion to size of travel spending, although one consistent theme is that the largest category of professionalism for all three spending levels is average (low spenders 2 percent; medium spenders 4 percent; and high spenders percent). However, although 24 percent of low spenders identify travel professionalism in their organization as minor, this figure falls quickly to 4 percent of medium spenders and 8 percent of high spenders. Bigger spenders rate their professionalism higher At the other end of the scale, only percent of smaller spenders and 7 percent of medium spenders consider their organizations to benefit from uppermost business travel professionalism, but this figure shoots up to 2 percent for high spenders. The apparently superior professionalism of larger spenders has been evident in numerous places in the study, including a much greater likelihood that they will have a corporate travel policy, negotiate supplier deals and use special tools for analyzing spending. This correlation poses something of a chicken-andegg question: are higher spenders more able to control their travel programs because they are more professional, or have they needed to become more professional because they have such a large travel expenditure which needs to be controlled? The answer may well be both. In fact, it is arguably surprising that there is not a greater gap in evaluations, with more high spenders feeling confident enough to proclaim their professionalism and more low spenders admitting to only minor professionalism if their spend is small enough only to command minimal attention. Travel managers want more flexibility Regardless of size of spending, all respondents appear to have a good grasp of where the limitations lie within their organizations. This emerges in another new question, asking which aspect is missing most or needs more expansion to make travel management better. The most common answer by far is flexibility in selection, in other words having the ability to choose the best price on the day. This answer is chosen by 24 percent of respondents. The second most frequently selected option is having better policy management ( percent) and the third is having more time for travel management (0 percent, a theme which recurs later in this section). As usual, answers are not consistent by market. In France, for example, the biggest complaint is lack of professional analysis tools, while in Mexico it is lack of employee co-operation. 0 Low Medium High Is there enough senior management support? There is also yet another split in responses according to size of spending. Flexibility in selection is a much bigger concern for lower and medium spenders than for high spenders. Conversely, 6 percent of high spenders are troubled by lack of support from executives, yet this is the top concern for only 4 percent of low spenders and 6 percent of medium spenders. This may be because corporate hierarchies in larger organizations are much steeper, making it difficult for travel mangers to enjoy a direct relationship with the senior management they need to endorse and lead their programs. Roles vary according to level of spend Another important insight into the role of travel managers is provided by a question asking respondents how many employees they are responsible for through their travel management duties. The average answer is exactly 00, but this too masks massive variations according to size of spending. Travel managers at low-spending companies are responsible for only employees, a figure which rockets to 0 employees for medium spenders and employees for high spenders. ø 6.9 Low Medium High Levels of business travel professionalism in the company Upper most professionalism Superior professionalism Average professionalism Minor professionalism These answers hint at some very different inter pretations of what travel management means. In smaller companies, it perhaps a more operational role, handling the bookings of a relatively small group of travelers as one of a number of administrative functions within the organization (the answers below on time spent on travel management support this impression). For higher spenders, employees is far too high a number to handle their bookings personally, and in any case that is not the function of managers of large travel budgets. Instead, their work is far more strategic: setting and managing policy, negotiating with preferred suppliers, controlling environmental aspects of the travel program and so on. This profile has emerged clearly and consistently throughout the study. Travel managers lack time to do their work A significant minority of travel managers (7 percent) believe they lack sufficient time to perform their travel management tasks owing to their other work responsibilities. Analyzed by market, responses range from percent in Spain agreeing with this statement to 2 percent in Australia and South Africa.

16 0 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Number of employees for which the travel managers are responsible. Leaders and followers in professionalism: US and Western European companies handle larger numbers of travelers and more often meet an appropriate balance between cost and optimal support. Bars: Average number of supervised employees within company Line: Percentage of companies with balance between cost and optimal support Which of the following aspects is missing the most, or, which aspects should be expanded much more in your opinion so that your work in the travel management area can be designed more efficiently? especially those working for smaller spenders In light of the clear distinctions regarding number of employees per travel manager, it is interesting to note that respondents from large-spending companies are not more troubled by time pressures, in spite of being responsible for many more employees. The proportion saying they lack sufficient time is percent, the same as medium spenders and six percent fewer than low spenders. This adds substance to the profile of travel managers at larger spenders as they are more involved in strategic management rather than handling the day-to-day travel requirement of employees as one of numerous administrative tasks. Less than one-quarter of working week spent on travel It is an impression which is confirmed when respondents are asked what proportion of their working week they dedicate to travel. Only percent of travel managers at smaller companies spend more than three-quarters of their time on travel, a figure that rises to 9 percent for medium spenders and a much more substantial 29 percent for high spenders. Looked at another way, 74 percent 2 99 USA Southern Europe South Afrika Asia-Pacific Latin America Western Europe of low spenders spend one-quarter of their time or less on managing travel, while the equivalent figures for medium and high spenders are percent and 4 percent respectively. Across the entire study, exactly three in five say they spend less than 2 percent of their time on travel. It emphasises the point that while all respondents in the study are automatically defined as travel managers, this is not necessarily the main focus of their work or a task for which they have had any vocational training. Another 2 percent spend quarter to half their time on travel, while 9 percent spend half to three-quarters of their time on it, and another 9 percent more than three-quarters. There is little change from last year. While the amount of time devoted by low spenders to travel is therefore very small, what is perhaps even more surprising is how little time even higher spenders devote to what is by definition a heavy expense for their organizations. Travel is the secondlargest controllable expense for most businesses, yet only around three in ten of the high spenders have someone dedicating more than three-quarters of their time to it, while four in ten only have someone Answers in percent Flexibility in selection of hotels & flights Traveling guidelines More time for travel management Cooperation of employees Professional analysis tools Support by the executives Exchange of experiences Special knowledge Negotiation competence Basic agreements Corporate payment solutions Other Don t know / no answer dedicating less than one quarter of their time to it. How much more could they gain if they invested more resources? Obligations without rights Other frustrations continue to emerge among travel managers in the AirPlus International Travel Management Study. A substantial minority ( percent) agree they have a lot of obligations but not many rights. Surprisingly, this time it is larger spenders in particular who have this grievance - 4 percent, compared with 2 percent for low spenders and percent for medium spenders. The reason this is surprising is that the larger travel managers are unhappy with this point in spite of the fact that, as has been evident throughout the study, they are achieving more than travel managers of smaller spenders. Perhaps the explanation is that larger spenders naturally feel they should be achieving more and are therefore setting the bar higher. It is also worth remembering the observation that travel managers at high spenders are expressing considerably more dissatisfaction about lack of support from senior management. The question about obligations and rights could reveal that travel managers are having many demands made of them by senior management but are not seeing this being reciprocated with the senior buy-in and example-leading behavior which would make their jobs much easier. Countries where travel managers feel most aggrieved on this point include Singapore, South Africa and France (all between 4 and 0 percent), while those with little complaint include Italy, the Netherlands and Austria (all between 2 and 2 percent). Seeking more attention An even bigger area of concern is that 46 percent of all respondents consider a lack of attention and arbitrary procedures are making their job more difficult. Once more, it is the larger spenders who are particularly unhappy ( percent). This could be further evidence that they are being given a general target of reducing travel costs but are not winning enough attention from management when they need support for challenging decisions. On a happier note, the number agreeing they have this problem is down from 2 percent last year. This might indicate, as has been substantiated in other research carried out by AirPlus International in conjunction with the Association of Corporate Travel Executives, that travel managers are gaining more management attention as a result of the economic crisis.

17 2 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY percent of travel managers find it hard to get the cost-versus-care balance right. Statements concerning travel manager s activities Total 00 % What are the future changes in travel management? Total 00 % I do not have enough time for travel management due to my other responsibilities. The travel management services are valued within the company No Yes The role of procurement will increase. The role of finance will increase Do not agree Somewhat agree Agree I have a lot of obligations but not many rights in travel management 6 4 Travel management will increasingly take over meeting and event management tasks as well the optimization of business travel is also one of my responsibilities. 8 2 Travel budgets will increasingly be controlled on company level or globally The monitoring of staff billing for business travel is very important Requests* will become more important and a strategic control instrument A lack of attention and arbitrary procedures make my job more difficult Climate protection aspects are increasingly taken into account The balancing act between optimal support for those travelling and strict cost management is becoming more and more of a challenge Before a trip cost optimization is increasingly done to determine the best rates *Requests for Proposals Getting the cost-versus-care balance right One final difficulty of note is that no fewer than 69 percent of travel managers believe balancing support for travelers with the task of controlling costs is becoming harder. In some countries, this problem is exceptionally acute, including Brazil (94 percent) and Italy (8 percent). It is yet another issue where high spenders (79 percent) are feeling the heat more than low spenders (64 percent), perhaps because the pressure on them to cut costs is more intense. In spite of everything, travel management is valued Yet in spite of all these difficulties, indeed almost paradoxically, respondents give an overwhelmingly positive answer when asked whether travel management services are valued within their company. An overwhelming 82 percent say the services are valued. but is senior management delivering? Why then are a substantial number of travel managers happy on this general point but dissatisfied about more specific points such as time, rights and lack of management attention? The impression conveyed is that organizations have an abstract appreciation of the principle of controlling spending and looking after travelers through a managed travel program. At the same time, however, they do not back this up in a tangible way. In particular, inadequate allocation of the time of both senior management and dedicated travel management personnel appears to be a barrier to success. Finance and procurement to strengthen their influence If this is a problem which needs to be rectified, then one path to a solution could be that travel managers will develop more powerful allies within their organization. Most respondents believe both procurement departments and finance departments will play a more significant role in travel in future. For procurement, percent agree it will play a bigger role and a further 7 percent somewhat agree, with only 20 percent disagreeing. The belief is particularly high among larger spenders. The figures are even more positive for finance, with 69 percent agreeing and percent somewhat agreeing it will become even more influential. The growing influence of financial risk management The role of procurement in travel procurement is an obvious one, with professional purchasers increasingly assuming responsibility for negotiating and contracting with travel suppliers, for example. The role of finance is perhaps less obvious, but it has become much more pronounced during the current economic crisis. For example, AirPlus International has observed finance departments participating more directly in negotiations to choose a corporate payment solutions provider. Broadly speaking, the phrase which explains this growing involvement is financial risk management. In the above example, for instance, finance directors are becoming interested in how their relationship with their payment provider affects their cash flow. Another example from the USA is the controversy over alleged misspending by TARP recipients on lavish corporate meetings. It has made finance directors more interested in establishing clear audit trails for their travel expenditure to verify they are spending responsibly in this area. Indeed, the proportion of US travel managers who expect finance to play an increasing role has shot up from 76 percent last time to 90 percent this time.

18 AIRPLUS INTERNATIONAL TRAVEL MANAGEMENT STUDY 2009 Conclusion This is the fifth AirPlus International Travel Management Study. The answers given by the,00 respondents worldwide are very different from those which appear in its four predecessors. For the first time since the study began, for example, more travel managers believe their organization s spending on travel is set to fall than those who think it will rise. It is clear that the global economic crisis, which started in property and finance, has now engulfed corporate travel too. Against this noisy background, two questions come to mind: how has the crisis changed travel management, and has it transformed travel management permanently? Before those questions can be answered, it is important to gain some perspective. Yes, there is far less travel than at any time since the study was launched, but by no means has travel ceased all together. Only one-third of companies expect to reduce their travel spending any further. A greater number say they will spend the same and one-quarter actually forecast they are going to spend more. On reflection, this relative optimism is not so surprising. Many businesses may assume things can only get better and therefore their travel will not decline any more than it has already done. It may also reflect the fact that this study covers different markets, not all of which are suffering as much as each other. More fundamentally, however, these answers reveal the remarkable resilience of corporate travel, even in the thick of the worst economic crisis in 80 years. It underlines that globalization is a seemingly unstoppable force which will continue to drive a need to put employees on the road in search of fresh customers and supply sources. If the cost of travel is not going to fall much more than it has done, then the need to manage it effectively becomes more important than ever. That is especially the case in times of economic hardship, when the investment of every cent, penny or jiao must be ruthlessly analyzed and justified. There is evidence in several places in the study that this is starting to happen. One example is a big jump in the number of organizations with a policy for all aspects of travel management from 7 percent to 70 percent. Furthermore, the proportion who expects their policy to get tougher has jumped above 0 percent for the first time to 8 percent. The study also shows evidence of negotiated corporate agreements making a comeback after a couple of years of drift. This suggests not only that the weak market is making suppliers more eager to sign deals but also that tougher control of travelers through policy is putting buyers in a better position to negotiate. Other examples of increasingly active travel management include greater use of special tools to analyze spend and more intervention not only by procurement departments but (for reasons of both cost control and risk management) finance departments. However, the study also offers substantial evidence of opportunities not being taken. This applies particularly to smaller spenders on travel, almost half of which still do not have a policy for all aspects of their travel program. Another problem is management support. A white paper published by AirPlus International earlier this year in co-operation with the Association of Corporate Travel Executives revealed that the