SIMON MCLEAN, managing director of Click Travel, thinks 2013 has the potential to be “a shocker”. He says: “There is still a huge degree of economic uncertainty which is putting pressure on travel budgets, and the European crisis still presents a huge risk to the corporate world.” He adds: “We expect to see a degree of continued cabin downgrading on long-haul flights and carrier-switching across the board among incumbent customers.” Prashanth Kuchibhotla, director of global consulting at American Express, believes the eurozone will be the looming shadow over business travel. “The eurozone is the big issue and has been dragging on for years,” he says. “It is a big trading partner for the UK.”
One of the side-effects of this uncertainty in Europe is in demand for long-haul. “If I am Spanish and planning a holiday, I am not going to go long-haul,” says Kuchibhotla. “As a result, the back of the plane on long- haul flights is, relatively, less full these days. This means that the lower fare classes usually picked up by leisure travellers are now available for the corporate to pick up. We saw this in 2012 and will see it continue in 2013.” In its 2013 Global Business
Travel Forecast, American Express predicts “low single-digit air fare increases in EMEA in 2013” with some countries, such as Spain, seeing declining fares. It also expects “only conservative increases in corporate hotel rates, despite relatively constant hotel room capacity”, while car rental prices will be relatively flat in 2013. Despite the worrying outlook
for some economies, particularly in Europe, some countries are bucking the trend – the so-called BRIC nations in particular: Brazil,
Russia, India and China. Even here, growth is predicted to be less spectacular than previously. Kuchibhotla says: “Brazil is seeing strong growth, and China and Russia are still up there, while eastern Europe is seeing growth and the business class travel demand remains. “Demand is still outstripping
air capacity to those economies. If you look at aircraft orders, most of it is replacement rather than growth capacity,” meaning fares will remain high, he predicts. Adam Knights, group sales director of ATPI, also sees Brazil as a growth market in 2013. “In Brazil, we partner with a top five local agency, Copastur, which operates in Sao Paolo and Rio de Janeiro. Both cities are experiencing massive growth, and our ability to use these local experts to service clients from Europe who are now venturing into that market, gives us a real advantage. The energy business – one of our specialist subjects – in Brazil is growing exponentially.” The TMC also believes that the uncertainty over Heathrow expansion could see a cut in air fares. Knights says: “Ultimately it looks like the UK will lose out to European rival hubs like Amsterdam and Frankfurt. Ironically, we would argue that the lack of capacity from Heathrow could actually reduce travel prices for UK travellers. From a travel buyer’s perspective, while senior business travellers will always choose to travel the direct route [if their policy allows], cheaper travel options from the regions means that they simply won’t have the option, meaning longer journey times at lower cost to fit in with the reducing travel budgets and more stringent policy application.”
Asked whether he expects prices paid by companies for
travel to rise in 2013, HRG group commercial director Stewart Harvey says: “We always do. We are seeing, and continue to expect, smarter inventory and yield management by hotels and airlines. We see fares and rates increase generally by 4-5 per cent but we have seen lower prices on certain days of the week. In Europe, there are not as many lower air fares on Mondays and Fridays, and certainly not before 9am or after 4pm.” “You can also get a better hotel rate when it’s not for a Tuesday, Wednesday or Thursday. To give you an idea, the rate ranges can be 10-12 per cent depending on time that you travel and day of the week for the same product.” Harvey says corporates will increasingly look to see how the booked fare or rate compares with the available fare or rate at the time of booking, and instances where travellers rejected a savings opportunity will be logged. However, the old approach of beating these mavericks with a stick is falling out of favour and being replaced by recognising best practice. “A couple of years ago, the knee- jerk reaction was to create ‘bad boy’ reports. These days, companies are extolling the virtues of good behaviour,” he says.
Preferred deals, particularly those with airline alliances, are also becoming harder to put together, believes Harvey. “Clients have become a lot more cautious as they can predict far less about their business while suppliers are asking for more solid expectations of either volume or market share. When clients are uncertain and cannot predict demand for the year ahead, it is difficult to commit. To do it across an alliance is even more difficult. “Airlines are now having to use a record of past loyalty as a steer for the future.” ■