Welcome FOR COMPANY TRAVEL & MEETINGS BUYERS ISSUE 61 MARCH/APRIL 2013 Flying sharp end AT THE
Who’s still turning left?
Editor’s letter
High performance How KPIs can optimise your business
BBT MAR APR 13
V3.indd 1
Lounge suits Airport ancillaries come of age
City limits
The changing demands of Square Mile travel
21/02/2013 13:11 ISSUE 61
Editor Paul Revel Digital Editor Rob Gill Executive Editor Bob Papworth Managing Editor Mike Toynbee Art Director Annie Harris Designer Javier Otero Sub Editor Richard Rees Contributors Caroline Allen, Alex Blyth, Scott Carey, Mark Caswell, Catherine Chetwynd, David Churchill, Amon Cohen, Felicity Cousins, Martin Cowen, Nick Easen, Mark Frary, Jonathan Hart, William Maxwell, Gareth Morgan, Gary Noakes, Julie Oliver, Jessica Puckett, Dave Richardson, Ian Skuse, Jenny Southan, Diane Steed, Paul Wait Publisher Chris Mihalop Marketing and circulation Kirsty Clark Production Manager Jamie Halling Editorial tel number +44 (0)20 7821 2715 Editorial fax number +44 (0)20 7821 2701 Email address
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sales@buyingbusinesstravel.com Email
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Buying Business Travel is published by Panacea Publishing International Ltd, 5th Floor, Warwick House 25-27 Buckingham Palace Road London SW1W 0PP United Kingdom Tel +44 (0)20 7821 2700 Fax +44 (0)20 7821 2701 Managing Director Julian Gregory Editorial Director Tom Otley
© 2013 Panacea Publishing International Ltd. The magazine is entirely independent of all commercial interests within the travel industry. Unsolicited manuscripts will not be accepted for publication. The opinions expressed by contributors are not necessarily those of the publishers who cannot accept responsibility for any errors or omissions. ISSN 2041-4242
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EMPOWERMENT TO THE PEOPLE
FIRST, CONGRATULATIONS to the deserving winners and finalists at the Business Travel Awards 2013. The Great Room at the Grosvenor House hotel rocked with music, lights and celebrations to create a fantastic evening on a snowy January night. Read all about it on p32, and check out all the photos at
www.buyingbusinesstravel.com I’m writing this as I’m heading on the Eurostar to Brussels, to moderate a day conference hosted by ACTE and the Belgian Association of Corporate Travel Management (BATM). Opening the agenda is the challenging issue of traveller empowerment, followed by the evolving role of travel managers. These topics grew notably last year and I expect they’ll be topping the bills at the major travel conferences this year (see Diary, p126). One of the defining characteristics of the travel buyer’s evolving role is getting a grip on the seemingly limitless potential of
City travel CITY THE
The profligate ways of the Square Mile have been put under the microscope of late, says Nick Easen – but has it embraced austerity, or is it business as usual?
City travel Why does
data – and in this issue we look at how you can maximise the benefits of your KPIs (p56). New for this issue is Mystery Buyer (p50), a regular slot which comes from our online travel buyers’ forum. She (or he) is asking Ryanair boss Michael O’Leary if they can ever come to a mutually profitable agreement. If you want to join the conversation, go to
www.buyingbusinesstravel.com/forum and get typing. If flatbeds and foie
nobody admit to flying up front?
gras are more your thing, as well as putting the City high-flyers under the microscope (p52), our cover story looks at the conundrum of why nobody admits to flying
up front, but airlines are investing in premium cabins – and filling them (p60). Meanwhile, buyers seeking traveller productivity and happiness for less outlay are looking at the extras offered by airports (p67). I know which end of the plane I
prefer, but I’d probably play havoc with your compliance KPIs, so best say no more about it...
UNDER SCRUTINY
IT DOESN’T SEEM THAT long ago when splashing out on yet another transatlantic ticket at the front of the plane didn’t merit a second thought, but to many involved in business travel it feels like a different era. At its peak, the vast spending power of the banks and financial service firms in the Square Mile supported a major industry of dependent travel businesses, from taxi firms to private jet providers. Then came the rough-and-tumble
of the global financial crisis five years ago: City firms slashed costs, and put the brakes on profligate corporate travel and entertainment. “At one point in the downturn, spending virtually switched off in the City,” says Ken McLeod, corporate director at Advantage Travel Centres. After the shakedown, the collapse
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of Fannie Mae and Freddie Mac, then Lehman Brothers and the bailout of British banks, we saw increased regulation, margins squeezed and head-counts slashed. Iron-clad travel policies were then used as straitjackets to rein in the excess. They’re still firmly in place today. “Overall, the sector is clearly now more cost-conscious. There are also significantly less business travellers in this sector due to smaller workforces,” says Simon
Bean, UK general manager at travel management company (TMC) ATPI. And, come 2013, we’re finally in a more realistic era. Travel budgets are under constant scrutiny in the knowledge that our ‘casino’ banking sector and financial services industries are very much in the public eye, from Goldman Sachs to
After the shakedown, we saw increased regulation, margins squeezed and head-counts slashed
Royal Bank of Scotland – with the media pouncing on signs of excess and the bonus culture. “Certain high profile firms
now have to be seen to do the right thing,” explains Anthony Rissbrook, managing director of Hillgate Travel. “With companies working hard to save money, travellers know that it’s best not to feature on the out-of-policy pre- trip report without a good reason.” Perception these days means everything to a City firm’s reputation.
INCREASED COMPLIANCE Many investment banks and finance houses have therefore witnessed a big increase in compliance to travel policies – applied to junior traders and board members alike. “Our clients tell us that they name rule-breakers in internal reports to ensure that they understand the impact their non-compliant activity
can have on the overall budget of the company,” says Anthony Drury, general manager at American Express Business Travel UK. The bigger the financial institution, the more compliance that’s likely to have been put in place. There’s also much stronger buy-in from senior level executives who now endorse specific travel policies. “There’s a real ‘we are all in this together’ mentality at the moment,” explains Bean. “This is extremely positive for buyers and travel management companies.” Many top brass at Square Mile firms are also increasingly leading by example when it comes to travel policies – and it’s their companies that are making the biggest savings. “Compliance has been responsible for an 11 per cent reduction in average room rates across our customer base in the financial sector,” says Capita Business Travel director Steve Banks. One City firm insists all
employees use an online booking tool as a means of reducing the cost of arranging travel – and if anyone makes an offline trip they have to personally answer to the CEO. It’s certainly not the norm, but it is an effective way of ensuring compliance.
FURTHER AFIELD In a more globalised financial world, where investments can be found from the Caspian oil fields of Kazakhstan to Indonesia’s mineral
HOT IN THE CITY: TRENDS IN MANAGED TRAVEL
• Since the global financial crisis, companies have been making compliance a much greater priority – travel policies are increasingly adhered to in the City and finance sectors.
• Traveller-tracking technology is becoming more important, and the high profile of the finance industry means companies are particularly bound to traveller duty-of-care.
• There is continued demand in the sector for full-service provision, with experienced staff on call 24/7, 365 days a year.
• In the larger organisations, there is an increased element of leading by example when it comes to travel policies.
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Saudi Arabia
hinges on the ability of Saudi to get up to speed with corporate travel advances, virtual accounting and cost containment methodologies since the kingdom’s accession to the World Trade Organisation (WTO) in 2005. More recently, a report by market research company Phocuswright ranked Saudi as ‘low’ in readiness for the adoption of globalised travel management. It said although technologically competent, the country was largely lacking in sophisticated management processes
“It’s a market requiring tailored management rather than a one- size-fits-all approach”
Mecca BRIDGING THE GAP 108
IT’S ODDS ON YOU’VE already learned, to your cost or frustration, that fast-emerging business destinations can be slow to adopt the seamless connectivity of uniform corporate demand. Take the BRIC countries (Brazil,
Russia, India and China), for example. To a greater or lesser extent, each has presented business travel planners with online barriers, investment hurdles or cultural idiosyncrasies in the course of migration to automated global programmes. In short, the US-inspired
consolidation model has been adopted in Europe, but does not always immediately gain root elsewhere. The Kingdom of Saudi Arabia is the latest case in point. Controversial politics, social strictures and the knock-on effects of the Arab Spring aside, this is an aspiring global player with ambitions to be a key regional hub. Combined with geographical size and strategic influence, it ticks the boxes for foreign organisations who want to expand into the country – but the UK’s leading travel management companies
SAUDI ARABIA
Given their dramatically different cultures, can West and Middle East find ways to consolidate business practices? Jonathan Hart reports
(TMCs) say that, at the moment, it lacks the maturity, integrated expertise and tools to implement globally mandated travel policies.
HIGH GROWTH MARKET Saudi is designated as a high growth market by UK Trade and Investment (UKTI), which cites the country’s diversification from oil, economic reforms, market liberalisation and a growing private sector as primary ingredients for growth in multiple sectors. Moreover, led by hotels, an airport, transport and education, the fiscally liquid state is spending lavishly on an infrastructural makeover. With UK exports already worth an annual £3 billion, plus an estimated £260 million currently earmarked for capital projects, it is said by UKTI to be offering investment opportunities
at all levels against the backdrop of a depressed Europe. Such enticements, however, are tempered by two drawbacks, according to travel managers and TMCs. Allied to a myriad of visa, security, legal, banking and zonal complexities, the first drawback revolves around the changeable reforms and limitations imposed by a traditionally insular, devoutly Islamic and autocratic monarchy. The second
and generally ill-prepared for the implementation of centralised purchasing, use of company credit cards or uptake of self-booking tools (SBTs). The report pointed to a local travel market that, in common with the rest of the Gulf, requires highly personalised service built on long-established relationships with (locally-based) corporates. At the same time the region remains predominantly a transaction-fee market dominated by point-to-point travel and online travel agency (OTA) sales. These are set to double from £1 billion in 2011 to more than £2 billion in 2014, according to Phocuswright.
CULTURE CLASH The result is that local corporates and their TMCs have been questioning the return on investment for globalised convergence, says BCD sales vice- president Ivan de Lantivy. “They have their own culture, cheap labour and contracting methods to fulfil most of
SAUDI SNAPSHOTS…
• Saudia has increased frequency to daily flights from London Heathrow to Riyadh, in addition to daily to Jeddah in current winter schedules. Major Gulf carriers and British Airways also serve the Kingdom from the UK.
• The country ranks 22nd out of 185 countries for ease of doing business in this year’s World Bank economy rankings. In contrast, it ranks 78th for starting a business.
• Jaguar Land Rover has signed a new agreement to manufacture an aluminium-coated Range Rover at a plant in Saudi.
Saudi Arabia
Jeddah CHANGE OF FACE
THE GLITZY SHOULDER-TO-SHOULDER skyrise properties that have almost overnight altered the ancient face of the Holy City of Mecca speak volumes about unprecedented new hotel development in Saudi. Despite average main city occupancies nationwide hovering around 60 per cent, few new projects are deemed too large for a mooted massive increase in international business traffic and (mostly domestic) tourism. Mecca alone is to get another 1,000-plus rooms
this year for an expected 6-8 per cent growth in (religious) visitors in the next few years, according to consultants TRI Hospitality. Hilton Worldwide is among the major international players investing here. Additional hotel construction close to the holy site of Madinah is expected to benefit from the re-development of Prince Mohammad Bin Abdulaziz International Airport. TRI says additional corporate hotel capacity
already in place in the Red Sea city of Jeddah points to increasing average rooms rates (ARRs) there, and that up to 5,300 new rooms will enter the market this year and next in the capital, Riyadh. Most new hotel construction in Riyadh and the
Gulf coast tri-city area of Dammam, Dhahran and Al Khobar carries an international management flag and is in the four- or five- (or sometimes labelled six- and seven-) star categories. However, adding to the mix are new budget Ibis and mid-category Mercure entries. These could prove beneficial to corporate cost-savings in future, according to Andy Taylor of HRG.
their corporate travel requirements,” he says. “So they question the need to employ additional processes or platforms. It’s a market requiring specifically tailored management rather than a one-size-fits-all approach.” FCM Travel Solutions Middle East managing director Andrew Boxall adds: “Although the travel industry in Saudi is well established, it has not embraced some of the progressive changes the industry has experienced in other global markets. A fear of changing conventional practices, combined with a lack of initiative from the
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