Supplier deals
NEGOTIATIONS
Following the worldwide credit crunch, TMCs could be forgiven for thinking it would be a buyer's market, says Bob Papworth. Only it wasn't quite that simple...
AS WE APPROACH the fifth anniversary of the start of the global economic meltdown in 2008, corporate travel managers’ palms should have been positively leathery after half a decade spent rubbing their hands with glee. The slump in the developed world’s fiscal fortunes saw dramatic cuts in corporate business trips, followed by the stark realisation that lower travel volumes generally lead directly to lower turnover and lower profits.
So while the end-of-the-world recessionistas persisted with their dirges of doom-mongering and despair, travel volumes began to creep up again, and corporate travel buyers were busily enumerating their reasons to be cheerful. With suppliers desperate to fill
their planes, trains and automobiles (and hotel rooms), prices would inevitably come a-tumbling down, they argued. Hurrah! At least, that was the theory. In fact, far from resembling a blacksmith’s apron, those aforementioned palms remain – to borrow from a 1960s pipe tobacco slogan – as smooth as a baby’s bottom. The gleeful hand- rubbing scenario never really got off the ground...
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EARLY WARNING At least part of the reason for suppliers’ resilience stems from the fact that the corporate travel world pre-empted the economic crisis by several months. Long before Lehmann Brothers and Bear Stearns went
belly-up, the Association of Corporate Travel Executives (ACTE) was warning of a business travel slump. The International Air Transport Association (IATA) was projecting massive airline industry losses. British Airways’ then head of sales, Drew Crawley, was telling the Guild of Travel Management Companies’ (GTMC) Istanbul conference that “partnership” was the way forward, because costs – and, therefore, prices – could not be trimmed any further. The corporate travel industry was in crisis long before the world economy latched on to the idea. IATA figures show that while average international air fares went into freefall in the year from mid-2008, they then started to climb back.
While suppliers’ prices have returned to near-normal, the negotiating process certainly hasn’t
By the autumn of 2011, they had regained all their lost ground and were back above the US$500 mark. Fares have remained there or thereabout ever since. And passenger load factors, which dipped below 74 per cent in mid-2009, have recovered to around 79 per cent – higher than their pre-recession peak. Accurate hotel data is harder to come by because of the vast range
may provide a useful snapshot. In 2008, the number-crunching specialist revised its three-year forecasts, predicting successive small increases – no decreases at all – to a year-end 2010 figure of US$110.80. Earlier this year, the
American average daily rate stood at US$110.94. The growth may be painstakingly slow, but it is growth of sorts.
of product available, and because of huge variations within regions and even within individual countries. However, STR Global’s data for average daily rates in North American hotels
TOUGH
MAY/JUNE 2013
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