The impacts of a tepid global economy and plunging oil prices are not playing out equally across Asia’s business cities, with some markets seeing a cutback in corporate travel while others are enjoying faster growth momentum. TTG Asia sizes up the situation

Jakarta
Policies and domestic demand spur confidence  
By Mimi Hudoyo

Increased government spending and strong domestic travel demand in Jakarta are keeping the Indonesian trade sanguine despite signs of declining hotel revenue in 2015 and a sluggish global economy.

The capital’s hotels, which are “predominantly driven by corporate demand”, saw RevPAR fall last year, according to Matt Gebbie, director, Pacific Asia for Horwath HTL.

“In 2015, economy/midscale hotels in Jakarta suffered the greatest falls in RevPAR of around 10 per cent, followed by upper midscale/upscale, down around five per cent. The upper upscale hotels were able to maintain RevPAR at 2014 levels,” he said.

But the trend could change as the recent boost in Jakarta’s upscale and luxury hotels is expected to exert a downward pressure on the same small high-yielding market, Gebbie opined.

John Flood, president and CEO of Archipelago International, noted: “For our (midscale) hotels we’re seeing an increase (in occupancy) – perhaps due to belt tightening by some companies downgrading from (upscale) to (midscale) to save money.”

Amid the slowing global economy, the oil and gas and related industries are the hardest hit. The automotive industry is also declining, while the construction and pharmaceutical sectors remain strong, observed industry players.

Mixed sentiments are seen for the financial sector though. Said Hellen Xu, COO of Panorama Tours Indonesia: “We see some financial institutions that are growing their presence in Indonesia, while some established firms here are cutting their spending.”

Still, there are compelling reasons to believe that Jakarta’s business travel sector will hold its own, especially as the Indonesian economy is performing better than its regional competitors, Flood posited.

He added: “(Archipelago’s) business in 2015 was down in 1H but picked up in 2H; 1Q2016 is about 30 per cent up from the same period of last year.”

Gebbie said: “The local economy and domestic tourism are what drive Jakarta’s mid to upper-upscale hotels and there are some encouraging signs for the Indonesian economy this year.”

Increased government spending and lower interest rates should drive greater investment and consumption, and the government has been pushing forward with infrastructure projects, he explained.

Furthermore, midscale hotels might benefit from government bookings, since the sector is once again allowed to organise events in hotels with some stipulations.

Singapore
Corporations stretch travel dollars more than ever
By Paige Lee Pei Qi

As financial storm clouds gather on the horizon, companies are likely to tighten their travel policies with a stronger focus on cost control but they will continue to travel, according to TMCs interviewed.

Several key industry sectors for premium travel – notably banking & finance, mining and energy – face challenging conditions that weigh down on their travel demand, noted Greg O’Neil, president of Asia Pacific for BCD Travel.

Due to plunging oil prices, the energy sector has suffered heavier travel cutbacks more than other industries, noted Bertrand Saillet, general manager of FCM South-east Asia.

Alvan Aiau, vice president, global sales & program management, Asia-Pacific at Carlson Wagonlit Travel, commented: “We see many of our customers adapting to the continued challenging economic climate. Although many companies are under pressure to reduce costs, they also understand that travel is necessary to facilitate and grow their business.”

Sharing similar sentiments, Saillet opined: “We do not expect a complete travel freeze, (perhaps) a slight drop in (business) travel this year but it will not be too drastic.”

The demand for business travel remains high though and business travellers in Singapore are very much focused on luxury, according to Saillet, with 52 per cent of flights booked on premium classes and 75 per cent of accommodation booked with international hotels.

“Companies are now looking at value-driven travel solutions to maintain the same travel volume but for less,” he added. “The current economic situation presents a good opportunity for companies to now mandate their travel policies to drive more value and greater savings.”

Saillet elaborated: “Instead of travelling less, companies can travel smarter and better on the same budget. By applying simple rules like advanced booking (at least seven days), allowing more restrictive fares, considering LCC for short trips, a company can generate substantial savings.”

O’Neil also suggested: “(Corporates) have many options including changing booking patterns, restricting who can travel, changing the class of travel or hotel tier.”

Manila
FDI inflow bodes well for corporate travel demand
By Rosa Ocampo

Greater foreign investment volumes and improving business infrastructure in Manila are contributing to positive sentiment within its business travel sector.

The Philippines is seeing economic growth and foreign investments in major industries and business enterprises related to infrastructure, energy, hospitality, as well as special economic zones.

“There are lots of opportunities for investors. Business process outsourcing and real estate developments are just two of the many industries that are getting a growing number of foreign investments,” said Fe Abling Yu, general manager of Arfel Travel and Tours.

“Several five-star hotels are opening (in Metro Manila). These hotels will not invest in the Philippines had they known that the business landscape was not improving,” she opined.

“This is the best time to invest in businesses in the Philippines and that’s why business travel is booming,” Christine Urbanozo-Ibarreta, director of sales and marketing, Golden Phoenix Hotel Manila, pointed out.

She said the boom in foreign investments include China-based companies pouring their money into the country where there are already a plethora of Filipino-Chinese-owned businesses and industries.

As well, the attractiveness of Manila to foreign investors is becoming more apparent, with a growing number of investors from South Korea, Japan and China setting up offices and headquarters in Manila even though their operations are elsewhere in the Philippines.

The growing wave of businessmen seeking opportunities in the Philippines has helped to buoy occupancy rates at New World Makati Hotel, according to its director of sales and marketing, Jann Delgado.

Corporate meetings and conferences too have been on the rise since last year, she noted.

But business travellers have to contend with pricey room rates and traffic congestion in Metro Manila.

“Hotel rates are still high compared with other Asian countries despite an increasing inventory of hotel keys in the city”, said Abling Yu.

She added that the Metro Manila’s traffic situation is another complaint among time-strapped business travellers.

Kuala Lumpur
Shrinking travel budgets prompt new tactics
By S Puvaneswary

Feeling the effects of the global economic slowdown, particularly in the oil & gas and banking sectors, Malaysia’s industry players are bracing themselves for a tough year ahead.

Corporate Information Travel’s business development manager, Foo Sze Zhaun, projected outbound travel to be flat, adding that longhaul travel demand has dropped as corporate clients opt for regional destinations instead.

Even incentive travel has been affected as fewer people had met their targets in 2015, resulting in a reduction in the number of qualifiers compared with previous years.

On the other hand, business travel to trade fairs and exhibitions in Europe had picked up slightly for the automotive, publishing and industrial machinery sectors, added Foo.

According to Syed Razif Al-Yahya, group managing director of Sutra Group of Companies, the government sector has reduced travel budgets by more than 50 per cent for both overseas and domestic travel.

“The cost cutting measures taken include sending fewer staff on trips and choosing a lower subclass of airline seats,” he explained.
Many corporate clients have dragged payments in the current challenging climate too, he revealed.

Expecting a 40 per cent fall in revenue from corporate and government bookings, Syed Razif plans to grow the leisure market, which currently comprises 10 per cent of the group’s total business.

Hotels too, are rolling out new strategies to cope with the reduced travel budgets among corporate and government sectors.

Following slower forward bookings this year, Eric Tan, general manager of Pullman Kuala Lumpur Bangsar, shared that the hotel is targeting both leisure and business travellers with ongoing tacticals such as including rooms with breakfast inclusions.

And as hotels compete for business amid an uncertain economy, Dorsett Kuala Lumpur has collaborated with Zuger International to equip guestrooms with smartphones that afford guests free 3G connectivity, local calls and SMSes in the hopes of attracting more business and leisure travellers.

Bangkok
Diversified economy a boon
By Michael Mackey

Business travel to Bangkok is proving resilient despite turbulence in the global economy and uncertainties at home, and players are pointing to Thailand’s diversified economy which continues to bring travellers to the Thai capital.

“Business travel for us continues to grow,” commented Leanne Harwood, InterContinental Hotels Group’s (IHG) vice president, operations, South-east Asia and Korea, adding that this market segment was the first to rebound after last year’s bombing in Bangkok.

“What we are seeing is growth across both SME and MICE segments,” she added.

IHG, which has nine properties in the capital with 2,800 rooms, put the business  travel crowd at 20 per cent of its guests, substantially higher than the Bangkok average of 12 per cent.

Unlike most other cities which often see companies with tightened travel budgets switching to lower-category hotels, pointed out Menard, this approach as not been observed in Bangkok as the Thai capital “still offers good value”.

“Corporate (demand) is slightly up about 15 per cent on the first two months,” said Accor’s Ianic Menard, vice president sales, marketing & distribution, who also observed stronger competition among Bangkok’s hotels for corporate travel business.

Alvan Aiau, vice president, global sales & program management, Asia-Pacific, Carlson Wagonlit Travel, believes Bangkok will remain an important business travel destination.

He said: “We expect to continue to see a strong volume of business travel to Bangkok in 2016, and CWT’s 2016 Global Travel Price Outlook forecasts that hotel rates in Thailand will increase 1.6 per cent this year,” he told TTG Asia in written responses.

Helping matters is Thailand’s economic diversity.

Oil and gas sectors have been hit, but manufacturing, consumer goods and banking were described by Accor’s Menard as “fairly stable”, electronics, chemicals and software sectors “okay”, and car manufacturing exceedingly good.

Thailand will turn out some two million vehicles this year.

Sharing similar observations, IHG’s Hardwood said: “We are absolutely seeing growth in the automotive and pharmaceutical sectors.”

Tokyo
Domestic economy holds the fort
By Julian Ryall

Japan’s business travel trade appears relatively unconcerned about recent uncertainties in the global economy, thanks in large part to the strength of the domestic economy.

Japanese airlines are also reporting good performances in the most recent quarter, thanks to falling aviation fuel prices, making overall travel costs lower.

“We have not seen any impact of the global economic downturn and we are not predicting anything down the line,” said Jian Yang of the Japan Airlines’ public relations office. “Our 3Q results show stable growth and all the data is still on track.

“A big factor is probably the domestic economy doing so well and the fact that there has been no downturn in our business class sales, which suggest that there is not too much concern here,” he said, adding that the abolition of the fuel surcharge is welcomed by business travellers.

Hotel operators also foresee few clouds on the horizon as demand for rooms still remains high in Tokyo for business and leisure markets alike.

Ignatius Cronin, director of international public relations for Tokyo’s Imperial Hotel, has so far seen “no discernible impact”.

“Our occupancy rates are up and we’re not factoring economic problems into our sales activities at all for the foreseeable future,” he said.

For Shinya Kurosawa, head of global business and a member of the board of JTB, the strength of the domestic economy is keeping the business arm of his company buoyant.

“Japanese companies are having a good time at the moment and we’re seeing that reflected in the business they are doing with us,” he told TTG Asia.

However, there has been a slight tapering off of business in economies traditionally closely linked to the economy of China, such as Singapore and Malaysia, Kurosawa said.

Other countries in South-east Asia, such as Vietnam and the Philippines are less exposed to volatility in China and consequently business has remained solid, he said.

Hong Kong
Decline in leisure arrivals prompts business tack
By Prudence Lui

Travel trade players in Hong Kong are training their sights on the business travel segment after feeling the pinch from the decline in leisure travel to the city.

According to Hong Kong Tourism Board’s statistics, business arrivals grew 3.3 per cent to eight million last year with overnight mainland business arrivals rising 11.4 per cent due to a surge in commercial activities between China and Hong Kong.

Following a weak 1Q, BCD Travel managing director, Lily Agonoy, believes that the trend will continue into the next few months.

“2H will be better than 1H. I believe the retail luxury goods sector will be most affected, followed by banking and finance sectors. We will be more aggressive and innovative to win business.”

To make up for the loss of leisure traffic, hotels are competing for the business travel segment.

For instance, Hotel Icon used to see a 70 per cent share of leisure travellers but business travellers now make up over half of hotel guests.

Director of strategy & business development, Sally Osborne, said: “We put a strong focus on this segment over the last six to eight months. In 2016, we’d look at international business and so far, the US and UK markets are strong.”

The hotel has embarked on plans to cater to bleisure travellers, with value-added services like breakfast on the club floor and a “creative conversion space” that allows the travellers on business to work outside the confines of their rooms.

Harbourview Hotel in Wanchai, general manager, Harrison Leung, said: “With a lower travel budget, business travellers tend to cut down their attendance to trade fairs. Indeed, hotel rate in this district was down by 15-20 per cent.

“Five-star properties even lure their business back by offering a lower rate. What we can do is to maintain our volume of business and occupancy by cutting our rate.”

This article was first published in TTG Asia, April 1, 2016 issue, on page 16 To read more, please view our digital edition or click here to subscribe.

Is there a future for intermediaries? In an open forum on the issue – hosted by an intermediary – is it any wonder that the answer is a resounding yes? But not all is PR, reports Raini Hamdi

Skeptics might be squirming in their seats when a select group of people flown in by GTA to Bangkok for its inaugural ‘g meet’ recently all said they believed there was a future for intermediaries. After all, they were suppliers, clients and technology companies that work with GTA, a B2B intermediary, and were being hosted for the one-day powwow.

But the arguments they put forth might convert even the hardiest non-believers.

Arthur Kiong, CEO of Far East Hospitality (FEH) Management, recalled when he was a 25-year-old sales executive at Hyatt International, sitting in a conference room much like the one at the InterContinental Bangkok where the ‘g meet’ was held, and the chain’s then executive vice president John Wallis had said agents would be obsolete because of the advent of the GDS. It amused Kiong that 25 years later, “we’re still sitting in a room asking if there is a future for intermediaries – of course there is. And that’s why the hotel business is a good business, because we keep selling conference rooms to people like you. So it is very important we keep you guessing and asking, ‘Is there a future?’”, said Kiong, turning furrowed brows on a serious topic into bellows of laughter.

A good joke aside, Kiong explained that for a company like FEH, whose brands and products are so disparate – from boutique hotels to conference resorts – intermediaries are essential. “We don’t have the capability to build a distribution infrastructure; it’s not our core business. Our conversion rates (from look to book) are terrible. We do want direct bookings and we have been working at it but the reality is the results improve by decimal points,” said Kiong.

Similar sentiments were echoed by a far bigger chain, AccorHotels, whose recent acquisitions leave some in the industry wondering if it is on the path to cut out intermediaries. AccorHotels acquired Fastbooking in April last year, a French firm that helps more than 3,500 hotels in Europe and Asia mainly sell directly to guests online with tools including website builder, channel manager, digital marketing campaigns and business intelligence software. More recently, it acquired a 49 per cent stake in Squarebreak, the disruptor operator of hotel homes in France, and a 30 per cent share of Oasis Collections, another ‘Home meets Hotel’ category of accommodation founded in Buenos Aires.

But Markus Keller, deputy senior vice president of AccorHotels, said these moves did not mean the chain was muscling in on intermediaries. Private home rentals were an extension of its core business – which is hotels – and widening the range of products it could offer guests, he said.

“Our new CEO has taken the approach of doing what you’re good at. We’re hoteliers by core, if we’re not good at it, we’ll be overtaken by someone who is. So there will always be a role for intermediaries in the short term and in the future. Customers need them, but they are also good for hotels. I don’t want to manage thousands of clients, (only partners) that can connect me to people who sell specialised products. I don’t need people who sell standard rooms; we have people doing that already,” said Keller.

Kiong couldn’t agree more. There’s a future for intermediaries that sell specialty products as it is those that drive the yield, or that add value. But he said intermediaries like GTA want to sell standard products at the lowest possible price. “One is fast-driven, quick volume; the other wants to push the specialty products. Either the agendas are misaligned or the system does not allow us (to sell specialty products),” said Kiong.

He said however that GTA had done a lot for FEH by marketing and promoting its brands in an effective and entrepreneurial way. “That’s what intermediaries should do. Value add, seek out the opportunities and capitalise on them,” he said.

“I predict a bigger future for intermediaries because the travel market in ASEAN and Asia is not only growing in size, but the people are becoming more sophisticated in their travel choices. And when they spend more on travel products, they want to talk to somebody. But intermediaries do have to step up, not just be a postbox of contracting most effective rates. The value add has to be a lot more sophisticated than the cheapest price and the easiest way to pay,” added Kiong.

Metin Altun, CEO and founder of Metglobal, a technology provider, said the industry did not need more players. “Current players need to be more efficient in order to grow. The big boys are monopolising the market, so the current smaller players must focus on what they do in order to maintain the business,” he said.

MakeMyTrip’s COO Mohit Gupta said if the larger, mainstream intermediaries got their act together and start addressing the broader requirements of either clients or suppliers, some of the smaller players who are on the fringe face the risk of being cut out. Conversely, if the small players are faster, the larger intermediaries would find it difficult to displace them.

Asked what some of the broader requirements might be, Gupta said: “One is to focus beyond booking to experiences as well. Right now, a lot of the focus is around price, availability and inventory. While you continue to work on those, you need to shift the focus to great quality content, the types that are more useful for mobile, pictures that are more detailed in nuances, more promotions flow-in to the system – all this will help significantly to expand the services in a relevant manner.

“Also, let’s say someone makes a booking with an OTA, which is connected to GTA, which is connected to hotels, and he wants additional services, say, bed arrangements, special food, handicap support, etc. An intermediary’s ability to support that kind of conversation between the hotelier and the customer in a seamless and easy manner is important. Similarly, going beyond selling the cheapest room to upselling services like early check-in/late check-out and other add-ons. Suppliers want to sell more than just the basic room and there are customers who really need the services. Essentially the system needs to expand its ability to handle those types of cases.”

Q&A with CEO Ivan Walter on GTA’s Vision 2020

Where  is GTA at now and where do you want to be?
We are a leader in the industry in our specific segment. We have great people, strong global footprint with local people all over and we are innovative as an organisation. What we now need is acceleration of pace, making sure we can bring to the market quicker all the digital initiatives that we have made, and that we have the funds and back-up to do so.

To stay a leader, we need to invest, not just in technology but people. There are also lots of opportunities for consolidation, as the smaller players may lack the resources and funds to play a role.

Are you saying you will be acquisitive?
We can do it organically and inorganically, the latter looking at what elements are missing to make us a leader, what technology out there that we are lacking today and which potentially could be part of our portfolio going forward.

What’s your take on TUI putting Hotelbeds up for sale?
For TUI, it’s a consequence of their vertical integration strategy. They want to be in control of the entire process, be it the booking process, their own airline, hotels, cruise ships, etc. They want to make sure that every touch point is proprietary to them and the content belongs to them, so in that sense Hotelbeds does not fit in. That does not mean it’s not great business.

How will this remake bed banks?
The market is so huge. There are a lot of small players out there that are involved in intermediary accommodation and destination services distribution. They can be small bedbanks or DMCs that have no differentiated value proposition – purely selling hotel rooms, which is not sustainable, we think.

So the market today is not dominated by a couple of bedbanks. In fact, it is very fragmented and is in the hands of hundreds if not thousands of small individual players, thus there are lots of opportunities for consolidation. So any potential buyer of Hotelbeds would be looking at consolidation as well. How can we drive consolidation faster, how can we remove some of the players that may not have sufficient differentiated value proposition out of their market?

Why is consolidation important to you?
It’s crucial today for any B2B or B2C player to have relevance, and that relevance has to do with a certain size, negotiating power with suppliers and clients, global footprint and scale.

The process of selling hotel rooms is also something that needs technological support. And if you have strong customer base, strong technology and very robust infrastructure, adding additional demand on it is easy because your processes end-to-end are already streamlined and automised.

As well, suppliers have created quite a dependency on OTAs. I’m sure they are looking for alternative partners so they don’t put all their eggs in the same basket. They want a more balanced client portfolio, but at the same time they don’t want to have to manage thousands of small players with different touch points, contracts and systems.

This article was first published in TTG Asia, April 1, 2016 issue, on page 8. To read more, please view our digital edition or click here to subscribe.