CORPORATE travel managers in Asia are battling the double whammy of tighter travel budgets and increased travel costs as a result of rising inflation.
With the eurozone debt crisis dampening economic sentiments, companies that have not instituted cost cutting are doing so now. UGL in Australia, which has been able to resist snipping the travel budget since the GFC unfolded in 2008, yesterday announced a major exercise to reduce travel costs by 15 per cent.
“The directive is from the top. Everything is softening a bit, so we want to be smart in the way we pay for our travels. The intention is not to reduce volume as we’re client-driven, but cost,” said UGL’s category manager, shared services procurement, Premah Krishnan, based in Melbourne.
Among measures are reviewing the eligibility of whom can travel business class; reducing the class of city hotels without compromising the safety and well-being of travellers; and mandating an approval from the higher levels for any trip request made within four days or less.
Asked how the new directive would impact her work, Krishnan said: “It’ll be more work because we have to provide monthly or even weekly data to show costs are actually dropping, so we would need to track where the non-compliance is coming from.”
Another travel manager, June Lai, assistant administration manager of Ingram Micro Asia Pacific based in Singapore, said her company had been in “cost-cutting mode” on travel spending since 2008, but rising airfares and hotel rates each year posed a real challenge to savings.
She said: “Our people used to be able to travel business class; we’ve cut that back to economy. While there are no more cuts, we constantly have to look at hotel rates, fuel costs, taxes, etc, which are increasing every year and are beyond our control.”
Observed Dean Fowles, principal, T&E management, global sourcing-services of Rio Tinto in Singapore: “Travel costs continue to go up in Asia-Pacific. Costs never went down in Japan even when it went into recession. Whenever there’s a bad time in Hong Kong, rates do not fall, occupancies fall. Airfares are also not going down – carriers are now good at controlling capacity.”
Joseph Bates, senior director-research of the Global Business Travel Association (GBTA), agrees that inflation in emerging economies, which pushes up costs, is compounding the squeeze being felt by Asian travel managers.
“It is tricky. The developed economies are pumping more money to get growth, which only makes it worse for emerging economies as all that liquidity results in higher inflation,” Bates said.
Yesterday’s closed-door GBTA Global Travel Management Forum saw inflation in Asia and cost of travel as the key concern of travel managers, said Bates.
Asked what advice he had for travel managers, Bates said: “For those whose companies are cutting the travel spend, travel managers must send across the message that while it’s prudent to keep travel in line with lower sales projections in any slowdown, a cut which is further than necessary will hurt their business and the economy.
“As well, to budget for inflation, use available data and information on inflation, so they don’t end up grappling with rising costs which are beyond their control.”
GBTA’s latest Business Travel Index shows the euro debt-crisis hitting the global GDP and global business travel hard. Its projection is for global business travel spend to grow 4.6 per cent this year – half of the growth last year – to US$1 trillion, subject to Europe’s recovery.
