Keeping a watchful eye

Austerity measures continue to bite the corporate travel market, which has become more prudent in spending and is driving a harder bargain in the wake of the global financial crisis

David Orszaczky, head of sales and commercial planning, Qantas Australia
Puneet Mahindroo, director, revenue management, APAC, Four Seasons Hotels and Resorts
Tommy Tam, managing director, Arrow Travel Hong Kong
David Fraser, executive general manager, Greater China, Flight Centre
Not pictured: John Chapman, Chief commercial officer, JetAsia Airways Thailand

Although corporate travel has gradually recovered since the global financial crisis (GFC), the sector remains cautious of their spending, disclosed participants of this Roundtable at Travelport’s APAC Customer and Partner Conference, moderated by Andrew Kelly, regional director Australasia, Association of Corporate Travel Executives.

Has the corporate travel market recovered from the GFC?

ORSZACZKY After the GFC, people were predicting the death of corporate travel and if growth in business travel demand could be sustained. Qantas did a lot of research in the Australian market to try and understand what it would mean for long-term future demand and to have substitutes like video conferencing, and concluded that travel is an essential part of doing business. We also looked at people’s choice drivers and adapted our proposition to suit the changing market.

On the back of the mining resources boom we’ve seen several waves of growth. However, in the Australian market, the last six to 12 months have seen a real fall-off in consumer and business confidence. We’ve seen serious overcapacity both from the domestic market where things are quite competitive and internationally.

In summary, we’ve done quite well in the Australian market since the GFC. We see a more subdued economic outlook ahead and the impact it’s having on corporates and how they adjust costs.

MAHINDROO The corporate segment has always been the more resilient travel segment. A number of interesting things has happened. People are travelling smarter – they’re doing day trips, shorthauls. On longhauls they arrive at their destinations in the morning, freshen up and go for their meetings straightaway. The length of stay has shrunk, so suddenly you see room nights have dropped, but it’s actually the length of stay that has dropped, not the frequency of bookings.

The next thing I think is a nice refreshing change for us at Four Seasons is that corporate and leisure travel are being combined. If someone’s flying on towards a weekend – a Thursday or Friday – those kind of travellers tend to extend their trips. It’s no longer corporate, it’s corporate and leisure travel.

TAM In our area of business, we have recovered. Companies are now very price-driven and have changed their spending habits. They are doing more videoconferencing than flying, and shortening the length of their trips.

For Hong Kong-based business travellers, there are a lot of convenient flights, e.g. Beijing, Shanghai. They can stay one night and come back.

What other trends are you seeing in the corporate market?

FRASER There’s been a shift from pre-GFC behaviour. There’s now a much higher uptake of discount fares, coupled with tightening of travel policies. Previously MNCs had quite generous regional travel policies – first and business class for three- and four-hour flights – but that’s certainly changed. From our business point of view, corporates are now negotiating a lot harder on service and transaction fees than they were before.

ORSZACZKY There’s a point to be made about visibility. The veil has been removed with all online pricing. The conversations we’re having with corporates in our market are absolutely becoming more price-sensitive and they are looking to take cost out, whether it’s through volume or price or a combination of both. We try to bring the conversation back to value rather than purely price.

For example, in the mining sector, the largest driver of corporate travel growth in Australia, it’s the interest in saving 10, 20 or 30 dollars more per ticket and getting the whole team there three hours late, which costs a million dollars in lost productivity. It’s hard to have that conversation with the procurement manager, but a little more balanced when you have it with the business owners and managers.

One thing I see with TMCs is that they really understand the drivers of the business behind those decisions so it’s not just purely price, and then you become more of an advisor about value.

With the growth of OTAs that supply direct to customers, do you believe there will always be a need for TMCs?

TAM Yes. They may supply information and price directly to customers, but we’re matching OTAs – we have to match them. There’s still room to survive.

FRASER We’ve had to move from something very commoditised, a ticketing agent in the past, to about travel tracking data. That’s what we see now and that will change again in the future. The good (consultants) will survive and prosper, and the rest will fall away.

There’s now a trend of airlines unbundling and selling ancillaries. What impact is that having on servicing the needs of corporate travellers?

CHAPMAN You need to come up with a different product offering for the corporate travel segment, something with more flexibility that you wouldn’t offer to the leisure traveller. That’s been the big trend. I’ve seen airlines come up with packages that would appeal to corporate travellers, e.g. AirAsia X and its lie-flat bed.

FRASER There’s not too much of that trend in the Hong Kong and China markets at the moment, but more broadly we need to be more involved with that.

Metasearch engines like Google Flight Search and Skyscanner are playing a larger role. Would their influence be contained to more price-sensitive leisure markets or also extend to corporates?

MAHINDROO We’re seeing a lot of impact, and when it comes to structured, managed travel for larger corporations, the GDS allows you to compare corporate prices and that’s why GDSs talk about rate parity. It’s not about metasearch but price transparency. You can see how corporate prices vary from what’s available publicly.

ORSZACZKY I would say that metasearch engines are definitely more for unmanaged markets that are more price-sensitive.

MAHINDROO There are tools available today that show what segment of business is really growing. Last time, 90 per cent of business travel was managed but today in more matured cities, that’s 65 per cent, closer to how it stands in North America where it’s 50-50.

FRASER The other part of why metasearch engines are taking off is that the information corporate travellers need are all there. They can pull it off sites like Kayak and be as informed as travel agencies, so the pressure is now on TMCs/travel consultants to show that they are the absolute experts. We’re not in the position of power where we have all the information.

With your knowledge of the travel industry, will GDSs play an important role in the future?

TAM The GDSs have a lot of resources they can develop; (they can also) provide travel consultants with more apps, software to let them communicate with suppliers. A good example is Roomsandmore that uses aggregated force to negotiate with hotels and airlines.

ORSZACZKY At a very general level, as long as you’re relevant, innovative, flexible and listening to what partners and customers needs, then there’s a future.

Another point – it’s not either-or, it’s a combination – is letting customers choose how they want to interact, and letting customers and partners build strategies on that.

CHAPMAN Travel agencies need to be able to differentiate themselves from others and package their products and market them across their own channels. I think Travelport’s done quite a good job of filling that gap (so there’s still a role for GDSs).

MAHINDROO GDSs have been looked at as a transaction platform, but it’s no longer about that. It’s about a merchandising and sales process, making it easier and faster.

As a hotelier, one of the biggest challenges is how to put the most relevant product in front of those that facilitate travel, whether for corporate travellers or those that combine leisure and corporate, and how to distinguish products on the channel, which requires a significant amount of merchandising, getting the banner ads going, showcasing the service-oriented facilities, etc.

That’s one area where we feel GDSs can make a change going forward. We’ve heard GDSs are dying, but last year GDS volumes hit a maximum high. I rest my case.

FRASER Content is still important through GDSs, direct connects or APIs. Increasingly, working and partnering with us on new solutions and technology will enable our businesses to meet the demands of our business.

This article was first published in TTG Asia, October 24, 2014 issue, on page 14. To read more, please view our digital edition

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