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.

GROWTH in outbound MICE to Asia remains flat in many European markets, which has already registered a slowdown over the past year due to the tightening of budgets amid a weak economic climate.

Said Tony Vanvinckenroye, CEO of White Reizen Belgium: “Europe is still in recession. People are travelling just once a year now, instead of two or three times per year.”

Besides unfavourable exchange rates, some consultants also singled out airfares as the primary obstacle to growing outbound MICE travel to Asia.

Gordon Owen, Messrs G Owen & Co, said: “Airfares are a major disincentive for MICE travel, especially when corporate budgets are tighter and companies must demonstrate a financial return on travel for meetings or seminars.

“Asia (offers) better value by far, but for a group of 70-100 delegates, the cost of travel to Asia is high which evokes hesitation from travel managers.”

Asia still commands interest from MICE groups though, driven by its growing air connectivity and infrastructure.

Signalling its competitiveness, South-east Asia has managed to steal cost-conscious European clients from Australia.

Marc Lambert, owner of Antipodes Voyages Belgium, which usually drives most of its traffic to Australia, has seen a 20 per cent rise in the number of MICE groups to South-east Asia this year. He said: “Because the (Australian) dollar is so high, clients are switching to New Zealand and South-east Asia instead.”

Singapore and Thailand top the region as MICE destinations, said European buyers at IT&CMA and CTW, who observed that Singapore attracts meetings, while Thailand is popular among incentive groups keen on multi-country travel.

Reporting by Timothy France

LOCAL government offices have become the latest target audiences of the Indonesian Ministry of Tourism & Creative Economy, which is planning a MICE show aimed at driving government-level meetings and events to 14 destinations across the country.

The destinations identified for MICE development are Jakarta, Bali, Bandung, Jogjakarta, Makassar, Surabaya, Medan, Manado, Semarang, Batam, Lombok, Solo, Palembang and Padang-Bukittinggi.

Explaining the move, deputy minister of tourism & creative economy, Sapta Nirwandar, said: “The government offices have so many meetings.”

He noted that the Ministry of Foreign Affairs, for example, would conduct international and domestic meetings of various sizes, while each directorate general in the Ministry of Public Works would host its own series of meetings.

Recognising that each government organisation has its own policies on meetings and events, Rizki Handayani, director of MICE & special interest marketing with the Ministry of Tourism & Creative Economy, said: “We are collecting data from the various government departments on the decision-makers and the meetings they organise.”

Handayani has learnt that there are six directorate generals in the Ministry of Public Works, and each hosts two coordination meetings with stakeholders around Indonesia every year. Each meeting is attended by 1,000 to 1,500 delegates. These exclude other smaller gatherings held annually.

Handayani pointed out that many government agencies were unaware of the development of MICE facilities and infrastructure around Indonesia, so a MICE show connecting central government officers with Indonesian MICE stakeholders would be beneficial.

The ministry has yet to decide on the show’s format, and one possible arrangement is a tabletop travel mart where local city or tourism government officials and MICE stakeholders are invited as sellers and central government officers as buyers.

Jogjakarta Tourism Office director, Tazbir Abdullah, welcomed the initiative, saying that it would enable the city to showcase its MICE potential, facilities, packages by DMCs and hotels, and the extent of incentives and support available to event planners.

He added that Jogjakarta was ready to host government agencies on fam trips to tour the city’s MICE facilities.

Indonesia Tourist Promotion Board board member, Didin Junaedi, said “an event like this” would drive government events beyond the usual mature destinations in Indonesia, such as Bali and Jakarta.

ASSOCIATIONS are facing difficulty in getting sponsorships and the consequences are dire for those that have allowed themselves to be hugely dependent on this revenue stream.

Since the GFC, major corporations have become more selective about what they support and demand more ROI from their sponsorships. Association professionals interviewed expect the trend to continue in the foreseeable future as there has been no end in sight to economic uncertainties in the eurozone and the US, which have now impacted Asia as well.

“Most associations would say that over the last two years, sponsorship has been more difficult than it has been in the past. Some major companies have withdrawn completely, while others are selective about what they support. There is no indication that’s going to change,” said Simon Pryor, CEO of Melbourne-based Mathematical Association of Victoria.

The association itself lost Hewlett-Packard (HP) as a sponsor, although HP continues to be an exhibitor at its event. It was able to secure Casio after making a strong business case to it.

“Essentially sponsors want access to delegates. If you are, say, the orthopaedic surgeons association, then there’ll be a pharmaceutical company or a manufacturer of prosthetics that wants to reach out to your members. To get sponsorship now, you have to think more carefully about the exhibition you run alongside the education programme so you give the sponsors as much access to the delegates as possible,” Pryor said.

Dave Cybak, executive vice president of the Canadian Society of Association Executives (CSAE), urged associations to customise their sponsorship offer to companies rather than take a one-size-fits-all approach. To further increase the ROI for sponsors, associations also must be proactive in educating companies on how best they can engage their members, and follow up regularly with sponsors following the event on targets outlined.

“Sponsors don’t understand the association market. Often, they do a direct ‘here’s what I want to sell’ approach as they come from sales-oriented backgrounds. Often, that does not work. You have to demonstrate to them that you’re supporting their profession, association, mission and vision,” Cybak said.

Cybak noted the impact of reduced sponsorships on associations could be devastating.
“We need the revenue to produce the products and services that provide value for our members. If we don’t see it coming from sponsorship, we either need to sell quite a number of new memberships and more conference registrations to make up for that sponsorship loss, or reduce costs, which often means a reduction in services to members.

“But that results in a vicious circle – members will then question why they are renewing their membership at the same fee when they are getting less service from their association,” he said.

Cybak said there had been increased dependence on sponsorships as a source of revenue since the early years of this century, as it was “easy and seductive”. He warned that if associations got a third of their revenue from sponsorships, they had “a risk management” issue.

CSAE was putting up more conferences, face-to-face and online education programmes, as well as publishing and distribution activities to diversify revenue streams. “I would suggest up to 40 per cent is the right percentage of revenue from membership dues, 10 per cent from sponsorship and the rest from conferences, etc,” he said.