Global

Executive Summary

Decisive opportunities for Success

The travel industry, a mirror of the overall economy, was under considerable pressure in 2009, a year unlike any other in recent history. In fact, last year marked one of the few times in the last 30 years that air traffic decreased globally year over year. (Year-over-year falls attributed to economic recession and the first Gulf War also occurred in 1991 and again in 2001, following the events of September 11.) Last year’s decline stemmed a three-decade trend in which air travel grew on average 5 percent per year.

Average ticket price was also down and IATA (International Air Transport Association) predicted the global airline industry would lose US$11 billion in 2009. To reduce their costs, airlines cut capacity and/or reorganized through mergers and acquisitions, joint ventures or new strategic partnerships. Ancillary fees became an increasingly common way of generating revenue for services that were once free of charge. Premium economy also emerged as a suitable compromise for companies who wanted to switch from business to economy class, particularly in Europe.

Fewer business travelers overall meant a significant decline in hotel occupancy worldwide, as well as lower average daily rates and RevPAR (revenue per available room). Hotels also saw business travelers shift to lower-category properties and shorter stays. In an unprecedented response to the changing market dynamics favoring travel buyers, several companies renegotiated their 2009 hotel agreements over the course of the year.

Rail was a bright spot in the industry in 2009, as more business travelers chose high-speed train travel over air for trips of three hours or less. Switching from first class to second class drove further savings.

Car rental companies, limousines, and chauffeur-driven black car services suffered in 2009 as demand declined. Furthermore, fleets were smaller than usual, resulting in service irregularities and higher rates.

Adding insult to injury, the very real threat of a flu pandemic brought a frightening new twist to the economic downturn and business travel. All told, industry experts believe this extraordinary combination of events had a more negative impact than those of September 11, 2001, and the SARS scare in 2002-03.

As the new year gets underway, there is some cause for optimism. The IMF (International Monetary Fund) predicts global GDP will grow by 3.1 percent in 2010, which should drive an increase in business travel, particularly in the second half of the year. (All sectors of the travel industry – air, hotel, car and rail – already showed varying degrees of improvement in the last few months of 2009.)

Although negotiated hotel rates should decline in 2010 and requests for dynamic pricing vanish, average ticket price for air travel could increase with industry consolidation and capacity restrictions.

And there is no doubt that ancillary fees are here to stay. Nonetheless, airlines will seek to enhance the traveler experience through such services as mobile check-in, WiFi and live satellite television in-flight.

Ground transportation will also evolve. Deregulation of the international rail passenger market in Europe, effective January 1, 2010, will increase competition. Significant investments in high-speed rail services in many countries around the world will also benefit business travelers.

Car rental companies will continue to control costs while increasing rates, and no-show fees will become increasingly common.

Smart travel management will continue to be of utmost importance in 2010. According to a CWT online survey of 169 travel managers conducted from September through November of last year, at least half said optimizing hotel spend, improving traveler compliance, optimizing simple bookings, and driving air and ground transportation savings would be the top four areas of higher priority for 2010. This was the case in 2009 as well, indicating ongoing opportunities for savings.

Although each of the following items was cited as a higher priority in 2010 by less than half of the surveyed travel managers, this does not mean they are of little importance. For example, developing key performance indicators and optimizing the travel policy were cited as higher priorities by 36 percent and 34 percent of surveyed travel managers respectively. While this represents a year-over-year decline, it also reflects the significant progress made in each of these areas in 2009.

The remaining items of higher priority cited by 13-37 percent of surveyed travel managers are:

• further consolidating the travel program,
• enhancing the traveler experience,
• tackling meetings and events,
• addressing safety and security needs,
• and making the program more environmentally friendly.

Which of the following areas will become a higher priority in your 2010 travel program compared to 2009?
(Several responses possible)