the future of corporate travel – today. a business model for a new world
DESCRIPTION
Keynote of Keith Mason at NICT 2010, Istanbul (Next in Corporate Travel)TRANSCRIPT
Dr.KeithMasonHeadofAirTransportManagementGroup,
Cran;ieldUniversity
The Future of Corporate Travel - Today A business model for today’s new world
Keith Mason
Head, Air Transport Management Group Cranfield University
Good Morning!
• Update on airline industry • Review of the Business Traveller
• Issues in Corporate Buying • Some “Do”s and “Donʼt”s
Source: ICAO to 2008 and IATA for 2009
Airline industry - Net Profit Margin 1950-2009
Source: IMF, World Bank
Global GDP Growth/Decline and recession
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1971
19
73
1975
19
77
1979
19
81
1983
19
85
1987
19
89
1991
19
93
1995
19
97
1999
20
01
2003
20
05
2007
20
09
2010
World GDP growth/decline
0%
1%
2%
3%
4%
8%
7%
5%
6%
1973-75 • Oil Crisis - 4X to $12 • Stock Market
1991-93 • 1st Gulf War • Oil Hike * 2X to $33
1980-82 • Iran-Iraq war • Oil Shock - 3X to $39
2001-03 • US Weakening • 9/11 • 2nd Gulf War
Oil Contracted to $15 per barrel
2008-2010 • Credit Crunch • Multiple Govt Bailouts • Stock market turmoil • Fluctuating oil prices
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1971
19
73
1975
19
77
1979
19
81
1983
19
85
1987
19
89
1991
19
93
1995
19
97
1999
20
01
2003
20
05
2007
20
09
2010
World GDP growth #
% C
hang
e of
GD
P ye
ar o
ver y
ear
GDP Growth
0%
1%
2%
3%
4%
8%
7%
5%
6%
0%
2%
4%
6%
8%
10%
12%
14%
-2%
-4%
World scheduled airline RPKs
RPK Growth
% C
hang
e in
Pas
seng
er T
raffi
c ye
ar o
ver y
ear
Source: ICAO, 2009a and WEO (IMF), 2009
World GDP & scheduled traffic growth
Source: IATA Economics
Average fares on international markets
Premium fares rise and fall more sharply with economic changes
The importance of the business travel market
• Business air travel is an approx. £3.5bn business in the UK • Dependent on the route, business travel can be 50% or
more of the market (in volume), • The value of the business market can be used to support
discounted fares in economy • Business class is more profitable than either first class or
economy class
UK business passengers on scheduled services
Rise of
LCCs
SO WHAT DO THESE PEOPLE WANT?
Business Passengers’ Map of Airline Product
Safety Schedule Reliability
FFP
Lounge
IFE
Lounge entertainment
Potential Services Core services
Expected services
Augmented services
Product expectations move over time
Quality
Price
Economy
Business
1st
Product expectations move over time
Quality
Price
Business
1st
Economy
Business
Product expectations move over time
Quality
Price
1st
Economy
Business
Product expectations move over time
Quality
Price
Economy
1st
Business
Product expectations move over time
Quality
Price
Economy
1st
Premium Economy
The Future?
Unbundling these services?
• Travel policy compliance issues • can travellers pay for extras and be confident that they will be
reimbursed?
• Processing is more complex • Self Booking Tools struggle to fulfill ancillary services (leading to
additional intermediary costs)
• Lack of total cost transparency • Pay one fee for ticket and then faced with additional charges – often via
T&S claims
Unbundling creates issues for Travel Managers
Business Travellers
• Mainly male - 80% • Middle aged
• 35 - 54 • 17 trips per annum
• 5 Long haul • 12 short haul
• down 3 since 2004
• Half work for large companies
• Half work for SMEs Source: IATA CATS 2009
Business Travellers
• Mainly male - 80% • Middle aged
• 35 - 54 • 17 trips per annum
• 5 Long haul • 12 short haul
• down 3 since 2004
• Half work for large companies
• Half work for SMEs Source: IATA CATS 2009
Business Travellers
• Mainly male - 80% • Middle aged
• 35 - 54 • 17 trips per annum
• 5 Long haul • 12 short haul
• down 3 since 2004
• Half work for large companies
• Half work for SMEs Source: IATA CATS 2009
Business Travellers
• Mainly male - 80% • Middle aged
• 35 - 54 • 17 trips per annum
• 5 Long haul • 12 short haul
• down 3 since 2004
• Half work for large companies
• Half work for SMEs Source: IATA CATS 2009
Or perhaps like this
Purpose of travel
• Purpose of travel • Trips for sales and commercial (45%) • Customer support (21%) • Conference and presentations (20%) • Internal company meeting (10%) • Training (4%)
(Source: KDS, Summer 2009)
• Travellers purpose of travel changes repeatedly • How do you identify? • Needs change by purpose of travel
Differing types of business travellers
Number of places business travellers visit regularly 10
5
Number of new places business travellers visit
Commuters
Explorers
Nomads
Source: Beaverstock, et al , 2010
Each group will have differing needs
27
Travel spend 80/20?
< 100 employees
1,000 – 10,000 employees
< 1000 employees
> 10,000 employees
Airlines cannot afford to manage accounts for companies with spend less than £50k
Company size
Mason/Amadeus 2007
0%
5%
10%
15%
20%
25%
30%
Less than 100 100 - 1000 1000 - 5000 5000 - 10000 10000 - 25000 More than 25000
Company Size: Number of Employees
Spend on travel
Mason/Amadeus 2007
0%
10%
20%
30%
40%
50%
60%
$0m - $2.5m $2.5m - $5m $5m - $10m $10 - $30m $30m - $50m More than $50m
Annual corporate spend on travel
Western Europe North America Latin America Asia Pacific
Cabin usage by business travellers
From this….
Via this…..
Move down inside the bus please!
To this….
Change of business market
• Downgrading and use of low cost airlines • Change in booking behaviour
• Increase in fare transparency • Travellers “going commando” – booking direct • No longer prepared to pay high multiples for business class • Increase in price elasticity • Increase in “value for money” purchasing
• Use of other forms of communication • Increased use of web-conferencing, tele-presencing, video-
conferencing. • This adoption has been increased as companies become
aware of the carbon cost of travel.
Business Travel Cuts – Summer 2009 onward
• 71% of companies had significantly reduced business travel • Class of travel
• 38% Business class • Of these 70% said only for trips > 5 hours
• Austerity to continue till 2012 • 24% of MDs and FDs believe this “frugality” will be be the blue print for
future travel spending Source: AMEX survey, Oct, 2010
Source: KDS, 2009
Choice of airline
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Factors affecting choice of airline: IATA CATS 2009
SH CATS 2009 LH CATS 2009
Effect of FFP
0
5
10
15
20
25
30
35
40
45
50
< 5% 5% - 10% 10% - 20% >20%
Perc
ent
Premium paid to use FFP carrier for business flight
Source: McCaughey, 2010
Survey of over 1,400 Business Travellers in Australia
Effect of FFP
Source: McCaughey, 2010
0
1
2
3
4
FFP influences airline choice when on business
Pick FFP airline for biz trip even if others cheaper
FFP benefits make biz travel more bearable
Mid tier status maintenance more
important than points
Top tier status maintenance more imp
than points
Leve
l of A
gree
men
t (1
= SD
, 5=S
A)
Influence of FFP on business travellers Survey of over 1,400 Business
Travellers in Australia
Managing Travel Spend
Management Information
Negotiation
Policy Enforcement
IT Integration
Policy and Process Review
Leverage your spend
• Consolidate your spend • Deliver promised volumes • Manage travellers • Develop strategic relationship with your suppliers
What should you be looking for from an air supplier?
• Network • Alliance or not?
• Schedule/frequency on most frequented routes • Product and service • Safety and security • Deals and discounts • Added value • Relationship management
Consider airline issues?
• Companies may buy travel like they buy paper clips • Procurement lead • Volume discounts • Strategic relationships with suppliers
• HOWEVER, a Business Class bed is not a paperclip • It is not a commodity • Personal and emotive
• (e.g. Class of travel/status/FFPs/away from family) • Everyone in the company has a view and many have decision making capacity
What should you be looking for from a TMC supplier?
• Fulfil travel • Travel policy and compliance • Management information • Deal tracking • Cheapest on the Day • Market product and services • Expertise to advise client • Consultancy • Security • Mediate between company
and suppliers
Ten Travel Management Companies in the UK dominate the market
Set a policy and mandate it
• Establish need to travel • ROI methodology on travel spend
• Establish a clear policy so that travellers are clear about what you expect of them and what they can expect from you.
• Develop in consultation with travellers to consider their issues and needs • Sick, stressed, un-motivated travellers are not effective
• Mandate the policy • Effectiveness of policy is greatly reduced if not mandated • Clear and fair for all • Report regularly to internal stakeholders about effectiveness of policy
Buying at the right time – the right product
• Help travellers to plan/book earlier to access best available prices
• Does the traveller need fully flexible ticket? • Business class overnight flight to reduce hotel spend? • From POSH
• Port out, starboard home
• to IBOFEH • Inflexible business class out, flexible economy home
Who sets policy?
0%
5%
10%
15%
20%
25%
30%
Travel arranger Regional Travel Manager
Global Travel Manager
Procurement Manager/Director
Finance Officer/Director
HR Senior Mgmnt Team/Directors
Person/Group setting travel policy
Do these guys need
help?
Source: Mason, Cranfield University, 2006
Source: Mason, Cranfield University, 2006
Lack of
understanding
Managing travel responsibly
• CSR – Companies need to know where its employees are when they travel
• Air disasters, hotel attacks, ash clouds, typhoons, etc. Companies need to know if any of its employees are potentially involved
• Travel can amount to 40% of a companyʼs carbon emissions. Can we do the same business with less CO2?
Travel Policy compliance
• Smoothing the travel process would improve travellersʼ life on the road
• Travel policy needs to support travellers as well as direct them to corporateʼs preferred (air, car, hotel) suppliers
• Travel hassles and time away from family are key issues for travellers • Make policy easy to use/follow with benefits for the travellers
Use self booking technology
• Self booking tools can • reduce intermediary costs – 26%, AND • reduce travel costs (visual guilt) – 9% Source: Amadeus, 2007
• Travellers need all available options before they book • TMC needs to aggregate content and overlay policy
0%
5%
10%
15%
20%
25%
30%
Nothing Up to 15% 16% - 29% 30% - 49% More than 50% Too early to judge
Don't know
How much does an online booking save in travel agency/TMC costs?
0%
5%
10%
15%
20%
25%
30%
None Less than 5% 5% - 9% 10 - 20% More than 20% Too early to judge
Don't know
How has use of SBT reduced average ticket prices?
Booking channels
26,3%
54,5%
10,8% 8,5%
44,8%
39,2%
9,3% 6,7% 8,1%
70,5%
16,4%
4,9%
29,1%
54,0%
11,8%
5,1% 5,1%
74,0%
15,9%
5,1%
12,7%
65,8%
13,9%
7,6%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
Self Booking Tool (% ) TMC for offline request (%) Directly from supplier (%) Other Internet provider (%)
Channels for Air Tickets by region (all responses)
Canada US Lat Am Europe ME/A AsiaPac
Direct booking may create difficulties
• When a traveller books direct… • Loses TMC support on that booking
• Change tickets • Loses Management Information • Loses leverage against suppliers • May lose volume deals • Duty of Care undermined
• Travel manager canʼt trace traveller if transport crashes/terrorist attack/act of god
• Harder to reconcile expenses
Integrate SBT with other IT systems
• Expense accounting • HR database • Corporate intranet • Meeting and events systems
Limited development so far
78,5%
12,9% 8,6%
54,3%
13,8%
31,9%
40,4%
14,9%
44,7%
74,7%
15,4%
9,9%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
90,0%
No Beginning of process Yes
SBT Integration status with other Corporate IT systems
Expense accounting HR Database system Corporate Intranet (Silent Log-In) Meeting/event management
30,5%
13,0% 10,8%
22,4%
14,3% 14,9%
37,3%
26,0% 27,0%
41,4%
26,0%
31,3% 32,2%
61,0% 62,2%
36,2%
59,7%
53,7%
0%
10%
20%
30%
40%
50%
60%
70%
Simplified electronic travel authorisation
Reduced need for manual input traveller
data
Time spent on reporting travel
expense
Time spent on authorizing trips
Automatic transfer of traveller profile data
Traveller profile data updated in all IT
systems
Perc
ent
Productivity from system integration
No productivity gain Limited productivity gain Significant productivity gain
Additional productivity and reduced work for travellers
FINALLY…. Some corporate travel takeaways
FINALLY…. Some corporate travel takeaways
• Do:- • Make it easier for suppliers to
deal with you by delivering promised volume
• Regularly review your suppliers and policy – are they fit for current purpose/strategic goals?
• Engage with and listen to travellers
• Get the most out of available IT systems
• Donʼt:- • Set policy in a bubble • Forget to establish the need for
travel within the process • Expect travellers to be happy
with change • Slavishly force travellers into
inappropriate local hotels or on lousy flight schedules and expect 110% performance
Thank you for listening Hope you enjoy the rest of your time in
Istanbul
THANKYOU…