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European business tourism — changes and prospects
European business tourism - changes and prospects RobDavidson
The recession has had a major impact on the business travel and tourism market in Europe. Budgets for this purpose are under pressure at a time when the demand for business travel and conferences in Europe is actually increasing. This article examines the changes in the structure of the business tourism market and the tourism industry’s response to the crisis. Rob Davidson is a tourism writer and visiting lecturer in a number of French universities as well as at the lnstitut Europeen de Recherche et de Formation Superieure du Tourisme. He may be contacted at 3 rue Sainte-Anne, 34000 Montpellier, France.
‘Business Travel Expenditure in Europe 7991, Visa International Service Association, London, 1992.
0261-5177/93/030167-06
0
The importance of business travel to the European tourism industry was clearly demonstrated during the Gulf War, when meetings activity and corporate travel were thrown abruptly into reverse, as companies instructed their executives to keep their feet firmly on the ground. All sectors of the tourism industry, from hotels and airlines to conference centres and car hire firms, felt the devastating effects of losing the greater part of their valuable business clientele as events in the Middle East ran their sorry course. With the return of peace to that region came a growing optimism in the tourism industry that the high-volume, high-spending levels of business travel, which had characterized the 198Os, were about to return. The evidence appeared to show that the demand for business travel, corporate and associate meetings, conferences, exhibitions, trade fairs and incentive travel packages was set to resume, providing custom for the swelling ranks of providers of business tourism-related services in Europe. One of the first analyses of the post-war situation in European business tourism was a survey of corporate travel carried out in spring 1991 by Visa International.’ This forecast a return to strong growth in the business travel market, but suggested different rates of recovery for different countries’ business travel markets. The authors of the survey reported that corporate travel was already back to pre-war levels in France and Italy, while in the case of Germany and Scandinavia, travel expenditure levels were estimated to be still 20-25% down. This reported buoyancy was confirmed by the results of a follow-up telephone survey of French businesses conducted by American Express after the end of the Gulf War. This found that fewer than 4% of those companies were planning a reduction in travel expenditure as a result of the war. The UK situation was less clear. While the Visa survey was predicting a rapid return to pre-Gulf War levels for European business travel in most countries, its authors were of the opinion that demand from the UK would remain depressed at least throughout 1991. The same report saw Germany’s corporate travel market as having the greatest growth potential for the 199Os, with reunification stimulating considerable travel demand. Over two-fifths of the German companies interviewed in the Visa survey reported increases in their corporate travel budgets to offset the effects of the Gulf War period.
1993 Butterworth-Heinemann
Ltd
167
In the event, however, the return to business tourism’s golden age of high-spending travelling executives, generous incentive packages and lavish conferences has failed to materialize in Europe. Consequently, providers of business travel services are currently undergoing the most difficult period most of them can remember. But the far-reaching impacts on the European business tourism market have not arisen out of the events in the Gulf, but from the more intractable effects of the deep recession which has stubbornly settled over most of the world economy. While the national economies of Europe and many of Europe’s traditional incoming markets for business tourism remain depressed, companies’ travel budgets will not stretch to the easygoing largesse which characterized the 1980s and the early years of this decade. Providers of business travel services, conference organizers and incentive travel houses may recall nostalgically those glory days, when, according to an American Express European survey conducted over 1989, 1990 and 1991, companies’ spending on travel and entertainment was rising faster than both inflation and company revenues;2 but the effects of the recession have cut deeply into the structure and texture of the business tourism market in Europe. In many ways, the party is over. However, the prevailing economic gloom has certainly not caused a substantial reduction in the demand for business travel and tourism in Europe. At the very time when travel budgets are shrinking or at best remaining stable, the demand for business travel and meetings activity is actually on the increase. Before examining the changes in the business tourism market itself, some of the reasons for the increasing demand in this sector must be given.
Increase in business tourism demand
‘The American Express European Business Travel Management Survey, 1991 Edition, American Express Europe. 3Nancy Cockerell, ‘The European incentive travel market’, E/U Travel & Tourism Analyst, No 4, 1991, p 81.
168
The European Single Market and liberalization in Eastern Europe have been key factors in stimulating business travel and tourism in this region. The move towards greater globalization of markets and industry in the European Community, and greater collaboration with foreign companies are already increasing demand, as representatives of businesses in European countries travel further afield in search of new business. The increased opportunity for companies to set up shop in new countries has led to a spate of mergers, acquisitions and partnerships over borders. This multinational business expansion means growth in the demand for training seminars, product launches and all the other forms of general meetings activity associated with the growing internationalization of businesses. Increased business travel to, from and within Eastern Europe has also been the logical outcome of that region’s new opportunities to open its economies to the rest of the world. The current infrastructural improvements under way in Eastern Europe, combined with their hotel building programme, will accelerate this trend, as well as consolidating their position as the fastest-growing incentive travel destination, over the next few years.” The exhibitions industry, too, has received a boost from the Single Market, which has brought a new impetus for European conferences to be accompanied by exhibitions. The abolition of border controls has made it much easier for exhibitions to move around the Community, bringing an end to the kind of delays, losses and charges which exhibition organizers have found so frustrating in the past. Finallv.2 the recession itself has been indirectlv i resnonsible for some of the recent increases in the volume of business travel’in Europe. The new ways in which business and manpower are organized in the 199Os, as companies try to reduce their cost bases and operate with greater flexibility, mean that they are tending to make more use of subcontrac-
TOURISM
MANAGEMENT
June 1993
Europeun
business
tourism
- changes
and prospects
tors, consultants and external services. As a result, the numbers travelling on business have been added to, as this new, work-force moves around their different employers.
of those flexible
Changes in the market
4The financial Times, 25 September 1992. 51bid.
‘Report on Europe: fhe
European
An Annual Survey of Conference Scene, 1992,
The European Federation Towns, Brussels, 1992.
TOURISM
of Conference
MANAGEMENT
Nevertheless, despite all the signs of a greater volume of business travel, levels of spending in this sector are currently either stable or shrinking. Britain illustrates the latter case. Accordin to a recent Financiul Times article on corporate travel expenditure, ’ Britain’s companies spent around f18 billion on travel and entertainment in 1992, compared with 520 billion the previous year. Travel and entertainment represents the second largest expense for many corporations after the salary bill, and the consistent and steady pressure from companies to reduce their travel costs has meant that global spending on this budget item has not increased in recent years. More business travel for less money appears to have become the market’s guiding maxim for the 1990s. This trend towards the reduction of corporate travel costs is confirmed in a Financial Times’ interview with the managing director of Wagon-Lits Business Travel, part of one of the major travel groups in Western Europe. Reporting on Wagon-Lits’ own analysis of this sector, which confirms the continuous decline in the average spend on all areas of business travel since the middle of 1991, he said, ‘Many large companies are radically cutting the amount of money spent on travel. This does not mean they are travelling less; rather, it shows the impact of downgrading from business class seats to economy on aeroplanes, staying in cheaper hotels for less time, and hiring smaller and cheaper cars.’ Trading down has become common practice among European firms now much more alert to squeezing better value for money from their travel budgets. With corporate accountants looking for any way to trim costs, business travel is a key target, and airline travel (accounting for a quarter of Britain’s travel and associated costs) is the easiest to prune. Cutting back costs, by booking economy tickets instead of business class, or business class instead of first class is now widespread. In some cases, travelling executives are being told to forego air travel completely and to use the train where possible - which may account for the incrrase in the volume of British Rail’s business clientele last year. The same cost-consciousness among buyers of business travel and tourism is also increasingly found among meetings and conference organizers. As early as 1990, the European Federation of Conference Towns’ Marketing Director Geoffrey Smith wrote, ‘Meetings planners, part or full-time, are more educated about the market, eager to get more for their money, aware that most things are negotiable, and more demanding than ever. Good suppliers welcome this; they like to do business with efficient clients and share a common pursuit of excellence.‘” More recently, however, this cost-consciousness, coupled with the recession, and an ever-increasing supply of meetings facilities (now outstripping demand) has led to many hotels being forced to discount prices in order to remain competitive. This is now a major cause for concern among hotel operators, who feel that in the long term this will have an adverse effect on quality. 1991-92 saw a reduction in the size and length of meetings in virtually all hotel groups in Britain. The British group Rank Hotels report that their delegate numbers fell by 20% in 1991, while there was a 33% drop in the average length of conferences. The trend was decidedly towards fewer overnight meetings, with less leisure time built into conference programmes. In January 1993, the same trends were reported by the Head of the Business Department of the French Government Tourist Office in
June 1993
169
European business tourism - changes and prospects
Paris, who added two more which had been identified in the French meetings industry: less expensive hotels are increasingly being used for meetings (penalizing the luxury end of the scale) and delegates are less and less inclined to bring along an ‘accompanying person’. A final trend, identified by the trade magazine, Conference and Incentive Travel, is that many hotel groups are now having to deal with far shorter lead times for bookings, with meetings organizers increasingly shopping around until the last moment. In some cases, there is only a two-week period between a booking and the date of the actual meeting.7 However, while this kind of simple trading down and ‘bargain hunting’ may have become the unwritten and unofficial travel policy of many companies, others have turned to more sophisticated and systematic techniques in order to control or reduce their spending in this sector. In-company
travel management
As companies find the volume of their business trips increasing, professional managing and monitoring of travel costs is becoming more widespread. Cost-effectiveness, rather than cost-cutting, is emerging as an important goal for many businesses, and more effective travel management is increasingly seen as a means of achieving this. The American Express European survey found that 40% of the companies interviewed had designated a member of the management team to take full-time or part-time responsibility for developing, implementing and monitoring an effective travel policy. This was a significantly higher proportion than in previous surveys. In Britain alone, the proportion of companies implementing a scheme of effective travel management has grown by 50% in the four years preceding the survey. Travel management
services
The use of travel management services from an outside supplier, such as American Express themselves, is another technique, widespread in the USA and now gaining acceptance in Europe. Such services integrate a number of related service activities: recommending and booking travel arrangements; providing a convenient payment system for business travellers and flexible billing options for their employers; providing a reporting and management information system, as well as advice on using this information to improve cost-effectiveness. Bringing all of a company’s travel expenditure into the hands of one agency with a thorough grasp of the opportunities for savings at each stage of the travel cycle allows for greater control and economies than using a variety of distributors. Zmplunts. A variation
‘Conference 1992.
and lncenfive
Travel,
April
on the use of external travel management services is for a company to use the expertise of a travel team seconded to it by a travel agency. By this method, one or several employees of the travel agency move into the company’s premises to set up shop there. Unlike outside agencies, where the company is just one client among many, implants work exclusively for the host company and therefore have the opportunity to develop a personal and deeper understanding of that company’s travel needs. Specialist implant travel bureaux can save money and improve the efficiency of a company’s travel purchases by, for example, agreeing preferential rates with travel suppliers or securing discounts on hotel accommodation. They also issue tickets, make hotel bookings and arrange currency, as well as providing the company with a regular computerized breakdown of its travelling expenses.
TOURISM
MANAGEMENT
June 1993
European
business tourism - changes and prospects
Corporate cards. The credit and charge card companies have always maintained that the use of corporate cards by their travelling executives is a cost-efficient way of enabling a company to monitor travel and entertainment spending, detect possible delinquencies and, above all, to identify areas where savings can be obtained, by negotiating bulk purchase deals with airlines and hotels. The American Express survey reports rapid growth in the use of corporate cards, often in conjunction with the type of travel management services described above. While many European companies in particular use corporate cards merely as a convenience for employees or as a status symbol, there appears to be growing recognition of their value as an effective management tool.
Competing for clients With the effects of the recession being felt throughout the tourism industry, the airlines and the hotels in particular have responded by chasing business customers with attractive offers. The result has been a plethora of cheap tickets, special discounts and ‘added-value’ gimmicks designed to woo high-paying business clients. Some airlines now offer free airport parking facilities, limousine transfers and prestige lounges to tempt the ever-shrinking supply of business class passengers. In the air, most efforts are directed towards pampering the executives with better food, more comfortable seats, and better ‘goodie’ bags. Similarly, hotels in Europe’s major cities are increasingly ready to negotiate with potential business clients, especially those who provide them with regular customers or a substantial volume of off-season business. Corporate rates are more and more widespread. But, while many operators in the business tourism field have followed the reflex action and reduced their prices, others have used more imaginative ways of competing for the custom of their business clients. Many operators have modified their product or their marketing strategies in order to survive in these high-volume, low-spending times. For example, in order to capture a larger share of the conference market, many of the major hotel groups have developed dedicated meetings packages which provide a one-stop shop for conference organizers. The packages include audio-visual equipment, special comfortable chairs for delegates (who may be seated for many hours at a time) and well-trained staff. In the past year, Sheraton, Rank, Forte, Hilton, Marriott, Inter-Continental and Scandic Crown have launched meetings services designed to make conference organizing as painless as possible. Increasing segmentation has also been identified by Projection 2000 in their 1991 survey of business travelX as a major trend towards making the business tourism industry more responsive to the needs of its clients: .
.
‘Business
Travel in Europe, Projection
2000, London, 1991.
TOURISM
MANAGEMENT
June 1993
Women now account for 20% of business travellers, with their own lobbies such as the Business Women’s Travel Club and the Association of Women Executives. Crest Hotels’ ‘Lady Crest’ product is an example of a chain catering for this segment, with extra hanging space in the rooms, spy-holes on the doors, and late opening of beauty and hair salons in their hotels. Airlines have been slower to target the female business traveller. So far, only Virgin has directed its transatlantic business class advertising at the female executive. Frequent travellers are heavily targeted by airlines through the use of frequent-flyer clubs, offering special privileges, promotions and magazines. In the effort to create customer loyalty, upgrades for frequent business flyers are increasingly offered by airlines, particularly the new transatlantic American airline companies. International hotel chains are also now targeting this segment: the
171
European business tourism - changes and prospects
.
‘The financial Times, 25 September 1992.
172
Hilton Club for frequent business travellers was introduced in 1990, and now has around 7000 members. A database of members’ preferences ensures that the guest gets precise personal service in whichever Hilton they use, world-wide. Budget business travellers are often those working for smaller companies, or the self-employed. In Europe, where 24% of air economy-class travellers are on business trips, some airlines have introduced a special class of travel to cater for this segment. For example, Virgin has just launched a new Mid-Class section for travellers who pay the full Economy fare (about f720 return from London to New York) rather than a cheap deal with restrictions. Mid-Class passengers get seats about the same size as Business-Class seats on other airlines and a separate check-in. Similarly, the fastest-growing hotel market is the budget sector, from Holiday Inn Garden Court hotels, through Forte Travelodges, to the plethora of French budget chains such as Formule 1 and Campanile.
As long as these recessionary times persist, those operating in the business travel sector will be under pressure to fight for their own survival in a strong buyers’ market. While the rush to offer discount and cheap deals for the use of anything from an airline seat to a conference centre may bring short-term benefits, in the longer term this solution presents problems. The profit margins required for constant reinvestment in products and the maintaining of quality are incompatible with falling average prices for business travel services. Alert to this, many companies are refusing to accept business from customers motivated purely by cost. British Airways,9 for example, in the drive to maintain a good yield on its ticket sales, refuses to always go to the bottom rate. Like many operators, they fear the advent of a ‘discounting culture’ among business travel and tourism buyers, which would ultimately be in the interests of no-one.
TOURISM
MANAGEMENT
June 1993
The recession has had a major impact on the business travel and tourism market in Europe. Budgets for this purpose are under pressure at a time when the demand for business travel and conferences in Europe is actually increasing. This article examines the changes in the structure of the business tourism market and the tourism industry’s response to the crisis. Rob Davidson is a tourism writer and visiting lecturer in a number of French universities as well as at the lnstitut Europeen de Recherche et de Formation Superieure du Tourisme. He may be contacted at 3 rue Sainte-Anne, 34000 Montpellier, France.
‘Business Travel Expenditure in Europe 7991, Visa International Service Association, London, 1992.
0261-5177/93/030167-06
0
The importance of business travel to the European tourism industry was clearly demonstrated during the Gulf War, when meetings activity and corporate travel were thrown abruptly into reverse, as companies instructed their executives to keep their feet firmly on the ground. All sectors of the tourism industry, from hotels and airlines to conference centres and car hire firms, felt the devastating effects of losing the greater part of their valuable business clientele as events in the Middle East ran their sorry course. With the return of peace to that region came a growing optimism in the tourism industry that the high-volume, high-spending levels of business travel, which had characterized the 198Os, were about to return. The evidence appeared to show that the demand for business travel, corporate and associate meetings, conferences, exhibitions, trade fairs and incentive travel packages was set to resume, providing custom for the swelling ranks of providers of business tourism-related services in Europe. One of the first analyses of the post-war situation in European business tourism was a survey of corporate travel carried out in spring 1991 by Visa International.’ This forecast a return to strong growth in the business travel market, but suggested different rates of recovery for different countries’ business travel markets. The authors of the survey reported that corporate travel was already back to pre-war levels in France and Italy, while in the case of Germany and Scandinavia, travel expenditure levels were estimated to be still 20-25% down. This reported buoyancy was confirmed by the results of a follow-up telephone survey of French businesses conducted by American Express after the end of the Gulf War. This found that fewer than 4% of those companies were planning a reduction in travel expenditure as a result of the war. The UK situation was less clear. While the Visa survey was predicting a rapid return to pre-Gulf War levels for European business travel in most countries, its authors were of the opinion that demand from the UK would remain depressed at least throughout 1991. The same report saw Germany’s corporate travel market as having the greatest growth potential for the 199Os, with reunification stimulating considerable travel demand. Over two-fifths of the German companies interviewed in the Visa survey reported increases in their corporate travel budgets to offset the effects of the Gulf War period.
1993 Butterworth-Heinemann
Ltd
167
In the event, however, the return to business tourism’s golden age of high-spending travelling executives, generous incentive packages and lavish conferences has failed to materialize in Europe. Consequently, providers of business travel services are currently undergoing the most difficult period most of them can remember. But the far-reaching impacts on the European business tourism market have not arisen out of the events in the Gulf, but from the more intractable effects of the deep recession which has stubbornly settled over most of the world economy. While the national economies of Europe and many of Europe’s traditional incoming markets for business tourism remain depressed, companies’ travel budgets will not stretch to the easygoing largesse which characterized the 1980s and the early years of this decade. Providers of business travel services, conference organizers and incentive travel houses may recall nostalgically those glory days, when, according to an American Express European survey conducted over 1989, 1990 and 1991, companies’ spending on travel and entertainment was rising faster than both inflation and company revenues;2 but the effects of the recession have cut deeply into the structure and texture of the business tourism market in Europe. In many ways, the party is over. However, the prevailing economic gloom has certainly not caused a substantial reduction in the demand for business travel and tourism in Europe. At the very time when travel budgets are shrinking or at best remaining stable, the demand for business travel and meetings activity is actually on the increase. Before examining the changes in the business tourism market itself, some of the reasons for the increasing demand in this sector must be given.
Increase in business tourism demand
‘The American Express European Business Travel Management Survey, 1991 Edition, American Express Europe. 3Nancy Cockerell, ‘The European incentive travel market’, E/U Travel & Tourism Analyst, No 4, 1991, p 81.
168
The European Single Market and liberalization in Eastern Europe have been key factors in stimulating business travel and tourism in this region. The move towards greater globalization of markets and industry in the European Community, and greater collaboration with foreign companies are already increasing demand, as representatives of businesses in European countries travel further afield in search of new business. The increased opportunity for companies to set up shop in new countries has led to a spate of mergers, acquisitions and partnerships over borders. This multinational business expansion means growth in the demand for training seminars, product launches and all the other forms of general meetings activity associated with the growing internationalization of businesses. Increased business travel to, from and within Eastern Europe has also been the logical outcome of that region’s new opportunities to open its economies to the rest of the world. The current infrastructural improvements under way in Eastern Europe, combined with their hotel building programme, will accelerate this trend, as well as consolidating their position as the fastest-growing incentive travel destination, over the next few years.” The exhibitions industry, too, has received a boost from the Single Market, which has brought a new impetus for European conferences to be accompanied by exhibitions. The abolition of border controls has made it much easier for exhibitions to move around the Community, bringing an end to the kind of delays, losses and charges which exhibition organizers have found so frustrating in the past. Finallv.2 the recession itself has been indirectlv i resnonsible for some of the recent increases in the volume of business travel’in Europe. The new ways in which business and manpower are organized in the 199Os, as companies try to reduce their cost bases and operate with greater flexibility, mean that they are tending to make more use of subcontrac-
TOURISM
MANAGEMENT
June 1993
Europeun
business
tourism
- changes
and prospects
tors, consultants and external services. As a result, the numbers travelling on business have been added to, as this new, work-force moves around their different employers.
of those flexible
Changes in the market
4The financial Times, 25 September 1992. 51bid.
‘Report on Europe: fhe
European
An Annual Survey of Conference Scene, 1992,
The European Federation Towns, Brussels, 1992.
TOURISM
of Conference
MANAGEMENT
Nevertheless, despite all the signs of a greater volume of business travel, levels of spending in this sector are currently either stable or shrinking. Britain illustrates the latter case. Accordin to a recent Financiul Times article on corporate travel expenditure, ’ Britain’s companies spent around f18 billion on travel and entertainment in 1992, compared with 520 billion the previous year. Travel and entertainment represents the second largest expense for many corporations after the salary bill, and the consistent and steady pressure from companies to reduce their travel costs has meant that global spending on this budget item has not increased in recent years. More business travel for less money appears to have become the market’s guiding maxim for the 1990s. This trend towards the reduction of corporate travel costs is confirmed in a Financial Times’ interview with the managing director of Wagon-Lits Business Travel, part of one of the major travel groups in Western Europe. Reporting on Wagon-Lits’ own analysis of this sector, which confirms the continuous decline in the average spend on all areas of business travel since the middle of 1991, he said, ‘Many large companies are radically cutting the amount of money spent on travel. This does not mean they are travelling less; rather, it shows the impact of downgrading from business class seats to economy on aeroplanes, staying in cheaper hotels for less time, and hiring smaller and cheaper cars.’ Trading down has become common practice among European firms now much more alert to squeezing better value for money from their travel budgets. With corporate accountants looking for any way to trim costs, business travel is a key target, and airline travel (accounting for a quarter of Britain’s travel and associated costs) is the easiest to prune. Cutting back costs, by booking economy tickets instead of business class, or business class instead of first class is now widespread. In some cases, travelling executives are being told to forego air travel completely and to use the train where possible - which may account for the incrrase in the volume of British Rail’s business clientele last year. The same cost-consciousness among buyers of business travel and tourism is also increasingly found among meetings and conference organizers. As early as 1990, the European Federation of Conference Towns’ Marketing Director Geoffrey Smith wrote, ‘Meetings planners, part or full-time, are more educated about the market, eager to get more for their money, aware that most things are negotiable, and more demanding than ever. Good suppliers welcome this; they like to do business with efficient clients and share a common pursuit of excellence.‘” More recently, however, this cost-consciousness, coupled with the recession, and an ever-increasing supply of meetings facilities (now outstripping demand) has led to many hotels being forced to discount prices in order to remain competitive. This is now a major cause for concern among hotel operators, who feel that in the long term this will have an adverse effect on quality. 1991-92 saw a reduction in the size and length of meetings in virtually all hotel groups in Britain. The British group Rank Hotels report that their delegate numbers fell by 20% in 1991, while there was a 33% drop in the average length of conferences. The trend was decidedly towards fewer overnight meetings, with less leisure time built into conference programmes. In January 1993, the same trends were reported by the Head of the Business Department of the French Government Tourist Office in
June 1993
169
European business tourism - changes and prospects
Paris, who added two more which had been identified in the French meetings industry: less expensive hotels are increasingly being used for meetings (penalizing the luxury end of the scale) and delegates are less and less inclined to bring along an ‘accompanying person’. A final trend, identified by the trade magazine, Conference and Incentive Travel, is that many hotel groups are now having to deal with far shorter lead times for bookings, with meetings organizers increasingly shopping around until the last moment. In some cases, there is only a two-week period between a booking and the date of the actual meeting.7 However, while this kind of simple trading down and ‘bargain hunting’ may have become the unwritten and unofficial travel policy of many companies, others have turned to more sophisticated and systematic techniques in order to control or reduce their spending in this sector. In-company
travel management
As companies find the volume of their business trips increasing, professional managing and monitoring of travel costs is becoming more widespread. Cost-effectiveness, rather than cost-cutting, is emerging as an important goal for many businesses, and more effective travel management is increasingly seen as a means of achieving this. The American Express European survey found that 40% of the companies interviewed had designated a member of the management team to take full-time or part-time responsibility for developing, implementing and monitoring an effective travel policy. This was a significantly higher proportion than in previous surveys. In Britain alone, the proportion of companies implementing a scheme of effective travel management has grown by 50% in the four years preceding the survey. Travel management
services
The use of travel management services from an outside supplier, such as American Express themselves, is another technique, widespread in the USA and now gaining acceptance in Europe. Such services integrate a number of related service activities: recommending and booking travel arrangements; providing a convenient payment system for business travellers and flexible billing options for their employers; providing a reporting and management information system, as well as advice on using this information to improve cost-effectiveness. Bringing all of a company’s travel expenditure into the hands of one agency with a thorough grasp of the opportunities for savings at each stage of the travel cycle allows for greater control and economies than using a variety of distributors. Zmplunts. A variation
‘Conference 1992.
and lncenfive
Travel,
April
on the use of external travel management services is for a company to use the expertise of a travel team seconded to it by a travel agency. By this method, one or several employees of the travel agency move into the company’s premises to set up shop there. Unlike outside agencies, where the company is just one client among many, implants work exclusively for the host company and therefore have the opportunity to develop a personal and deeper understanding of that company’s travel needs. Specialist implant travel bureaux can save money and improve the efficiency of a company’s travel purchases by, for example, agreeing preferential rates with travel suppliers or securing discounts on hotel accommodation. They also issue tickets, make hotel bookings and arrange currency, as well as providing the company with a regular computerized breakdown of its travelling expenses.
TOURISM
MANAGEMENT
June 1993
European
business tourism - changes and prospects
Corporate cards. The credit and charge card companies have always maintained that the use of corporate cards by their travelling executives is a cost-efficient way of enabling a company to monitor travel and entertainment spending, detect possible delinquencies and, above all, to identify areas where savings can be obtained, by negotiating bulk purchase deals with airlines and hotels. The American Express survey reports rapid growth in the use of corporate cards, often in conjunction with the type of travel management services described above. While many European companies in particular use corporate cards merely as a convenience for employees or as a status symbol, there appears to be growing recognition of their value as an effective management tool.
Competing for clients With the effects of the recession being felt throughout the tourism industry, the airlines and the hotels in particular have responded by chasing business customers with attractive offers. The result has been a plethora of cheap tickets, special discounts and ‘added-value’ gimmicks designed to woo high-paying business clients. Some airlines now offer free airport parking facilities, limousine transfers and prestige lounges to tempt the ever-shrinking supply of business class passengers. In the air, most efforts are directed towards pampering the executives with better food, more comfortable seats, and better ‘goodie’ bags. Similarly, hotels in Europe’s major cities are increasingly ready to negotiate with potential business clients, especially those who provide them with regular customers or a substantial volume of off-season business. Corporate rates are more and more widespread. But, while many operators in the business tourism field have followed the reflex action and reduced their prices, others have used more imaginative ways of competing for the custom of their business clients. Many operators have modified their product or their marketing strategies in order to survive in these high-volume, low-spending times. For example, in order to capture a larger share of the conference market, many of the major hotel groups have developed dedicated meetings packages which provide a one-stop shop for conference organizers. The packages include audio-visual equipment, special comfortable chairs for delegates (who may be seated for many hours at a time) and well-trained staff. In the past year, Sheraton, Rank, Forte, Hilton, Marriott, Inter-Continental and Scandic Crown have launched meetings services designed to make conference organizing as painless as possible. Increasing segmentation has also been identified by Projection 2000 in their 1991 survey of business travelX as a major trend towards making the business tourism industry more responsive to the needs of its clients: .
.
‘Business
Travel in Europe, Projection
2000, London, 1991.
TOURISM
MANAGEMENT
June 1993
Women now account for 20% of business travellers, with their own lobbies such as the Business Women’s Travel Club and the Association of Women Executives. Crest Hotels’ ‘Lady Crest’ product is an example of a chain catering for this segment, with extra hanging space in the rooms, spy-holes on the doors, and late opening of beauty and hair salons in their hotels. Airlines have been slower to target the female business traveller. So far, only Virgin has directed its transatlantic business class advertising at the female executive. Frequent travellers are heavily targeted by airlines through the use of frequent-flyer clubs, offering special privileges, promotions and magazines. In the effort to create customer loyalty, upgrades for frequent business flyers are increasingly offered by airlines, particularly the new transatlantic American airline companies. International hotel chains are also now targeting this segment: the
171
European business tourism - changes and prospects
.
‘The financial Times, 25 September 1992.
172
Hilton Club for frequent business travellers was introduced in 1990, and now has around 7000 members. A database of members’ preferences ensures that the guest gets precise personal service in whichever Hilton they use, world-wide. Budget business travellers are often those working for smaller companies, or the self-employed. In Europe, where 24% of air economy-class travellers are on business trips, some airlines have introduced a special class of travel to cater for this segment. For example, Virgin has just launched a new Mid-Class section for travellers who pay the full Economy fare (about f720 return from London to New York) rather than a cheap deal with restrictions. Mid-Class passengers get seats about the same size as Business-Class seats on other airlines and a separate check-in. Similarly, the fastest-growing hotel market is the budget sector, from Holiday Inn Garden Court hotels, through Forte Travelodges, to the plethora of French budget chains such as Formule 1 and Campanile.
As long as these recessionary times persist, those operating in the business travel sector will be under pressure to fight for their own survival in a strong buyers’ market. While the rush to offer discount and cheap deals for the use of anything from an airline seat to a conference centre may bring short-term benefits, in the longer term this solution presents problems. The profit margins required for constant reinvestment in products and the maintaining of quality are incompatible with falling average prices for business travel services. Alert to this, many companies are refusing to accept business from customers motivated purely by cost. British Airways,9 for example, in the drive to maintain a good yield on its ticket sales, refuses to always go to the bottom rate. Like many operators, they fear the advent of a ‘discounting culture’ among business travel and tourism buyers, which would ultimately be in the interests of no-one.
TOURISM
MANAGEMENT
June 1993