The region’s leading Travel Management Companies (TMCs) have warned that the travel industry continues to face a “challenging” time ahead; and that despite signs of increasing business volumes and a fragile economic recovery, corporate travel spend will not see a recovery to levels seen before the global economic downturn took hold in 2009.
Many companies slashed their travel budgets by up to 40 percent in 2009 and some corporates even implemented complete travel bans, as they fought to ride out the global financial crisis.
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While 2010 has seen a slight loosening of the purse strings as the world emerges from the grips of recession, TMCs say the biggest trend to come out of the downturn is a much tighter control on travel spending.
Abdulla Abu Khamseen, executive general manager of Kanoo Travel told ATN that post-recession, companies have become much stricter with their travel budgets – a trend that was unlikely to change going forward.
“The travel industry, post-recession, will never be the same as we experienced before. Times have changed and so has the way we do business,” he said.
“We see more and more companies implementing strict controls on their travel policies to keep costs down.
“Companies are being much smarter at budgeting travel costs and other T&E [travel and entertainment] related expenditure.”
Khamseen added that as a result TMCs would have to find creative ways to bring their outgoings down in the future. “Travel companies will have to be smarter at controlling their costs and concentrate on offering quality service to their customers in order to remain profitable in this business.”
According to Tim Waddell, director of marketing, Al Shamel Travel, low cost carriers are increasingly being favoured by corporates looking to tighten up on their travel spend, while business class is being ditched in favour of economy class travel.
“Many corporations are looking at restructuring their travel policies to allow more travel within existing budgets,” said Waddell. “Low cost carriers are becoming more widely accepted as the core choice for inter-regional travel and class of travel rules are being applied much more strictly today.”
Asim Arshad, CEO of Orient Travel added that while business levels have been steady in 2010, it would be “futile” to try to compare travel budgets today to pre-recession peaks and said TMCs had to learn to take a “reality check”.
“The travel budgets have not increased,” said Arshad. “We have to take a reality check, and it would be futile to compare it to the peaks of pre-recession.”
He added that TMCs were facing numerous other threats to their business today which put additional pressure on costs: “Travel companies are facing a challenge as there is no reduction in [operational] costs whilst income is being diluted with lower fares, smaller service fees from LCCs [low cost carriers] and business lost to airlines due to their online offers.
“There has also been an increase in online booking portals who have been promoting aggressively, which has also taken a considerable amount of business.”
In support of these comments, a recent poll carried out last month by sister magazine Arabian Business revealed that 56.4 percent of people think business travel will not pick up for a few years as companies remain cautious about spending.
A further 23 percent of respondents to the poll, which ran online at arabianbusiness.com, said there might be an increase but it would be seen in economy class rather than business class as companies continue with the cost-cutting measures brought in amid the global downturn.
Only 10.3 percent of respondents to the online poll were optimistic that business travel would see an increase in 2011.
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