Business Travel Insight

Transcription

1 Business Travel Insight 2015

2 Overview In a recent survey conducted by Travel Leaders Group, an impressive 86% of respondents who specialize in business travel indicated that 2014 business travel bookings were better than or on par with As we look forward to 2015, data indicates the number of people traveling for business will continue to increase as global growth continues to strengthen. Despite political unrest and health concerns; airline passenger traffic, hotel stays, and rental car reservations are all slated to increase in This growth will result in higher prices, new technology, and an increased need to plan and adapt travel programs to the ever-changing business environment and Beyond: Trends to Watch Global and regional trends can have a major impact on the way businesses operate, manage their resources and, of course, travel. By examining some of the major socioeconomic trends we expect to see in 2015, we can forecast how this will impact the ways in which people travel and the influence these trends will have on business travel and suppliers in Airline Consolidations Consolidation in the airline industry is nothing new American and US Air, Southwest and AirTran, and United and Continental just to name a few over the last several years. While these mergers have led to reduced competition and increasing airfares in some markets; the mergers have also led to the emergence of more financially sound airlines. In the short term, these mergers can work to benefit corporations as the Big Three (American, Delta, and United) grapple t o maintain their preferred supplier status within corporate travel programs. However, as many corporations continue to focus on cost saving, decisions may ensue to reduce the number of preferred airline suppliers. In addition, with passenger load factors at high levels the airlines are less likely to introduce discounted pricing as they have in past years. Corporate Hotel Rates and Demand A recent study from New York University estimates average corporate hotel rates will increase between % compared to a 4.5% increase in Hotels are viewing 2015 as an opportunity to catch up for missed revenue resulting from the recession and the economic slowdown over the past few years. Hotel demand in the U.S. continues to strengthen and markets like Chicago, New Page 1

3 Six consecutive years of occupancy increases 64.6% occupancy rate expected for 2015 Five consecutive years of average daily rate (ADR) growth York, and San Francisco will show the largest rate increases. Along with the expected rate increases, the U.S. lodging industry expects occupancy levels to increase to 64.6% in 2015, which is the highest percentage increase since pre-recession For travel managers, the steady demand and high occupancy rates will result in a more difficult year of hotel negotiations. In order to keep large rate increases at bay, many travel managers may choose to relax last room availability (LRA) requirements and move from upscale and full service hotels to select service hotels which often include breakfast and Internet in the room rates. Duty of Loyalty Most travel managers have heard of and understand duty of care as it relates to an employer s obligation to make reasonable best efforts to keep travelers safe while traveling for business. However, there is another side of the coin which is the responsibility of the employee to uphold the duty of care policy of their employer. This concept, which is termed duty of loyalty, applies to an employee or contractors responsibilities in concert with the employer s best efforts to keep themselves safe and to act in the best interest of the employer. An employer can provide sound programs and precautions to attempt to avert a crisis, but if a traveler is unaware or ignores the programs and procedures, they are likely failing in their duty of loyalty responsibilities which contribute to their own safety. Duty of Care Duty of Loyalty Together, duty of care and duty of loyalty lend themselves to a culture where both employers and employees are focused on the health, safety, security, and well-being of their travelers. The organization fulfils the duty of care policies by developing and deploying appropriate travel risk management procedures to protect employees from possible harm. At times these responsibilities may be vague and subject to interpretation, so it is crucial for employers to specifically define the traveler s duty of loyalty and perhaps require written acknowledgement that documents the traveler s agreement to adhere to these policies. Looking to 2015, many organizations will begin developing the two fold policy to ensure the utmost safety and security of their employees. Page 2

4 Flight Delays and Cancellations Delays and cancellations continue to be a major concern for business travelers. For the first eight months of 2014, the FAA recorded on-time performance for all carriers at 74.8%. This reflects a 3.4% decline for the same time period in The largest year over year decline in on-time performance by domestic carriers was led by Southwest. The most common reasons for poor on-time performance are air carrier delays, weather, late arriving aircraft, security, and national aviation systems. Flight delays and cancellations can impact many organizations resulting in diminished employee productivity and potential lost business. In addition, these delays and cancellations can spike an organization s travel budget due to additional unexpected expenses related to extra hotel nights, meals, and the like. Global Uncertainty Unfortunately we live in a world where political unrest, terrorism, security threats, and health concerns are quite prevalent. With tensions on the Russia-Ukraine border, organized criminal groups in Mexico, conflicts in the Gaza Strip, the Syrian Civil War, ISIS, and the outbreak of Ebola; keeping abreast of world affairs will remain crucial in McKinsey & Co. recently completed a survey of business executives which showed that 80% of respondents believe geopolitical instability in the Middle East and North Africa is either very likely or extremely likely to upset the global economy in the next year. As organizations continue to expand their global presence and because unpredictable global events are a harsh reality; employers must make every effort to protect their employees. By monitoring current events in countries where employees travel and having an updated duty of care policy in place, organizations can ensure travel to certain areas of the world is not only good for the business, but also safe for the employee. Page 3

5 Ranks of Millennial Business Travelers Growing By 2020, it is expected that approximately 50% of the U.S. workforce will be under the age of 32 and will make up half of all business travelers. This age group, born between 1980 and 2000, commonly referred to as Millennials are young, diverse, tech-savvy, and constantly connected to their smartphones. According to recent studies, this demographic group is expected to travel more, spend more, and continue to increase their use of technology. Related to airline travel, millennials tend to book flights with less advance purchase and will pay extra for conveniences such as snacks and Internet access. Major hotel chains are competing for the millennials by enhancing their properties with new features and services such as wired lobbies, co-working spaces, and grab n go dining options Outlook for North America Airline Page 4 With the U.S. and Canada currently performing among the best of the advanced economies, business travel volume and costs are expected to rise in Travel managers will need to closely monitor corporate agreements, set clear market share expectations with suppliers, enforce travel policy parameters, and continuously analyze spend to maintain travel and expense budgets. With the expected growth of business travel in 2015 coupled with little new capacity and network consolidation, North America air prices are expected to increase by nearly 3%. Along with the expected pricing increases, the portion of revenue airlines capture from ancillary fees (i.e. seat upgrades, in-flight services, baggage fees, etc.) will continue to grow. A recent Travel Leaders Group survey also revealed an increase of nearly 11% of business travelers buying either first or business class seats. Travel managers will need to take a strategic approach in negotiating successful supplier contracts, determine which ancillary fees comply with their travel program, and review travel program compliance to ensure success in the new year.

6 Hotel Source: Research and Innovation Technology Administration: Bureau of Transportation Statistics North America hotel construction has been more limited than in other regions of the world, but where growth is occurring it is focused in the mid-scale hotel arena. Therefore, with the increasing room demand in the business travel sector but slower supply growth, the result is continued hotel price increases in North America for 2015 of slightly greater than 3%. In key business markets like Chicago, New York, and San Francisco, the rate increases are expected to be closer to 6%. Travel managers will need to negotiate harder than in previous years for their corporate rates and may secure better rates from select service properties which include breakfast and Internet instead of upscale and full service hotels. Travel Leaders Data: Hotel According to our Travel Leaders Group data, hotel average nightly rates (ANR) in 2014 show a slight increase quarter over quarter. With several factors influencing 2015 prices limited hotel growth and increased demand hoteliers are viewing next year as an opportunity to get back to business after a soft couple of years. Top 10 Hotel Markets (Values listed are the average nightly rate) Chicago, IL $163 Boston, MA $195 San Francisco, CA $196 New York, NY $259 Washington, D.C. $206 Los Angeles, CA $176 Dallas, TX $142 Atlanta, GA $138 W. Palm Beach, FL $114 Miami, FL $147 Page 5

7 Ground Transportation Rental Car In North America the rental car industry continues to be led by three major companies Avis Budget Group which operates as Avis and Budget brands, Enterprise Holdings which operates Enterprise, National, and Alamo brands, and Hertz Global Holdings which operates as Dollar, Hertz, and Thrifty. As business travel continues to grow, the competition between these primary rental car suppliers remains quite competitive. This is good news for the travel industry, as only a modest increase of 1% is expected for rental car rates in Travel managers can capitalize on this competition by extending current contracts or moving to longer term contracts. Other Trends Meetings As business travel continues to grow and economic conditions improve, demand for meetings is also growing globally. Meeting rates within APAC and NORAM are expected to be moderate while EMEA is expected to remain flat and Latin America is expected to experience the largest growth. Meeting planners will continue to be tasked with maintaining shrinking budgets, securing meetings at mid-scale properties, and negotiating additional inclusions all while having less lead time. Within the U.S., the top meeting and convention destinations have changed slightly since a year ago. Orlando continues to hold the top spot while Washington has moved up from number 7 to number 2. With New York falling off the list, most likely due to higher costs and hotel availability issues, New Orleans has made a debut at number 10. Top Meeting and Convention Destinations 1. Orlando, FL 6. San Diego, CA 2. Washington, D.C. 7. Phoenix, AZ 3. Las Vegas, NV 8. Atlanta, GA 4. Miami, FL 9. Dallas, TX 5. Chicago, IL 10. New Orleans, LA --CVENT Supplier Network Globally several countries have emerged as top meeting destinations: Cambodia, Indonesia, Ireland, Portugal, Thailand, United Kingdom, and Vietnam. Page 6

8 Mobile Bookings/Travel Apps Mobile continues to be the fastest growing trend not just in business travel, but in the industry in general. In the first half of 2014, mobile travel bookings increased by 20% while desktop bookings grew only a mere 2%. Mobile bookings vary by country and are led by Japan, Australia, and the United States. In the U.S. alone in 2015, travelers are expected to book over $39 billion worth of reservations on a mobile device which is nearly 12% of all travel sales. As you can see from the chart to the right, mobile bookings are up considerably across all travel categories from Not only are mobile bookings up, but the cost of the trips being booked via mobile devices is also up. The average airfare booking was 21% higher on mobile devices than on desktop computers and rental cars were 13% higher. This phenomenon is believed to be the effect of last-minute bookings which may become a concern for travel managers. Percentage of Travel Booked via Mobile Device Cutting edge and adapted are two words that could be used to describe the current activity in the Source: Business Travel News/PhoCusWright business traveler s app market. Airlines, airports, and hotels are continuously developing applications to network with travelers, while third party apps are allowing travel management companies and employers to tailor details of a trip, engage employees, and gain data upon their return. By 2015, it is estimated that nearly 90% of airlines and airports will provide flight status and tracking applications for mobile devices. Transportation Security Administration (TSA) PreCheck When TSA PreCheck made its debut in 2011, the goal was to revolutionize the security process with expedited screening and allow travelers to leave shoes, jackets and belts on and keep laptops and liquids packed in carry-on bags. The program was initially considered successful; however, more recently TSA has experienced several issues that are of concern with the program. Page 7

9 Shortly after the start of the program, when select individuals were invited to opt-in through an airline s frequent flier program or were in a trusted traveler program ( Global Entry, SENTRI or NEXUS), the TSA opened the program to the rest of the traveling public. With an influx of individuals who did not travel as often, the PreCheck lines became more time consuming. The wait time grew as individuals did not know exactly how PreCheck worked and would still take everything out of their bags. Unfortunately, long lines and extended time to get through PreCheck resulted in fewer people wanting to apply for the program and pay the fee. Moving into 2015, TSA s budget was decreased by $300.3 million below the fiscal year 2014 enacted level. The TSA PreCheck program is now more focused than ever to enroll new customers willing to pay the $85 to be part of the program. TSA hired private contractors to launch a massive enrollment campaign and plans to use them to recruit and screen millions of people into trusted traveler status. Currently only 598,184 people are enrolled in PreCheck and more than 1.3 million more have PreCheck clearance. TSA is hoping millions more will enroll to ensure PreCheck lines are fully used. Free Business Travel Evaluation Want to see if your company can bring down cost, free up time and take advantage of new technologies? Request information about our business travel programs from Williamsburg Travel Leaders, please contact us. (770) Contact Us Page 8