For all its promise of opportunity, 2019 will be the year to manage costs taking into consideration the unpredictability of our current economy.
From the challenges of Brexit, to talk of trade wars, 2019 will prompt companies to implement sound planning and precise management of resources and costs.
One aspect of the business environment to watch is the development of travel prices in 2019 as they are continuing their steady rise onwards and upwards.
Let’s take a look at the big picture and then consider what actions to take to ensure smoother financial operations within your specific business.
Development Of Travel Prices In 2019 – An Overview
To predict what will happen to travel budgets in 2019, we turn to the annual global travel estimates provided by the Global Business Travel Association and Carlson Wagonlit Travel.
Beginning with airfare costs, we can observe an expected global increase in pricing of around 2.6% next year.
The main continental outlier? Western Europe facing the brunt of this rise with an expected 4.8% increase in airfare expense. This implies that careful planning to maximize returns from business travel and implementation of smarter travelling strategies are highly recommended for companies operating in most Eurozone countries.
It is important, however, to take into consideration specific country outliers such as India, New Zealand, Norway, Germany and Chile since these countries are facing the highest increment of airfare expenses.
Industry speculation suggests that overall pricing increases flow from issues such as rising fuel costs, increased tourism, ongoing pilot shortages around the world, as well as talk of trade war between the US and China.
On a more positive note, it is worthy to mention that Eastern Europe, Latin America and Middle East & Africa are, on average, still facing lower airfare pricing. This could definitely bring interesting business opportunities to consider for industries operating in international marketplaces.
Airfare expense is not the only travel expense on the rise. Current analysis strongly suggests a considerable rise in hotel costs as well.
The annual global travel report found:
“As pressure increases on accommodation providers, corporate travel buyers will face challenges in their ability to secure rooms at their preferred properties, much less at their preferred rates.”
The global increase in hotel rates is predicted to be around 3.7% with Western Europe again leading the pack with an expected hike of around 5.6% This increase in hotel pricing can be mainly attributed to increase in demand due to the surge of business travel around the world and tourism.
Considerations Arising From The Rising Business Travel Prices
Without a doubt, companies with higher travel expenditure need to take into consideration the expected increases in airfares and hotel costs in 2019 and plan accordingly:
- Does the travel need to occur at all?
- If so, how does the business best manage business travel expenses?
With so many web conferencing tools available, it makes sense for any business leader to ask whether the scheduled business trip is actually necessary.
For internal company meetings, can the meetings be converted into online web seminars or tele-conferences?
For sales and business development, in-person meetings are always more likely to close a deal.
However, a savvy sales leader will also take every opportunity to improve their sales lead qualification process and online conversion without increasing the business travel required.
Again, is web conferencing an option before sending a team member out of the office for a few days where less than 50% of their time will actually be spent with the sales lead or client? Is there any strategy your business can implement to incentivize online conversion of leads without physical travel?
It is still important to mention that business travel may be inevitable in some cases, and can improve the relationship between the client and the vendor. In these scenarios it is perhaps also important to improve our management of business travel expenses.
In times of ever-increasing business travel prices, proactive businesses don’t wait for the annual review – they schedule regular time to review all travel vendors and supplier agreements to ensure the best deals are available to their corporate travellers.
As Scott Hyden (SVP/Chief Experience Officer – Roomit by CWT) suggests, there are various ways to reduce travel costs while maintaining the same amount of travel, such as examining hidden room costs, utilising midscale hotels, and more.
In addition, business leaders ensure that their business travel policies and expense management processes run like clockwork by replacing clunky old manual approval systems that rely on paperwork with streamlined, automated expense management systems.
Business Travel Prices Are Rising – Be Prepared
With global airfare costs set to increase by 2.6% next year and hotel rates to go up by 3.7%, you need to take action in order to protect your operating margins.
Manage the demand for business travel and then optimise your expense management processes for the best financial return on the travel that does occur.
In the meantime, keep in touch with us here on the Declaree blog as we continue to monitor the world of business travel and expense management.