Businesses look to travel bookings to help bolster the bottom line, new HRG air data shows
The fragility of the economy continues to impact business attitudes towards cost reduction, the latest HRG air data shows. The economic uncertainty of recent years has driven corporates to continue to refocus on their bottom line and to acknowledge that cost-effective corporate travel is a contributory factor to a healthy cost base.
“As businesses seek to reduce travel costs, we have begun to see a shift in business travel trends, with one in three of our business managers reporting revisions of client travel policy in the past two years.” comments Matthew Pancaldi, Global Client Management Director at HRG. “Whilst policy changes are still broadly driven by hours flown and destination, it is indisputable that there has been an overall move from Business to Economy Class, and within both Classes, a shift towards lower cost, less flexible fares, as companies look for actionable ways to reduce their corporate spend.
“As the economic recovery continues, we see our clients remain focussed on reducing their travel expenditure as they seek to manage costs and contribute to organisational profitability,” continues Pancaldi. “For domestic and regional travel, encouraging the appropriate use of advance purchase and restricted fares will continue. On longer-haul journeys our advice is to shop for the lowest fare of the day but also to secure competitive agreements with preferred suppliers on key routes. This will help to maintain low fares when increasing demand impacts availability and inevitably puts pressure on price. If a client is able to follow this advice they can ensure that fares are capped on routes where they have the most volume. This will help to mitigate the risk of fare increases, particularly in markets where demand is beginning to surge.”
- The data enables a number of key conclusions to be drawn. These are:
- A movement from Business Class to Economy Class for journey times of less than four hours
- In Economy Class there is use of more restrictive fares available
- In Business Class there is use of client negotiated corporate deals
- Lower Economy fares – clients should select partially restricted fares and so avoid total fare loss for changes
- In many cases some taxes are non refundable
- Use of client corporate deals are now reducing and are focused on international trips
- Clients should consider a new pattern for negotiation
A regular review of policy enables different requirements from within the organisation to be accommodated
Making the switch
2013 saw business travellers from the UK to other European destinations increasingly booking Economy fare trips, with a 35% switch from Business Class to Economy, year on year. From the UK, the greatest reductions in Business Class bookings were for flights to Sweden (61%), Netherlands (43%) and Norway (42%) with Italy and Switzerland also witnessing a drop of over 40%.
For those businesses continuing to make Business Class bookings, HRG has also seen some changes, with an 8% move towards more restrictive tickets, in a bid to keep costs down.
As a result of the general overall shift from Business to Economy Class, however, almost 60% of the top 50 air routes from the UK have seen a drop in average ticket price in the period from January 2012 to December 2013.
Pancaldi continues: “Despite this, only domestic UK trips saw an actual fare decrease – just over 4% on average – across all travel Classes. Travel to the rest of Europe, North Atlantic and to the rest of the world all saw overall fare increases of between 3 to 5.5%. In tandem with these rises, and via a separate study we recently conducted, average taxes applied per ticket have undergone a significant increase, with a 10% year on year increase since 2010.
In helping our clients change their travel policy to ensure more restricted tickets and Economy Class tickets are booked, clients are paying on average less for their air tickets this year compared to last. Overall, average fares, blended by Class, have either fallen or remained static, despite increased average ticket prices. So, the key driver is the shift in Class, rather than the reduction in fares.”
“Our latest trends have really demonstrated the benefits of considering a change to the determined use of cabin class. As we see a growing number of Premium Economy alternatives available from carriers this will provide a welcome addition to the cabin class conundrum some clients face.
“As ever we are urging our clients to really stay on top of their air travel policy and to consider flexing and adapting policy to accommodate different requirements within the organisation so that the needs of market and or business unit can be reflected. This will enable a regular review of the overall policy framework and help budget holders determine what is right and works for their areas of responsibility.” Pancaldi concludes.
For further information, please contact:
Hogg Robinson Group
Tel: +44 (0) 1256 312 688
Hogg Robinson Group
Tel: +44 (0) 1256 312 671