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AMEX: Europe Reports Budget Cuts, Video-Conferencing

November 18, 2009 By: George Dooley
 


business travelA new report from American Express Business Travel (AEBT) and its 2009 European Barometer, reveals an 18 percent fall in budgets reported on average with 66 percent of companies reporting a reduction (-31 percent) of their travel budgets. Twenty-three percent have witnessed no change and a mere 11 percent have noted an increase (of +23 percent). The Barometer highlights the impact the global economic crisis has had on business travel expenditure, Interestingly, the survey also finds that 70 percent of organizations are implementing alternative ways of travel including video-conferencing.

"Faced with an unprecedented economic crisis, we are seeing a new normal emerge with corporate behavior," said David Herrick, senior vice president and general manager of Business Travel EMEA. "We’ve seen travel policies tighten up, purchasing controls increase and employee travel driven by client retention needs where as a focus was on driving new business. Travel management companies (TMC) play a key role in helping companies maximize savings without sacrificing the tangible benefits of a robust travel and entertainment program. Undoubtedly, the economic crisis has placed a significant strain on companies, who are having to think about their travel spend in a much smarter way and will continue to do so as we move into 2010. TMCs will become increasingly relevant as companies redefine their business travel needs."

The Barometer reveals a marked change in the reasons companies give for employee travel. During the past year, organizations have placed greater importance on using travel and entertainment (T&E) spend for maintaining existing clients, AEBT said.

Ahead of trips for internal meetings (29 percent) and meetings with suppliers (8 percent), on average, 57 percent of European companies' travel budgets are dedicated to maintaining or acquiring clients and markets. This is a trend that affects small-to-medium sized enterprises (61 percent) more than companies with budgets exceeding $29.9 million (47 percent).

"[The] 'best buy' strategies lead the way in terms of measures that have immediate effect, with restricted fares or advanced reservations also being cited," AEBT says. "Smaller companies with travel budgets of less than $7.5 million tended to prefer the immediate effects of 'best buy' strategies, the use of the preferred TMC, and controlling seminar and conference expenditure. Where budgets exceed $29.9 million, companies have combined more structural measures such as the renegotiation of supplier agreements, the increased use of preferred TMC with 'best buy' and the increase of restricted fares."

Top 10 T&E Saving Practices include:
*    Best buy strategies
*    Use of preferred TMC
*    Renegotiation of supplier agreements
*    Use of alternatives to travel (video conferencing)
*    Tightening of travel policy
*    Advance reservations
*    Increased use of Self Booking Tools and the Internet
*    Greater use of preferred suppliers
*    Use of restricted fares
*    Control of MICE budget

European companies have tightened their purchasing control and travel policies, AEBT says.

*    Supplier negotiations are becoming increasingly global, with the majority identifying air as the top category (81 percent) for international supplier agreements. The globalization of agreements, which had already seen an increase in 2008, is now at 94 percent for companies with budgets exceeding $29.9 million.

*    Eighty-nine percent of companies surveyed say that they now have a single travel policy and are including additional elements within the policy. Video conferencing is now an alternative to travel featuring among 70 percent of companies, and the inclusion of rules relating to incentive conferences or trade fairs, which is a cost item that has not been widely controlled to date.

*    Environmental policies have reduced in priority, with only 18 percent of businesses indicating that they have put provisions in place.

*    Online usage has increased – the internet continues to gain ground as an important means of booking business travel (60 percent of companies said they use online tools, up from 57 percent in 2008).

However, despite tighter controls, 55 percent of companies still give employees partial autonomy for the travel expenses they incur.

Companies are placing greater emphasis on gathering and consolidating reporting data, with 61 percent reporting that they have all the business travel spend information compared to 37 percent in 2008.

Companies are increasingly using several sources to ensure accurate reporting.  The role of the TMC as a consolidator is acknowledged as being essential (77 percent), followed by corporate card providers, (41 percent), the internal financial system (41 percent) and travel suppliers such as carriers and hotels (12 percent).

Whilst 2009 has provided companies with a strong incentive to identify and activate all possible optimization routes and sources of saving, and the TMC is critical to this, only 24 percent have implemented an assessment to measure effectiveness (other than large corporations with budgets of over $29.9 million).

This indicates a discrepancy between the increasing expectation of TMCs to deliver tangible cost savings and the fact that companies do not always measure their effectiveness, AEBT says.


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