Companies are zeroing in on travel spending to generate revenue, rather than cutting travel across the board, as they grapple with the worst economy since the Great Depression, according to a new American Express (AMEX) survey of global senior finance executives.
AMEX says that even though more than 87 percent of respondents plan to spend less on business travel this year, 82 percent are likely to maintain or increase travel for meetings with new clients and 66 percent plan to maintain or increase travel for meetings with existing clients.
AMEX’s findings in the second annual American Express/CFO Research Global Business & Spending Monitor and a new paper titled “Managing Travel Spending in a Downturn,” offer specifics on business travel strategies in the recession.
“Yet while more stringent controls—such as tighter advance booking requirements– are being implemented, companies are continuing to emphasize face-to-face interactions for the most important parts of their business," the report reads. "Some company’s even report attempting to tie travel spending directly to revenue growth. “
Many businesses are continuing to invest in areas such as technology, marketing, and R&D to generate revenue and improve their operations once the recovery begins, AMEX says in its survey. The survey included 285 senior finance executives from the U.S., Europe, Canada, Mexico, Asia, and Australia.
“While companies are clearly focused on cutting where they can, they are spending when they should to become more efficient and keep revenue flowing,” said Gunther Bright, senior vice president, of the Global Client Group at American Express. “They’re also measuring themselves against new metrics that reflect today’s market reality, as well as a post-recession global economy.”
Companies in all regions remain pessimistic about the prospects of rapid economic recovery, with nearly 70 percent of respondents expecting to see recovery begin sometime in 2010. More than two-thirds of respondents predicted modest to substantial economic contraction over the next 12 months, and 63 percent reported that their companies’ capital investments will decrease in 2009.
When asked about changes in their workforce, 59 percent of respondents anticipate a decrease in headcount, AMEX said. “But companies are also taking actions now to avoid layoffs. Half the executives polled reported plans to freeze salaries and bonuses, while 32 percent plan to reduce benefits and 29 percent plan to cut salaries and bonuses. Twenty-four percent plan to reduce employee work hours or give furloughs and 16 percent plan temporary office or plant closures.
“Despite the weight of the economic downturn, many companies are taking proactive steps to ride out the storm and position themselves for recovery," AMEX reports. "The research revealed a clear divide between investments that companies feel are vital to controlling costs or increasing revenues, and those that may be delayed until a recovery begins."
When asked where it would be important to sustain spending, companies identified information technology (69 percent), employee benefits (64 percent), marketing/advertising/PR (57 percent), and research and development (54 percent). Other areas of investment, such as merger opportunities and third-party consultants, were much less likely to be rated as important categories to sustain spending.
Finance executives’ attitudes toward business travel told a similar story, AMEX said. Overall, 87 percent of respondents reported that their companies plan to spend less on business travel this year, with 44 percent expecting a decrease of more than 10 percent. Yet the corporate travel mix is shifting toward a heavy focus on revenue-generating travel: 82 percent are likely to maintain or increase travel for meetings with new clients or for business development while 66 percent plan to maintain or increase travel for meetings with existing clients.