Costs of business travel putting the squeeze on many companies
Wednesday, February 13, 2013
As the global economic situation continues to worry investors, executives and government officials alike, some experts remain confident that business travel will increase during 2013. Although tentative signs of financial recovery have been observed in recent months, many companies are still exercising caution when it comes to their expenditure. According to The Wall Street Journal, some organizations are facing tough choices in terms of reducing spending on business travel.
Stricter policies
The news source reports that many firms are implementing aggressive new travel compliance policies that may significantly affect the business travel experience for executives. Some companies have instituted regulations that stipulate all employees must travel in economy class, regardless of their position or the duration of the flight. Others are urging workers to spend company funds like they would their own money in an attempt to regulate excessive spending.
Companies such as consulting firm Booz & Co. doubled their use of video teleconferencing during the past year, and other firms have trimmed down their lists of preferred hotels in certain destinations. These trends seem likely to continue well into the second quarter of 2013 and beyond, and as a result, more executives could begin choosing serviced apartments and corporate lodgings over suites at chain hotels.
No end in sight
For some organizations, the changing landscape of business travel is unlikely to provide them with any relief in the near future. According to the Global Business Travel Association, demand for travel services is expected to increase sharply throughout the year, but so too are rates. Marginal profit increases will be offset by rising travel costs, especially for airfare and accommodations.
"Travel buyers are being pushed to balance higher costs, the need to get travelers on the road, and corporate budget constraints," said Joseph Bates, vice president of research for the GBTA. "Strategic travel management programs will play a key role for companies dealing with a tougher negotiating environment and focused on getting the most out of their travel spending."
Hotel rates could rise by as much as 8 percent internationally and 3 percent domestically this year, while airfare is expected to increase by 4.6 percent in North America and 8.3 percent around the world. As companies seek to maximize their return on investment and keep travel costs at manageable levels, alternatives to corporate suites at chain hotels, such as corporate apartments, could become an increasingly attractive option for budget-conscious travel management professionals.