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Forecasts predict business travel will become risky proposition in Europe

Wednesday, November 28, 2012

Forecasts predict business travel will become risky proposition in Europe

It is difficult to escape the constant litany of economic gloom in the mainstream media. From the looming fiscal cliff in the U.S. to the continued instability of the eurozone, bad news in the financial markets is never far away. The direct correlation between the global economic situation and the business travel sector has been the subject of intense speculation in recent months, and according to data published by the ACE Group, business travel could soon be seen as an increasingly risky proposition, particularly in Europe.

A cautious approach
While many corporate travel managers are beginning to appreciate the value of serviced apartments when booking arrangements for executives, other aspects of business travel present these professionals with unique challenges. In addition to the existing financial pressure of securing suitable accommodations, reasonable airfare and other corporate travel essentials, insurance and liability concerns are becoming increasingly important to many travel management professionals.

The ACE report indicates that more than half of the 600 organizations surveyed believe business travel will become a substantial financial risk during the next five years. Tax and regulatory compliance complications were cited by 71 percent of respondents as potential risk factors for business travel. Insurance of executives on the road is also seen as something of a gray area for many companies, especially in emerging markets such as Asia.

"Traditionally, companies have tended to put in place one single insurance policy to cover their business travel globally," said Jeff Dowling, chief underwriting officer for accident and health for the U.K. and Ireland at ACE. "However, this might not always be the best or most compliant approach. Whether or not a claim for medical expenses can be paid to a European employee who falls ill in an emerging market where the insurer is unlicensed, for example, will depend on local laws. Our research suggests that Asia, Australasia and South America are becoming the business travel 'claims hotspots' for European companies. With the shift to emerging markets gathering pace, we expect this trend to continue."

Emerging opportunities
Dowling's assertion that emerging markets are likely to continue to develop as the global economy stagnates have been echoed by many other studies around the world. However, while some organizations see this expansion as a possible threat, other countries are capitalizing on the unprecedented growth in these markets.

According to The Independent, demand for corporate apartments in Australia is becoming greater as companies realize the economic potential of investing in this market. In fact, serviced apartments are rapidly becoming one of the fastest-growing areas of the Australian real estate development market. As such, corporate travel managers booking flights and accommodations in Australia and New Zealand may find that this type of accommodation will serve the needs of their executives more cost-effectively than chain hotels. In particular, cities such as Melbourne are expected to see unprecedented growth in the demand for corporate housing during the next three decades, and some economists believe that Melbourne will soon overtake Sydney as Australia's most important financial hub.

Changes in the real estate and hospitality industry are not limited to Australia, however. Bloomberg reports that some Japanese developers anticipate strong growth in the demand for managed housing in the coming years as the country's economy stabilizes.

Akira Mori, one of Japan's wealthiest property developers, plans to invest approximately $1.2 billion in the acquisition of residential real estate companies to cope with the projected demand for serviced apartments in cities such as Tokyo. Mori told the news source that falling property values and lower interest rates make now an ideal time to invest in the development of such properties.