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Volatility in IT sector impacting business travel

Monday, December 10, 2012

Volatility in IT sector impacting business travel

For many organizations, business travel is an essential way of doing businesses. Despite advances in technology such as video conferencing, nothing compares to meeting people face-to-face and closing the deal in person. However, while interest in alternative executive accommodations such as serviced apartments and corporate housing remains steady, many hotel chains are reporting fluctuations in reservations due to caution in market sectors such as information technology (IT).

Hesitant outlooks
While many foreign investors see emerging markets such as India as the next great frontier in the global economy, many Indian hotels have reported a sharp decline in the number of business travelers choosing to stay in their properties. This drop has been partially attributed to the cautious outlook in the country's IT sector.

The Financial Chronicle reports that far fewer IT professionals are traveling domestically and internationally in light of the prolonged economic uncertainties observed around the world. Many major players in India's hospitality industry have noticed this hesitation and the resulting impact on hotel occupancy.

"Business travel continues to be shaky and slow. The lull from the IT sector continues and the macroeconomic conditions in Europe and the U.S. has been impacting the sector," said Sanjay Sethi, chief executive officer and managing director of a major Indian hotel chain, as quoted by the news source. "The decline from the IT sector is around 20 percent. The sector is directly impacted by the global economic developments. Travel itself has come down. Further, except for the top management people, most of the traveling IT professionals have been using serviced apartments than hotels."

Examining the alternatives
Just as many executives in India are searching for ways to reduce the travel spending, such as choosing corporate housing over commercial hotel chains, this trend is being observed elsewhere around the world.

Supply Management reports that, according to recent data published by American Express (Amex), the cost of traditional hotel rates is an area of great concern to many travel management professionals. More than half of the professionals polled by Amex said that hotel rates were an area of significant concern with regard to corporate travel budgets, and almost 90 percent of respondents indicated the cost of accommodation was their primary concern when setting and regulating internal travel policies. This, in turn, could spark renewed interest in cost-effective alternatives such as corporate suites in serviced apartment buildings.

Additionally, the survey identified cost control as a primary objective of many travel management professionals moving into 2013, with approximately 41 percent of respondents indicating that itemized travel budgets would be implemented with greater scrutiny in an attempt to maximize the return on investment of corporate travel next year.

Worldwide trends
Despite the fluctuating market conditions reported in emerging markets such as India, other nations around the world continue to face substantial challenges in balancing the necessity of business travel with uncertain financial forecasts.

Business Travel News reports that air passenger traffic at European airports was down 1.3 percent in October, a substantial decline for a sector already facing lingering financial uncertainty. Olivier Jankovec, director general of the Airports International Council (ACI) Europe said that while economies such as Ireland and Portugal had reported modest gains in the number of passengers using air travel, other nations like Greece, Italy, Poland and Slovenia continued to struggle in light of lasting economic struggles.

Interestingly, outside of the eurozone, countries such as Iceland, Moldova, Russia and Turkey have reported strong gains in the aviation sector, indicating the possibility of economic stability returning to these regions. Data from ACI-Europe suggests that these countries have experienced double-digit growth in both the business travel and recreational tourism markets.