Conference call technology, ash clouds, air traffic control strikes, terrorist attacks and economic downturns; each have been described as ‘the final nail in the coffin of business travel’. But, while they have all thrown up challenges for the industry, recent results show the sector to be in rude health. According to the 2013 GBTA BTI Outlook report by the Global Business Travel Association, global spending on business travel will grow by 8.2% in 2014, and by 7.6%, 7.2% and 7.1%, respectively, in the following three years.
Stefanie Gallob, who works in the research and development department at the European Travel Commission, is equally upbeat. “Although leisure spending naturally represents the lion’s share of direct contribution [of the travel industry] towards the EU's GDP, business travel spending represents a significant driver at $284.1bn in 2013, and it is forecast to grow slightly faster than leisure travel in 2014 at 3.5%.”
Although a recovery is now under way, the business travel sector has undoubtedly become more price sensitive since the 2008 financial crisis. “Hotels wishing to attract business have to show real value,” says Willie Williams, director of sales and marketing for Taj Cape Town Hotel in South Africa. “Free high-speed internet and Wi-Fi have become the norm as more and more business meetings and events rely on enterprise-grade video conferencing to facilitate discussions. But there is still the need for private and luxurious venues for face-to-face interaction among high-level corporate delegations.”
A similar trend is emerging among the airlines, with customers now expecting a higher level of service, according to Ms Gallob. “Signs of a recovering economic climate point to a growing demand for business class on long-haul trips from North America and Latin America as well as Asia and the Pacific. Setting the standard in this development are Middle Eastern premium airlines, while others are increasingly investing in new technologies, such as in-flight Wi-Fi and an improved and seamless travel experience, to lure business travellers,” she says.
Carriers are also adding new routes to target business travellers. “The new Qatar Airways route from Doha is the first route between Edinburgh and the Middle East,” says Lindsay Brown, marketing manager of VisitScotland's business tourism unit. Two new seasonal routes into the Scottish capital have also been announced, with Swiss airline Edelweiss Air starting a service from Zurich and US-based United Airlines running a non-stop service to Chicago.
Competition is also heating up between the low-cost and legacy carriers, with no-frills airlines moving to take a bigger share of the business travel riches. In the Middle East, Jazeera Airways and Flydubai are among the airlines now offering an essentials-only business-class service. According to the 2013 Global Trends Report produced by global travel industry event World Travel Market, 87% of senior industry executives believe no-frills business-class cabins could be successful in other regions.
In May 2014, UK-based airline easyJet launched an inclusive fare for corporate passengers and travel bookers looking for one-step transactions. The airline says the new offering combines low fares with services important to corporate bookers, such as a bag and seat selection. “It will help us to compete more effectively with the legacy carriers, as well as providing further choice and value for the 10 million-plus corporate travellers who fly with easyJet every year,” says Ruth Spratt, the airline’s head of UK sales.
Easyjet's Ireland-based rival Ryanair is also targeting opportunities in the sector. “We’ll be launching a new business product later this year that will include premium allocated seating, fast-tracking through the airports and changeable tickets,” says Lesley Kane, Ryanair's head of corporate travel and groups. “We expect to double our business passenger traffic in the next four to five years, from 18 million passengers per year to 36 million.”
The airline recently signed an agreement with travel commerce platform Travelport, which opens up Ryanair's products to travel agents, companies and travel managers. “We are also in talks with other global distribution systems, [including] Amadeus and Sabre, to further broaden our distribution base, and expect to have at least one more agreement in place by the end of the year,” says Ms Kane.
The minutes matter
Further adding to the competition, at least for short-haul journeys, is the emergence of business-class options in the rail sector. “The rail industry is gaining momentum and improving business-class options, which put airlines under pressure to adopt the model of low-cost carriers,” says Ms Gallob.
One advantage of rail over air is that it can usually route passengers direct to the centre of a city, compared with airlines, which usually operate out of airports that are some distance from city centres.
Already a considerable 40% of UK-based Flybe’s passengers are business customers, but the airline is looking at further improving its offering to this market. Recently, it announced new business-friendly routes to London City Airport from Edinburgh, Inverness, Belfast, Dublin and Exeter.
“This will provide vital links for regional businesses straight to the heart of London’s financial district,” says Paul Simmons, the carrier’s chief commercial officer. “For City-based business travellers who need to access the UK regions and neighbouring European destinations quickly and efficiently, Flybe's new services will be significantly faster overall than travelling via Heathrow or Gatwick, or travelling by road or rail.”
It is not only growing competition that is fuelling developments in the business travel sector, but also new opportunities. Growth in emerging markets in particular is driving demand for business travel.
“This year’s GBTA BTI Outlook shows the importance that emerging markets such as China, Brazil and India play in the business travel marketplace,” says Tad Fordyce, head of global commercial solutions at financial services corporation Visa, a sponsor of the report. “With global business travel expected to experience continued growth in the next few years, China is projected to overtake the US as the top business travel market in the world by 2016.”
Ms Gallob notes that hotel chains are responding to the gradual shift towards emerging business travel markets, especially China. “An example of [a company] adjusting to this emerging segment is [French hotel group] Accor, which recently introduced its ‘Chinese optimum service standards’ to provide a service specifically designed to cater for Chinese guests.”
Opportunities are not limited to Asia, either. Taj Cape Town has just completed a multi-million rand refurbishment of the ABC Banking building in Cape Town, which stands adjacent to the hotel. Having taken over management of the building, Taj Cape Town plans to use it as a conference and banquet venue. “The city is already well equipped to cater for large conferences with thousands of delegates, but we identified high demand from both the international and the domestic market for a more intimate, sophisticated venue that can cater for up to 400 of the most discerning delegates,” says Mr Williams.
Elsewhere in Africa, demand for business travel is picking up. For instance, in Nigeria, despite ongoing security concerns, investment in business travel facilities is continuing. “It is amazing that even with such a reputation, great hospitality brands still find their way to Nigeria, and this only means there is money to be made in its hospitality industry," says Biodun Jaji, chief executive officer of Corporate Leisure, a Nigerian firm specialising in corporate hospitality.
"With a growing number of brands and hotels, it only means there are people that can pay for these hotel services," he says.