TRAVEL PRICING IN 2010
Up, down or bouncing around?
With the Australian economy rebounding well ahead of its peers, optimism is in the air again. And thank goodness for that.
The buzz that is beginning to resurface in the business sector is a welcome change. But when it comes to corporate travel, will everything be as you would expect for the short term? Or are things about to become tricky? For those of you in the hot seat of purchasing your company travel, can you expect more of the good times or is it time to reach for the paracetamol?
How we've changed
Over the past year in particular, businesses have held the power play on price negotiation. With airlines, hotels and car hire companies slashing their rates to boost demand, your industry has been revelling in the cost savings with some amazing rates.
It's highly likely that you've reduced your Average Ticket Price (ATP) on flights and stayed in hotel rooms at the lowest rates in years. And you've probably had value-adds such as breakfasts and transfers thrown in for good measure!
Here's the three main ways in which travel purchasing habits have changed.
Assessing cost proposals
1. New policies
The latter half of 2008 saw many launch tighter travel policies with lower classes of travel (or low cost carriers), stricter guidelines on who could travel and use of restricted fares. Policy mandates became a reality rather than a myth. Nonessential travel became a thing of the past and minimum flight times for business class travel increased. The focus was on more advance bookings and anyone who deviated from policy came under the spotlight.
2. Airline & hotels for cheap!
Airlines offered drastically reduced tickets to fill their aircraft and in some cases reduced or removed their fuel surcharges. This period gave businesses the opportunity to maximise cheap fares and reduce their ATP. It also saw a growing number of companies evaluate an open skies policy.
In the hotel sector, we saw an increase in the utilisation of dynamic pricing strategies, accessing reduced best available rates and accepting non-last room availability prices. You made it clear to your preferred hotel companies that cost was the clincher and if their deal wasn't good enough, you would look elsewhere. This resulted in more hotel companies being prepared to negotiate on rates.
3. Online - bigger than ever
Your sector is a big fan of online reporting and booking tools, but in the past 12 months we have seen a robust transition to online travel and expense tools, which came with lower transaction fees and per trip processing costs.
Do our expectations stack up?
We are all aware that when it comes to travel pricing, we've had a very good run in recent times. And while the economy is starting to find its feet again, airlines and hotels are still struggling to maintain profits. So prices will stay low for some time yet. Right...or wrong?
In the hotel market, you should be safe to assume costs will remain competitive. Compared with 2008, hotel rates in 2009 have been substantially lower. And while occupancy levels are likely to lift sometime during 2010, industry experts predict there will be a lag time between this and any rate increases.
So don't stress, as you are probably going to enjoy great rates for some time yet. In fact the entertainment rates negotiated by Stage and Screen are substantially lower than rack rates. And what's more, Stage and Screen will be able to help you further re-negotiate your rates during the year head.
In the airline market, recent activity shows airfares may be set to chart a different course.
Within Asia Pacific, airlines have already begun to lift their fares - slowly but surely. More airlines are moving to close off discounted seats, and many have sold this allocation to leisure travellers who will be travelling late 2009 or early 2010.
We will expect to see a rise in your Average Ticket Prices and Cost Per Mile. Your saving grace is that there is likely to be intense competition on key routes like the trans-Pacific, where airlines will have pricing wars well into the new calendar year. For you - this will represent more flight options and schedules to choose from, at great rates.
How can you keep costs down?
No one likes to think they need an attitude realignment, but it's possible you may need one if you believe 2010 will be another year of amazing travel prices. The reality is that as the economy picks up, so too does the yield. And travel suppliers will not be slow in trying to claw back lost revenue. Corporate travel prices are not likely to drop any further, and in fact, they are more likely to increase. So what can you do to make sure the prices you are paying in 2010 still drive value for money?
- Consolidate - Make all your travel bookings with Stage and Screen so we can draw your attention to any weaknesses in your travel program. eg. Maybe your policy can do with an overhaul? Or you are not tracking your expenses as well as you could be? Or maybe your supplier contracts can be more cost-effective than they have been?
- Smarten your policy - Your travellers need to 'get on board' and do the right thing to save your overall travel spend. You need to educate them about booking early for the best fares, taking restricted fares where possible, and using the suppliers who look after you the best. Remind your travellers and bookers that if they act outside your policy, there will be consequences.
- Re-assess your airlines - Let Stage and Screen work out whether you can realise more savings by improving your consolidation with your existing carrier/s to meet their volume targets, or whether you should investigate an open skies policy.
- Go for broke on hotel rates - Choose hotels that offer you the lowest rate of the day if you can really make a saving. But remember to work with Stage and Screen to monitor any effect this has on your existing hotel agreements.
- Don't settle for less - Stage and Screen can regularly renegotiate with your suppliers and cut new deals to ensure that even as the market shifts, you always receive the best prices. Using our multi-sourcing product platform, we can test negotiated rates against best flexible rate of the day and book the most appropriate flight or room night.
- Look ahead - You need to get a handle on the future travel patterns of your business. For example, if you are expanding into new countries, your travel habits are obviously going to change. So make sure you use good reporting tools so you can look at your patterns and pinpoint where there might be room for improvement.
- Help your people 'see the light' - Stage and Screen can help you educate your travel bookers and travellers on the benefits of any changes needed to your policy. Also make sure you acknowledge or reward policy compliance as this is more important now, than ever.
- Benchmark your results - Work with Stage and Screen to continuously benchmark your travel performance and costs, including your ATP, Cost Per Mile, and hotel rates. Benchmarking is not only essential to understanding your own travel behaviour and areas for improvement, but can also be used to compare your performance with other companies with similar travel patterns.
Applying these strategies will ensure that as economic and travel industry conditions change, your own purchasing behaviour changes to consistently produce the highest possible savings.
