Business travel up in the air

Many businesses are looking to cut their travel costs by locating conferences to destinations within New Zealand. Photo / Doug Sherring

Business travellers are often spoiled for choice, but many are now having to make some tough decisions about how they spend their time on the road and in the air.

As companies tighten their belts, travel budgets are often hit first. Senior employees are expected to maintain client relationships and monitor off-site projects without leaving the office, the city or the country.

At the same time, firms are being encouraged to become more global in their focus. Business travel could be booming; instead, firms are canning trips that do not directly generate sales.

New Zealand is now hosting fewer business travel visitors from Asian countries, but the important Australian and United States markets are intact, for now at least.

Domestic business travel is also secure; in fact, travel agents report that corporate bookings are higher than they were at the start of last year.

Transtasman travel is in good shape, too, with airfares to Australia a fifth cheaper than they were a year ago. These are all promising signs, but they could change quickly, according to Ministry of Tourism general manager Ray Salter.

"In December, business travel from the United Kingdom to New Zealand was down by 44 per cent compared to the previous year. But in the same month, arrivals from the United States were down by only 5 per cent.

"We know that the United States was hit hardest by the economic crisis, so we expected to see more negative growth in that market. We do know that, overall, business travel has fallen by 5 per cent in the past year."

Previous surveys have shown that seasoned Kiwi business travellers have no problem securing company approval for luxury travel. They are likely to forego those trimmings in the coming months.

Exotic destinations for corporate events are being swapped for traditional locations such as Auckland and Sydney, which do not raise eyebrows in the finance department.

Unlike leisure-seekers, corporate travellers do not have time to scout for cheap promotional fares online.

Travel agents are scrambling to find new ways to keep those business travellers on their books. As a result, Flight Centre is opening a retail chain dedicated to the corporate market.

But it seems the real winners are budget airlines, which have been buoyed by an increase in business travel. In response, many mainstream airlines have slashed their fares to lure back high-paying customers.

While the big players expect a drop in demand in coming months, low-fare outlets such as Jetstar expect to make gains in the business travel market. Smart corporate travellers can consolidate their travel expenditure, according to House of Travel's group sales manager, Brent Thomas.

"Many small and medium-sized companies have limited travel budgets and they are considering the options available, compared with some of the larger companies which tend to stick with mainstream, tried-and-true travel operators.

"The average business traveller is getting good deals. The dollar has weakened, which creates incentives for exporters to get out into some of those new overseas markets. They can't do that from behind a desk."

Incentive trips are offered by retail businesses to reward loyal, high-performing staff and to encourage workers to meet sales targets. Those lavish annual trips have become part of workplace culture in many firms, but they are also under threat because of their high cost. Go Conference and Incentive Management says it can organise cocktails atop the Eiffel Tower, breakfast with stingrays in Tahiti, or rickshaw tours in China.

Its founder, Wayne Harris, says that despite the current economic climate, demand for reward travel is still high.

"A year ago, we saw the economic tidal wave coming. We said to our clients, 'Let's get conservative'. We can do that by reducing the size of the groups that travel.

"We can pick a destination that is closer to home, or cut back on the value of the reward or length of the stay. We can choose different experiences which have lower budgets, or we can make reward trips less frequent.

"These options can keep the sales momentum going, without spending excessively."

Government-sponsored junkets have been off the agenda under National, but Harris challenges the notion that corporate meet-ups are superficial. He believes that - "apart from sending more memos to each other" - there is no easy alternative to bringing staff together in one place.

Group travel providers are now devising fresh local experiences for companies wanting to deliver trips that are affordable, yet classy, at home. While that could come at a cost to airlines, it may boost local accommodation and service providers.

Hospitality Association chief executive Bruce Robertson is optimistic about the payoffs for his industry.

"The accommodation market here is already tight, and our rates are competitive. There's no point attracting business travel by cutting rates, because if you do that, you won't be able to deliver top service.

"New Zealanders know that this is the time to support domestic travel, and business travellers are continuing to look for convenience and efficiency here at home."

As a last resort, some companies are exploring ways to remove the need for employee travel altogether.

Telecommunications firms such as Agile report growing interest in networking options such as videoconferencing. Even so, this kind of interaction can be nightmarish for firms with offices in many locations.

Another option is to enter distribution deals and sales partnerships in foreign markets as a cost-effective way to remove the need for regular trips to check routine operations.

New Zealand's tourism industry is now focused on attracting business travel from other markets. In the long term, the creation of a national conventions centre in Auckland could be beneficial.

International conference delegates already inject more than $250 million into our conferences and incentives sector each year, and while they are here, business travellers spend four times as much as leisure tourists.

Even so, our existing venues cannot host more than 1500 delegates. That puts us at a big disadvantage compared to other major destinations in Australia and Asia, says the Tourism Industry Association's chief executive, Tim Cossar.

"We just don't have the facilities to host those large events. We have been lobbying for the creation of a national conventions centre, and the Government has put that on its agenda.

"It would be a valuable piece of tourism infrastructure, because events are a high-value part of the industry, and they attract business travellers.

"If we do large events well, more markets will choose us. But that'll take time. Right now, the worst thing we could do would be to stop marketing our country overseas. We need to remain competitive."

In the short term, there are few solutions to boost the business travel sector, but travel operators say that once the economy recovers, it'll be business as usual. Business travellers are advised not to dramatically change their consumption simply to compensate for slashed travel budgets.

It is in the interests of travel operators to say that, but Travel Agents Association director Peter Barlow believes the industry's outlook is not as bleak as it seems.

"We've been through recessions, overseas conflict, world health crises and terrorist attacks. At those times, companies tend to hunker down, as they are doing now. But business travellers know how to ride those waves. They are smart about heeding the signs and being ready when times change for the better.

"If anything, they are thinking more carefully about the reasons for their travel, rather than fussing about which airline class they travel in."