Travel Management Priorities 2012

CWT PerspectivesTravel Management Priorities for 2012

January 2012

Travel Management Priorities for 2012 | 3

Contents

Executive summary .................................................................................................................................................................5

Business travel market trends ..............................................................................................................................................8

GDP and business travel going East ............................................................................................................................................. 9

A mixed outlook for air capacity ..................................................................................................................................................11

Ever more complex travel spend .................................................................................................................................................14

All eyes on airline direct connect ................................................................................................................................................17

Occupancy driving hotel negotiations .......................................................................................................................................18

Even easier rail travel ......................................................................................................................................................................21

Opportunities ahead in car rental ...............................................................................................................................................24

More strategic meetings and events management ...............................................................................................................26

Rising prices in most categories and regions ..........................................................................................................................29

Value in social media and mobile applications ......................................................................................................................31

Recommendations for 2012 .........................................................................................................................................................33

Survey results: travel managers' priorities for 2012 .....................................................................................................35

Priorities and planned measures: total sample ......................................................................................................................38

Driving air and ground transportation savings .................................................................................................................................... 38

Improving traveler compliance ................................................................................................................................................................. 40

Optimizing hotel spend .............................................................................................................................................................................. 41

Optimizing online adoption ....................................................................................................................................................................... 43

Optimizing the travel policy ....................................................................................................................................................................... 44

Enhancing the traveler experience ......................................................................................................................................................... 45

Developing key performance indicators ............................................................................................................................................... 46

Further consolidating the travel program ............................................................................................................................................. 47

Addressing safety and security needs ................................................................................................................................................... 49

Tackling meetings and events................................................................................................................................................................... 50

Making the program more environmentally friendly........................................................................................................................ 51

Priorities and planned measures: regional highlights ..........................................................................................................52

Asia Pacific ....................................................................................................................................................................................................... 52

Europe, Middle East and Africa ................................................................................................................................................................ 53

Latin America .................................................................................................................................................................................................. 54

North America ................................................................................................................................................................................................ 56

Global travel managers ............................................................................................................................................................................... 57


Executive summary

2012: a shifting landscape requiring strong foundations

Travel managers who have faced market turbulence over the last few years should be steeling themselves for another challenging year that will underline the importance of an effectively managed travel program.

Global economic recovery may be slower than previously anticipated, according to the International Monetary Fund, which has revised its forecast for GDP growth down to 4% (stable compared to 2011).1 These global figures hide considerable differences between countries, however, with weak progress in advanced economies contrasting with double-digit growth in China and India. Although oil prices may be lower than in previous years and air capacity looks set to rise slightly, higher travel costs can be expected across regions.

In air travel, international traffic looks set to grow in all regions, especially to and from Asia Pacific. Nevertheless, airlines will maintain a tight capacity environment, and cuts will continue on domestic routes in the United States. In all markets, buyers will need to manage ancillary fees and high fuel surcharges, while new credit booking charges and the inclusion of airlines in the European Union’s Emissions Trading Scheme will add to the cost of flights to and from E.U. airports.

Hotel occupancy will continue to pose a challenge in many cities, making last-room availability agreements advisable to secure rooms for travelers. London in particular will require special attention during the 2012 Summer Olympic Games. Increases are likely to continue in average daily rates, ranging from negligible to double figures, depending on the city.

Ground transportation should bring some new good news for the travel program, with car rental prices possibly falling in some markets as consolidation and competition intensify. At the same time, high-speed rail networks will continue developing around the world, notably in China and some European countries. Buyers will have to watch for higher prices though and progress in intermodal travel remains slow.

In the meetings and events market, buyers can expect more scope for regional contracts in Europe but less flexibility on cancellation and contrition fees in North America. Average group size and spend will likely increase in North America but decrease in Europe, where many organizers will favor national over international destinations. Hybrid events combining physically present and remote attendees will be more common, and companies will increasingly adopt a more strategic, innovative and technology-driven approach to M&E management while seeking synergies with the transient travel program.

Finally, 2012 promises to bring improvements to the traveler experience as more dedicated travel management apps come onto the market and social media are used more commonly to share information relevant to business travel.

1 World Economic Outlook, International Monetary Fund (September 2011)

6

CWT has highlighted 10 key trends likely to impact the corporate travel market in 2012, as summarized in Figure 1:

Travel managers' priorities for 2012

For the fourth year running, CWT surveyed clients to find out which areas of the travel program they intend to focus on and which key actions they plan to implement in the year to come. To best manage the challenges ahead in 2012, travel managers intend to focus above all on four key foundations of the travel program: driving air and ground transportation savings, improving traveler compliance, optimizing hotel spend, and optimizing online adoption. These areas represent major savings opportunities even for the most mature travel programs, given shifting market dynamics and the need for ongoing efforts to optimize performance. This explains why they come high in the rankings every year. (See Figure 2 for a comparison with 2011.)

At a regional level, some differences in results reflect the supplier offering as well as program maturity. These differences concern both the top priorities and travel managers’ planned measures in these areas. For example, travel managers for Asia Pacific place more importance on optimizing hotel spend, no doubt due to the very high occupancy rates in some cities, which makes availability harder to secure and keeps prices high. Travel managers for Europe naturally place more focus on managing the trade-offs between air and rail, given the importance of rail travel in the region. In Latin America, the great majority of respondents say they will be driving air and transportation savings in a context where competition is being shaken up by TAM, the region’s largest airline, completing its merger with LAN, another major player. In North America, more travel managers intend to seek synergies with meetings and events spend. Finally, global travel managers will make improving traveler compliance their top priority to support the efforts already made to optimize their travel policies.

Figure 110 key trends for 2012

MARKET SHARE

Even easier rail travel

Rising prices in mostcategories and regions

Occupancy drivinghotel negotiations

All eyes on airlinedirect connect GDP and travel going East

China +13%

+14%India

2

2

A mixed outlook for air travel

Ever morecomplex

travel spend

Opportunities aheadin car rental

RESTAURANT

More strategicmeetings & events

management

Value inmobile andsocial apps

Within Asia Pacific, strong increasesin business travel spend are expected

TAXI

TAXI

TAXI

Meals/Drinks Extra Luggage

Payment Charge

Wifi/Breakfast

MARKET SHARE

Ever mcom


Figure 2Travel managers' priorities for 2012

Breakdown by scope of responsibility

2012ranking Priority Respondents

2012 vs. 2011 ranking

2011 ranking

3

1

4

2

6

5

7

9

8

10

11

1

2

3

4

5

6

7

8

9

10

11

Driving air and ground transportation savings

Improving traveler compliance

Optimizing hotel spend

Optimizing online adoption

Optimizing the travel policy

Enhancing the traveler experience

Developing key performance indicators

Further consolidating the travel program

Addressing safety and security needs

Tackling meetings and events

Making the program more environmentally friendly

63%

68%

60%

56%

42%

39%

34%

33%

27%

22%

12%

Asia PacificCompliance

Hotel

Online adoption

Travel policy

Air & ground

Traveler experience

Safety & security

Consolidation

KPIs

Environment

M&E

75%

66%

53%

53%

47%

53%

38%

34%

25%

25%

13%

Europe, Middle East& Africa

69%

67%

60%

63%

45%

34%

28%

26%

23%

24%

13%

Air & ground

Hotel

Online adoption

Compliance

Travel policy

Traveler experience

KPIs

Consolidation

M&E

Safety & security

Environment

Latin America

83%

73%

43%

43%

57%

37%

23%

23%

17%

17%

3%

Air & ground

Hotel

Compliance

Online adoption

KPIs

Consolidation

Traveler experience

Travel policy

M&E

Safety & security

Environment

North America

73%

58%

46%

46%

46%

42%

36%

39%

27%

30%

12%

Compliance

Air & ground

Online adoption

Travel policy

Hotel

Traveler experience

Consolidation

KPIs

Safety & security

M&E

Environment

72 travel managers33 travel managers30 travel managers123 travel managersSample size: 32 travel managers

Global

79%

60%

54%

49%

39%

42%

38%

44%

32%

24%

8%

Compliance

Online adoption

Air & ground

Hotel

Travel policy

Consolidation

KPIs

Traveler experience

Safety & security

M&E

Environment

Notes:

CWT asked travel managers to select their top five travel management priorities for 2012 and rank them in order of importance. The responses were weighted to take into account how often each priority was ranked 1st, 2nd, 3rd, 4th or 5th. The “Respondents” column shows the proportion of travel managers who included the priority in their top five.

“Driving air and ground transportation savings” was identified as a priority by fewer travel managers than “Improving traveler compliance” (63% compared to 68%) but ranked higher overall because it figured higher in travel managers’ top five.

Regional results include country/regional travel managers.

Source: CWT Travel Management InstituteBased on a survey of 290 travel managers worldwide (October – November 2011)

8

Business travel market trends

What to expect in 2012?

In an uncertain economic environment, travel managers need to monitor changes closely to ensure they are getting the best deals from suppliers and the right performance from their travel program. With this in mind, CWT has identified 10 key trends likely to impact the business travel market in 2012:

GDP and business travel going East

A mixed outlook for air capacity

Ever more complex spend

All eyes on airline direct connect

Occupancy driving hotel negotiations


Opportunities ahead in car rental

More strategic meetings and events management

Rising prices in most categories and regions

Value in social media and mobile applications

Each of these trends will be discussed in the following pages, along with some recommendations for travel managers planning their program for the year ahead.


“Western” has long been synonymous with economic power, but this label is gradually weakening as the world's most advanced countries face uncertainty at home in contrast with remarkable growth in developing countries, especially in East Asia. Global economic power is gradually shifting to the East, with Asia Pacific expected to account for 43% of the world’s GDP by 2020.

2 Amadeus Total Demand by airconomy (June 2011)3 CAPA – Centre for Aviation, and U.S. Department of Transportation (September 2011)4 Global Business Travel Spending Outlook 2011‒2015, GBTA Foundation and Vantage Strategy (August 2011)

Figure 3Forecast GDP growth

Source: World Economic Outlook, International Monetary Fund (September 2011)

Implications for the travel program

What does this mean for business travel? Travel patterns will evolve, and buyers will find a wider offering from airlines and hoteliers along with more competitive prices on the horizon. However, air capacity and hotel occupancy will not ease noticeably:

A strong increase in Asia Pacific travel. In fact, global traffic should continue to grow fastest to and from this region. As an indication, air passenger volume has already risen by 13.4% between Asia Pacific and the Middle East, 6.1% between Asia Pacific and North America, and 4.8% between Asia Pacific and Europe from first quarter 2009 to first quarter 2011, compared to a 1.0% drop in volumes between North America and Europe.2 Moreover, traffic between China and the United States grew by 200% over a decade to a record 2.7 million passengers in 2010 (+30.5% year-on-year).3 Within the region, business travel spend is expected to grow by an impressive 14% in India and 13% in China between 2011 and 2012.4

GDP and business travel going East

10

Figure 4World’s busiest airports (2011)

1

Atlanta

Hartsfield

-Jackson

ATL

69.7

4.0

Beijing

Capital

PEK

58.0

4.8

Chicago

O’Hare

ORD

50.2

-0.6

London

Heathrow

LHR

52.7

5.9

Tokyo

HND

45.5

-4.6

Los

Angeles

LAX

46.8

5.8

Paris

Charles

de Gaulle

CDG

46.4

5.1

Dallas

Fort

Worth

DFW

43.5

2.1

Frankfurt

FRA

42.7

6.7

Denver

DEN

40.0

1.1

2 3 4 5 6 7 8 9 10Rank

Airport

Passengers

(millions)

Code

% change

(vs. 2011)

5 CAPA ‒ Centre for Aviation (January 3, 2012)6 CAPA ‒ Centre for Aviation, and Ascend (September 15, 2011)7 Global Hotel Review, STR Global (September 2011)

A dynamic aviation market. Growth in air traffic naturally follows economic expansion and there are a number of striking illustrations of strong activity in the region. Currently, Beijing Capital International ranks 2nd among the world’s busiest airports (Figure 4), compared to 14th five years ago, and the city is set to become the world’s largest aviation hub (all airports combined), thanks to a second airport at Daxing, south of Beijing, which began construction in 2011.

Another illustration is the region boasting the world’s fastest growing domestic aviation market: India. According to CAPA – Centre for Aviation,5 India’s domestic air traffic had grown by 17.6% to 55 million passengers in the first 11 months of 2011, completing 15 consecutive months of double-digit growth. Strong performance should continue, with IATA forecasting a compound annual growth rate (CAGR) of more than 16% between 2010 and 2013.

While legacy airlines are increasing their service to key destinations in the region, many low-cost carriers are launching new services especially on international routes, which will almost certainly impact prices. (See Page 12.)

Finally, Asia Pacific airlines are expanding or renewing their fleets more noticeably: among the top 30 airlines by widebody deliveries planned from September 2011 to September 2012, 14 are from Asia Pacific, compared with five from Europe, four from Latin America and three each from Middle East/Africa and North America.6

Given the continued strong demand, Asia Pacific business hubs register some of the world’s highest hotel occupancy rates, making room availability an ongoing challenge for the travel program. According to STR Global data,7 the year-to-date rolling average in September 2011 reached 84.4% in Singapore, 82.3% in Hong Kong, 82.0% in Sydney and 80.7% in Seoul.

Source: Airport Council International (based on passenger figures, January ‒ September 2011)


A mixed outlook for air capacity

A tough environment for airlines looks set to continue in 2012, with very slight profits across the industry and only cautious increases in capacity—a situation that could quickly switch to declines if the economic context worsens.

International growth vs. domestic decline

Overall, global air capacity is expected to remain flat or slightly increase (by 0.6% to 3.1% in a more optimistic scenario, compared to 6.0% in 2011, according to IATA8), anticipating slower growth or even a decline in traffic (between -1.3% and 2.9% compared to 4.2% in 2011). More than ever, established airlines will practice capacity discipline to protect margins, focusing on matching demand on profitable routes while cutting any services proving to be a drain on resources. In many cases, the increases will be on international routes, and the cuts on domestic service.

Figure 5Examples of planned capacity developments (mid December 2011 – mid May 2012)

Source: CAPA Outlook (December 2011)

ChinaSouthern

ChinaEasternAirlines

Lufthansa

TAM Airlines Qantas Cathay Pacific

All NipponAirways

AmericanAirlines

Air France BritishAirways

+7.7% +5.9% +4.0% +2.7% +1.7% +0.1%+10.3%

+ + + + + + +

-0.3%

--0.6%

--3.2%

-

Strong growth is expected on some international routes. IATA revealed in its November 2011 monthly brief that international capacity year-to-date had increased by 8.3% year over year9 and was likely to continue growing in 2012. GBTA forecast a 3.3% increase in the number of trips abroad, which it believes will be reflected in a 7.7% increase in international travel spend.10

Some major international routes will see significant capacity increases as carriers introduce superjumbos. For example, Singapore Airlines has announced a 25% increase on the New York JFK–Frankfurt–Singapore route from January 2012.11 At the same time, low-cost carriers will continue to aggressively expand, particularly on international routes. (See Page 12.)

8 Financial Forecast, IATA (December 2011)9 Air Transport Market Analysis, IATA (November 2011)10 Global Business Travel Spending Outlook 2011‒2015, GBTA Foundation and Vantage Strategy (August 2011)11 News release, Singapore Airlines (September 19, 2011)

12

New low-cost services

2012 will see increased competition on many domestic and international routes as new low-cost carriers (LCCs) enter the market and existing players expand their offerings.

Many announcements concern Asia Pacific:

Jetstar Japan will be Japan’s third new low-cost carrier, offering domestic routes by the end of 2012 and short-haul international flights by 2013. The carrier has said it will consider any destination within four to five hours of Japan and is currently planning routes to China, South Korea and the Philippines. Jetstar Group, one of the main low-cost brands in Asia Pacific, also comprises Jetstar Airways in Australia and New Zealand, Jetstar Asia in Singapore and Jetstar Pacific in Vietnam.

Peach Aviation will launch Japanese operations in March 2012, starting with domestic flights between Fukuoka, Kansai International and New Chitose airports. The carrier intends to serve destinations within three to four hours of Japan, including major cities in China, South Korea and Taiwan, as well as resort destinations Guam and Saipan. The first international destination to come on stream should be Seoul in May 2012.

Scoot Airlines, Singapore Airline’s long-haul budget carrier, has unveiled Sydney as its first daily destination, due to launch in June 2012. Scoot will be the first low-cost carrier to fly non-stop to Sydney, which is also served by Jetstar (Singapore ‒Melbourne ‒Sydney). By 2015, Scoot intends to expand to destinations in Europe, the Middle East, New Zealand and North Asia.

SpiceJet of India is seeking authorization to fly to 10 international destinations in 2012, including Bangkok (Thailand), Dubai (United Arab Emirates), Kuala Lumpur (Malaysia), Muscat (Oman), Riyadh (Saudi Arabia), Singapore, Tashkent (Uzbekistan) and Tehran (Iran). Currently, the carrier flies to Kathmandu (Nepal), Colombo (Sri Lanka) and around 33 domestic airports.

Thai Smile, a subsidiary of Thai Airways, is due to start flying domestic routes in Thailand from July 2012 and short-haul international routes within Southeast Asia, India and China from 2013. Thai Airways also plans to launch Thai Tiger Airways in partnership with Tiger Airways, although no firm date has been announced.

In other regions, new developments include the following:

Iberia Express, Iberia’s new low-cost airline, will launch operations out of Madrid Barajas airport, serving domestic and international routes. The Spanish carrier will initially run four aircraft in summer 2012, rising to 13 by the end of 2012.

Norwegian Air Shuttle ASA, Scandinavia’s second-largest airline, plans to start long-haul flights in

2012 using Boeing 787 Dreamliners. The carrier is planning routes from the Scandinavian capitals to Bangkok and New York by late 2012 or early 2013.

VivaColombia will be Colombia’s first budget airline when launched in May 2012. The carrier intends

to serve more than 20 domestic and international destinations, including the United States, focusing on routes under four hours.

Wow Air, an Icelandic low-cost carrier, has announced it will start operations in June 2012. Wow will connect Reykjavik with 12 European destinations, including Alicante, Basel, Berlin, Cologne, Copenhagen, Krakow, London Stansted, Lyon, Paris, Stuttgart, Warsaw and Zurich.


In contrast to international increases, cuts will continue on many domestic routes. Europe will be impacted, but in particular the United States, which will experience a steep decline in domestic capacity, continuing the trend over the past decade.

Figure 6U.S. domestic and international capacity (Q4 2007 ‒ Q4 2011)

186.1

165.6

-9.4% +6.1%

162.4

168.3 168.7

79.2

77.3

73.4

79.0

84.1

Q42007

Q42008

Q42009

Q42010

Q42011

Q42007

Q42008

Q42009

Q42010

Q42011

Domestic

Available seat miles (billions)

International

Source: CAPA ‒ Centre for Aviation, and Innovata (August 2011)

One of the main reasons for this two-speed market is that many domestic routes are being trimmed as carriers retire fleets of smaller jets that have become more expensive to run in terms of fuel cost per passenger. Some routes have shut down, requiring travelers to fly from airports further afield, while others have become less competitive and typically more expensive. According to Airports Council International, 27 small U.S. airports have lost service from major commercial airlines over the past two years, including St. Cloud (Minnesota) and Oxnard (California). OAG12 notes that capacity to and from Cincinnati has dropped drastically (-31% in 2011 compared to 2009), while Memphis (Tennessee) has also seen considerable reductions (-15% on overall capacity, with Delta cutting 25% of its flights at the destination). Pittsburgh, which used to be US Airways’ main hub, is down to about 165 flights a day by all airlines to 37 airports. Some observers believe that Cleveland service may also be impacted in the wake of the merger between United and Continental.

12 OAG Facts (November 2011)

14

Meals/Drinks Extra Luggage

Payment Charge

Wifi/Breakfast

Ever more complex travel spend

Those little extra fees charged by airlines and other suppliers have grown into a multibillion dollar business that makes it virtually impossible for buyers to efficiently and accurately compare the full cost of travel between suppliers.

With the proliferation of credit card booking surcharges in the European Union, volatile fuel surcharges and increases in other taxes and charges, the situation is not likely to ease anytime soon. Future U.S. regulation on airline ancillary fees in GDSs could bring radical improvements in transparency, but no firm decision has been reached yet.

Given that airline fees alone can add up to 30% to the average ticket price according to CWT observations, it is clearly in corporate clients’ interest to push for greater visibility and negotiate these costs whenever possible with suppliers, while communicating a sensible policy on them to travelers. This advice applies not only to airline spend but also hotel amenity fees and additional costs charged by car rental companies.

Ancillary fees, charges and taxes

Here are some of the key items expected to impact the travel program in 2012:

Airlines will continue to focus on growing ancillary revenues. According to Amadeus and IdeaWorks,13 the global average year-on-year increase was 43.8% in 2011, ranging from 13% by low-cost carriers to 87% by U.S. major airlines. (Seven North American airlines alone account for 34% of the estimated US$32.5 billion in ancillary revenues charged in 2011.) Such growth has enabled airlines to remain profitable in a harsh economic environment and has largely been enabled by leisure travelers, since an estimated 20% of these revenues come from baggage fees and 50% from the sale of frequent flyer miles.

Figure 7Key ancillary revenue components

Source: CWT Travel Management Institute

13 Amadeus Worldwide Estimate of Ancillary Revenue for 2011, Amadeus/IdeaWorks (October 2011)

Baggage fees(checked, overweight and carry-on bag fees)

Priority check-inand securityscreening

In-flight entertainment& Internet access

Sleep sets In-flight foodand drinks

Seating assignments

Charges forlost tickets

One-time loungepasses

Fare lock-in fees

X

$


U.S. regulators delay action on ancillary fees in GDSs ...

New U.S. regulation now requires airlines to display all “optional" (ancillary) fees more prominently on their websites and disclose baggage fee information on e-ticket confirmations. Travel agents must also point out on their booking sites that additional fees may apply and direct travelers toward the relevant information. These measures are a step in the right direction for price transparency, but the burning question for travel managers remains: When will ancillary fees be widely available in GDSs—and in a way that enables an efficient comparison of total trip prices?

The technology now exists to include ancillary-fee data in GDSs, but airline uptake has been slow. Further, the U.S. Department of Transportation has deferred action on a proposal to mandate the inclusion of airline ancillary fees in GDSs. New discussions on this hot topic are scheduled for April 2012, but implementation will be delayed until 2013 at the earliest.

... but there is good news for air passenger rights

Ancillary fees are just one of the subjects that have been targeted by the DOT to enhance airline passenger rights. A number of new requirements have been introduced over the past year, including:

Full-fare advertising, meaning that advertised fares must include all mandatory taxes and fees

Details of ancillary fees on a specific web page linked to the carrier's home page.

Notification of bag fee changes on carriers’ websites for a minimum of three months

Fee refunds for bags lost in transit

Higher minimum compensation for denied boarding

A four-hour limit on tarmac delays for international flights

Refreshments for travelers during delays

The European Union’s Emissions Trading Scheme (EU ETS) could impact airline fares and fees. Starting in January 2012, this controversial scheme will include all airlines using E.U. airports, meaning they will be allocated a free carbon allowance and required to surrender one unit per ton of carbon dioxide produced. Any surplus allowances may be sold, while airlines going over the quota will need to buy more at an auction. EU ETS is likely to cost the aviation industry billions of dollars, and many airlines have warned that fares or fuel surcharges will rise as a result. For example, in December 2011, Lufthansa raised its fuel surcharge on European and long-haul flights to €10 (approximately US$12.70), up from €3 (US$3.80), citing EU ETS as the reason. Further, in January 2011, Chinese and U.S. carriers contested the legality of the scheme and refused to pay the associated charges.

Fuel prices are forecast to drop slightly but the impact on fares and surcharges will vary between airlines, largely due to different fuel hedging strategies. British Airways and Iberia, for example, are likely to increase their fuel surcharges and fares as existing hedging deals come to an end.

A growing number of legacy airlines are applying credit card booking surcharges. In 2011, Air France-KLM, British Airways and Lufthansa joined the ranks of carriers imposing credit card booking fees in certain European countries that authorize them. Typically charged by low-cost carriers, these fees vary widely, making a fair price comparison difficult when they are not included in the quoted ticket price. For example, at the end of 2011, Air France-KLM announced it would charge €15 on credit card bookings through travel agents for long-haul flights and €7.50 for short- and medium-haul flights departing from Germany, while Lufthansa announced €5 for domestic, €8 for continental and €18 for intercontinental flights.

Air passenger duty will increase by 8% to 10% in the United Kingdom starting in April 2012. Economy flights of up to 2,000 miles (approximately 3,220 km) could therefore rise by £4 (approximately US$9.3) to £16 (US$25).

16

Jet fuel prices may dip in 2012 but remain high

In 2012, jet fuel prices may fall slightly, having climbed back to 2008 levels in August 2011, according to Airlines for America (A4A, formerly known as the Air Transport Association). While some airlines have mitigated the impact of high fuel price increases through long-term fuel hedging strategies and increased energy efficiency, jet fuel remains one of aviation's largest cost items, having a major impact on profits.

A4A14 reports that a US$0.01 increase in the cost of a gallon costs U.S. airlines US$175 million, while a US$1 increase costs them US$415 million. IATA15 estimates that jet fuel will account for 32% of global airlines’ costs in 2012 based on an average price of US$100, compared to 30% of their costs in 2011 at US$110 per barrel.

13% 13% 14% 17% 22% 26% 28%33%

26% 26% 30% 32%

319 311 323 376

409450

490

571

474525

583

609

2001 2002 2003

Total costs

Fuel expenses

2004 2005 2006 2007 2008 2009 2010 2011F 2012F

Figure 9Evolution in airlines’ total costs and fuel expenses (2001‒2012F)

Source: CWT Travel Management InstituteBased on data from IATA's Financial Forecast (December 2011)

14 A4A website (accessed in January 2012)15 Financial Forecast, IATA (December 2011)

Hotel amenity fees will be included in about two-thirds of negotiated rates in 2012, helping companies to mitigate price increases.

+2 pts = stable +8 ptsBreakfast Parking Internet

P @31% 71%63%

Figure 8Preferred rates including amenities in 2012

Source: CWT Hotel Solutions Group (December 2011)


All eyes on airline direct connect

The travel management industry will keep a watchful eye on the issue of airline “direct connect,” which does not look likely to be settled any time soon. At the heart of the matter, corporate buyers and their travel management companies largely see the proposed system as a step backward for the travel program since it would involve airlines removing content from global distribution systems (GDSs).

For airlines, the benefits are clear: lower distribution costs from bypassing GDS fees, and the ability to use the system to market customized services, including the full range of ancillaries that currently have patchy coverage on GDSs.

For clients, however, pulling content out of GDSs would disrupt not only the current productive booking environment, raising costs, but also impact reporting, traveler tracking and the ability to meet duty of care for employees away on business. The key issues include:

Less efficient booking. TMCs would be required to implement new interfaces to access airline content outside GDSs, while still using GDSs for other travel content (other airfares, hotels and ground transportation, as well as policy data).

More difficult fare comparisons and potential missed savings. Typically travel counselors would need to start their search with direct connect flights, rather than scrolling through the program-compliant options displayed on the GDS.

More complex traveler tracking, safety and reporting. To ensure that non-GDS bookings are included in TMCs’ tracking and reporting systems, data can be entered into passive GDS segments. Doing so involves additional charges, however, and may not be supported by GDSs in the long term.

Higher costs. CWT continues to believe that the GDS environment is the most cost-efficient and effective model available for managing corporate travel. Any system that fragments content introduces unnecessary inefficiencies that cannot benefit corporate customers.

18

RESTAURANT

Occupancy driving hotel negotiations

2011 saw hoteliers taking back some of the pricing power they had lost since the downturn in 2009, and they may well hang on to it in 2012. Already high occupancy rates are likely to rise and further push up rates in many cities, with increases ranging from negligible to double figures, depending on the region. (See Pages 29-30 for CWT’s price forecast relating to hotels.)

Rising occupancy and room rates

Occupancy and average daily rates (ADRs) have risen in most regions over the last year.

Figure 10Evolution of the global hotel market (January ‒ November 2011 vs. the same period in 2010)

Source: Global Hotel Review, STR Global (November 2011)


Source: Global Hotel Review, STR Global (November 2011)

16 Global Hotel Construction Pipeline Reports for November and September 2011, STR Global (2011)

In 2012 occupancy is likely to remain an issue in many top cities, with uneven supply across regions. According to STR Global,16 most of the development projects concern Asia Pacific and Latin America:

Growth is strongest in Asia Pacific, where 348,653 rooms are in the pipeline at 1,433 new hotels. In 2012, 139,432 new rooms are expected to open at 559 new properties across the region, but especially in Beijing and Bangkok.

The economic slowdown has impacted many new hotel developments in Europe, where hoteliers are currently adding 139,006 rooms, mostly in the upscale and upper midscale segments. Much of this new build is concentrated in the United Kingdom, which is preparing for the 2012 Olympic Games, and Russia, which is preparing for the 2014 Winter Olympics and the 2018 FIFA World Cup.

New build is slowing in North America, with 76,497 planned new rooms in 2012. Half of this pipeline was postponed from 2011.

Significant growth is expected in Latin America. In Central/South America, 196 new hotels are in the pipeline, bringing 28,958 rooms, particularly in the budget category and in Brazil, which will host the 2014 FIFA World Cup in 2014 and the 2016 Summer Olympics. Meanwhile, 131 new hotels are being built in Mexico and the Caribbean, totaling 133,705 rooms.

Figure 11 shows the world's top 20 hotel markets in terms of occupancy in September 2011.

Figure 11World’s 20 highest-occupancy hotel markets (September 2011)

20

Key findings during 2012 negotiations

So far, hoteliers have taken a tough stance overall, holding back on complimentary amenities and LRA clauses unless clients specifically request them:

This year, hoteliers are taking a harder line on amenities. In North America, hotel offers are more often including breakfast or Internet, but not both, while in Europe, many hotels are leaving these amenities out of their initial bids, leaving clients to negotiate them in the second round as a way to lower the total cost of stay.

Negotiations have been harder on last-room availability clauses at properties in many high-occupancy cities, although CWT clients have still managed to obtain them at 84% of their preferred properties, consistent with results last year.

Mid-year renegotiations could be possible in some European locations if economic conditions take a significant turn for the worse.

Hoteliers will continue to develop their “green” offerings and also enable buyers to more easily evaluate their environmental friendliness as new industry standards are introduced.

In addition, the following developments are worth noting:

Travelers will increasingly be able to use their mobile phones or other remote solutions as key cards. For example, a number of chains have been experimenting with OpenWays mobile technology, which unlocks a guest’s door through a dialing tone. Others are testing online lock systems with radio-frequency identification (RFID) technology, which enables specific rooms to be assigned to permanent loyalty cards and turned on or off remotely.

Travelers will turn increasingly to social media reviews when selecting a hotel. Travel managers can take advantage of new tools that will soon be available through travel management companies to enable travelers to share their reviews of preferred hotels. Such tools can boost service for travelers while promoting compliance with preferred suppliers.


Rail is often the preferred way to travel when trips are three hours or less, and routes in competition with air have seen enormous growth in corporate traffic in recent times. Convenient city center access, a productive working environment and a relatively light carbon footprint all make rail an attractive alternative to air or ground transportation when prices are competitive, as they often are. (New rail connections typically lead to lower airfares on competing routes.) In 2012, the use of rail in the corporate travel program may be boosted further by developments including new high-speed routes and integrated air-rail offerings. New regulation in the European Union also promises to facilitate rail travel in the coming years.

Expanding high-speed networks

Rail networks are developing around the world at different paces, reaching remarkable milestones in some countries:

China continues to expand its high-speed network, already the world’s largest and fastest. In 2012, numerous new lines are due to open: Beijing–Guangzhou (the main north-south rail corridor through central China, linking Beijing, Shijiazhuang, Wuhan, Guangzhou and Hong Kong), Hankou–Yichang (linking Wuhan and Yichang), Chongqing–Lichuan, Suining–Chongqing and Shijiazhuang–Jinan.


Figure 12New high-speed lines due to open in China in 2012

Source: Nextbigfuture.com (June 2011)

C H I N A

Dark red lines show the high speed rail that shouldbe completed by the end of 2012

22

Spain is the first European country to offer more than 2,000 km (1,243 miles) of high-speed lines, while boasting the largest number of projects under construction. Some 1,000 km (621 miles) should be completed by the end of 2012, with routes including Vitoria–Bilbao–San Sebastian, Variante de Pajares (connecting Madrid with Oviedo and Gijon in the Asturias region), Bobadilla–Granada, La Coruna–Vigo, and Olmedo–Zamoro–Orense.

In Germany, the Munich–Augsburg line will be fully upgraded to operate at high speed by the end of 2012. This route is Germany’s busiest, and a major corridor for European passengers from Budapest through Vienna to Paris.

Turkey has inaugurated its second high-speed line, stretching from Ankara to Konya.

The United Kingdom has confirmed plans for a national high-speed network, connecting London to Birmingham by 2026 and Birmingham, Leeds and Manchester by 2033. The first phase of the "HS2" network will also connect to Europe via the Channel tunnel, as well as to Heathrow airport.

In a few countries, however, high-speed rail developments have stalled:

In the United States, several projects have met with funding difficulties. In particular, conservative governors have rejected federal funds to begin building high-speed lines in a number of states, including Florida, Ohio and Wisconsin. However, construction on the California High-Speed Rail project is due to begin in September 2012, with an initial segment from Merced or San Jose to Bakersfield in the Central Valley to be completed by 2019.

In Brazil, a government auction for the right to build a 510-km (317-mile) bullet rail service between Rio de Janeiro and Sao Paulo failed to attract any bidders in July 2011. The auction had already been postponed twice due to a lack of interest. Nevertherless, the country’s president Dilma Rousseff remains keen to see the project completed before the 2016 Summer Olympics in Rio de Janeiro, and officials have announced that the auction will be split in two to speed up the process.

In Argentina, the Buenos Aires–Cordoba high-speed link has been on hold since 2009, due to the financial crisis.

New international services

In the European Union, deregulation since 2010 has opened up transborder competition, enabling carriers to operate limited national routes outside their home country. Many of the new service announcements still involve partnerships with local companies:

Thello, a new venture between France’s Veolia and Italy’s Trenitalia, has launched night trains between Paris and Dijon in France and seven destinations in Italy.

Thalys, jointly owned by France’s SNCF, Belgium’s SNCB and Germany’s Deutsche Bahn, has expanded its service with three new German destinations, Essen, Duisburg and Dusseldorf, departing from Brussels and Liege in Belgium.

SNCF has bought a stake in Rail Holding AG, the parent company of Austria’s Westbahn Management GmbH. The partners intend to compete with Austrian incumbent OBB on its busiest and most profitable route, Vienna–Linz–Salzburg.

SNCF has also started service on its Rhine-Rhone high-speed line, intended to facilitate travel between Germany, northern Switzerland and France.


A partnership between SNCF and Nuovo Trasporto Viaggiatori, an Italian company that plans to be Europe’s first private open access operator of high-speed trains, has pushed back its launch to 2012. According to previous announcements, three high-speed lines should come into service: Salerno–Turin, Venice–Rome and Rome–Bari.

Deutsche Bahn intends to launch service between Frankfurt and London in 2013, two years later than initially scheduled due to delays in deliveries of rolling stock.

Plans for seamless pan-European rail ticketing

Currently, cross-border rail travel in Europe can be complicated to plan and book with different countries and operators using different systems. Railteam, an alliance of seven European rail companies set up in 2009, originally intended to offer integrated ticketing but has since abandoned those plans. The good news is that the European Commission adopted new regulation in 2011 requiring rail operators to standardize data on fares and schedules, and in 2012 the Commission also plans to bring forward complementary regulation on interoperable IT systems and practices. Implementation will not be immediate, but these measures effectively lay the foundations for seamless pan-European rail reservations and ticketing, which could also integrate other modes of transport.

Developments in intermodal travel

Transfers from airports and stations can add hours onto a trip if roads are congested or connections are poor. In response, airlines are increasingly combining air and rail tickets for easier itineraries and ticketing. Some recent examples include:

Lufthansa launching “Rail&Fly” tickets with Deutsche Bahn trains in Germany.

China Eastern Airlines coordinating flight times with China’s high-speed rail to minimize transfer times between Shanghai Hongqiao international airport and the center of Hangzhou and Wuxi.

Jet Airways entering into its first intermodal codeshare agreement with Thalys high-speed rail to help intercontinental travelers from India, the United States and Canada reach Paris faster. This service links Brussels International to Paris Nord rail station in under two hours.

In the longer term, the European Commission has announced ambitious plans for a unified transport network (TEN-T)—a rail backbone that should be accessible by the great majority of Europeans within 30 minutes’ travel time. The aim is to ease congestion, upgrade infrastructure and facilitate cross-border transportation for passengers and businesses across the European Union. This new network would connect 37 key airports with rail connections into major cities, and 83 main European ports with rail and road links, thanks to 15,000 km (9,375 miles) of railway line upgraded to high speed and 35 cross-border projects. (Currently Europe’s railways use seven different gauge sizes and are connected to only 20 major airports and 35 major ports.) This new backbone network would be completed by 2030 with connections feeding into it by 2050. Initial funding would be provided at a European level, with Member States expected to contribute additional funds.

24

Opportunities ahead in car rental

In 2011, car rental companies weathered stormy market conditions without significant increases in corporate rates, driving record revenues mainly by increased cost efficiency and on-airport business. At the beginning of 2012, fierce competition for corporate business shows no sign of abating, meaning that corporate buyers can expect fairly flat prices and a favorable negotiating environment. A number of new services may also bring benefits to the travel program.

More consolidation offering opportunities for wider contracts

One of the major events of 2011 was Avis Budget Group acquiring Avis Europe, reuniting the Avis and Budget brands under one global umbrella. The company expects synergies to save more than US$30 million a year and provide a stronger presence in rapidly growing markets worldwide, including India and China, where the available services are mainly chauffered vehicles (vs. self-drive options). In the future, travel managers may find more opportunities to negotiate deals covering a wider geographical scope, and the company’s more efficient cost base may help keep prices down.

Also in Europe, U.S.-based Enterprise Holdings is set to acquire Paris-based car-rental company Citer from PSA Peugeot Citroen. In doing so, Enterprise, the parent company of Alamo Car, National Car Rental, Rent-A-Car and WeCar, will expand its presence in France and Spain.

While Hertz Global Holdings withdrew its latest offer to buy Dollar Thifty Automotive Group in October 2011, it has continued to seek anti-trust clearance from the Federal Trade Commission, leaving the door open to a new offer.

Fierce competition impacting prices

Three global brands (Avis Europe, Europcar and Hertz) now account for 61% of the European market and four brands (Enterprise Holdings, Hertz, Avis Budget and Dollar Thrifty) similarly dominate the U.S. market. However, this high degree of consolidation by no means prevents strong price competition: a move by any of the major rental companies to cut prices tends to be closely matched by competitors. In addition, many smaller brands enjoy a strong position in specific countries.

Such competition will continue to hold corporate prices in check for the foreseeable future. CWT forecasts cautious changes, ranging from rate cuts of 1-2 percentage points to slight increases, depending on the region. (See Pages 29-30.)

It is worth noting that Avis will be limiting its new “non-cancellation fees” to special events like major conventions or sports attractions, as well as specialty vehicles. The company may concentrate on offering discounts for prepaid rentals instead.


Technology driving new services

Among the new services announced:

More electric cars are now available for rental. Notably, Hertz has expanded its fleet of electric vehicles to China, making it the first global rental car company to offer electric cars on three continents, while Enterprise Rent-A-Car has expanded its electric fleet to 11 California cities, now operating the state’s largest network of “green” rentals.

Herz has introduced 24/7 ExpressRent™ kiosks at airports and city locations in more than 30 markets, with plans to extend to a further 18 markets. Moreover, Hertz Gold members can sign up for “eReturn,” which offers electronic receipts and faster vehicle returns. Hertz has also introduced a Roam Express Rental e-Pass system in Australia, enabling automatic payment at road, bridge and tunnel tolls.

Avis Budget Group is planning an “On Location” service powered by I.D. Systems’ proprietary wireless vehicle management system, which will enable corporate clients to rent and check in vehicles using a smartphone and also has the potential to automate vehicle data collection and streamline billing. The service will be launched initially in North America.

26

More strategic meetings and events management

Meetings and events trends look both conservative and innovative for 2012: conservative in terms of the scale of confirmed bookings, and innovative in the way that M&E will be designed and managed. Many more companies will adopt a strategic approach to meetings management, while using technology to enhance planning and content.

Conservative bookings

M&E spend typically reflects the corporate mood, with drastic scaling back during difficult periods and more flamboyancy during a boom. In 2012, therefore, a cautious

1% to 4% increase in group size and a 5.5% to 6.5% increase in spend per attendee is expected in the United States, assuming economic growth of around 2%. Meanwhile, in Europe, the average group size is expected to decline by up to 3%, accompanied by a 5% to 6% decrease in spend per attendee. In this region, the average length of events is likely to remain stable at just under three days.

Another reflection is the type of M&E spend: international destinations generally fare better than domestic destinations during times of growth. In 2012, international M&E bookings should increase in the United States, as they have done over the past few years, although remaining below 2008 levels. In Europe, Middle East and Africa, the proportion of international meetings is expected to decline, representing an estimated 30% in the first half of 2012 compared to 40% in the second half of 2011. In addition to economic factors, political instability in some destinations, notably the Maghreb, may weigh heavily on the choice of destination.

Figure 13Proportion of meetings and events held internationally (vs. domestic destinations)

40% 26% 22% 25% 28% 30% 29% 40% 30%

H1 2008

H2 2008

H1 2009

H2 2009

H1 2010

H2 2010

H1 2011

H2 2011

H1 2012

Source: CWT Meetings & Events client data for Europe, Middle East and Africa


A challenging supply environment in some markets

Companies are also likely to remain cautious regarding lead times and booking terms. Although early booking is advisable for a variety of reasons—from ensuring room availability, preferential rates and well-planned content to attracting maximum participation—many planners are preferring shorter lead times to minimize the risk of cancelling events and incurring attrition fees. Similarly, they are looking for more flexible terms and conditions, sometimes asking hotels to adopt the company's own standard contracts.

Although it is difficult to make generalities in the hotel market, which varies considerably between cities, growing demand combined with limited new supply will make occupancy a greater challenge in some key cities, and notably London during the Olympic Games. This situation will be intensified for larger groups. (See Pages 18-20 for more information on the hotel market.)

More strategic M&E management

CWT noticed remarkable progress in strategic M&E management in 2011 and expects the trend to continue through 2012. Companies are acknowledging four main areas for improvement: savings, data/reporting, global consolidation and policy compliance (Figure 14).

Figure 14Top pressure points in strategic meetings management

66%

41%

33%

25%

Need to reduce costs/increase savings

Need to improve data analytics

Globalization of strategic meetings and events

Need to improve event policy compliance

Source: Aberdeen Group (May 2011)Based on a survey of 115 companies (April ‒ May 2011)

In particular, enterprise-wide consolidation is taking hold, especially in sourcing. Many companies are outsourcing more of their M&E management while making great progress in reducing the number of M&E agencies they work with—in some cases from 50-70 local players to a handful of partners worldwide. They are also more often consolidating M&E and transient spend, finding sufficient overlap to negotiate better deals with preferred hotels and other suppliers.

More companies are also developing a consolidated M&E policy, including the use of preferred suppliers, standardized contacts and improved reporting. The results are not only savings but also enhanced service levels and mitigated risks. For some organizations, (e.g., in the pharmaceutical or public sectors), regulation on M&E spend and reporting is driving such improvements.

28

More innovative, technology-driven M&E

Another key trend for 2012 will be using technology to facilitate M&E planning, control costs and offer an improved experience for attendees. The following points are worth noting:

Growing adoption of strategic meetings management tools. Online registration tools are designed to save time for both attendees and meetings planners, and in the best cases are integrated with online booking tools to enable seamless travel bookings. According to a CWT survey,17 89% of a sample of companies were already using online registration tools in North America in 2009, compared to 39% in Asia and 24% in Europe, where the slower uptake was due largely to weaknesses in terms of local language capabilities and market presence. Adoption is increasing now that providers are addressing those problems.

Increasing use of virtual meetings and “hybrid” events. For various reasons—cost, convenience and concern for the environment—companies are keen to explore alternatives to travel when appropriate. While small meetings by phone and videoconference have been common for years, larger-scale virtual arrangements are growing in importance for events that previously required participants to be present physically. These events range from company-wide training courses to industry thought-leader conferences, and may be designed specifically for online participation or take into account both physical and virtual attendance.

More interactive formats, especially through the social web, networking and mobile apps. M&E organizers are finding innovative ways to build content and engage participants before, during and after events. For example, organizers may crowdsource key issues ahead of an event, publicize important messages using Twitter feed, conduct a live poll of participants, broadcast speeches on YouTube, share presentations, photos and other content on Facebook, and keep debate open on a dedicated website. Mobile apps can help participants with anything from finding their way around a venue to keeping tabs on different sessions and speakers, and in particular, near-field communication features are likely to be more common (e.g., QR codes containing information that can be read by mobile phone code readers).

More sustainable events. Planners and suppliers continue to consider the impact of meetings and events on the environment and local communities. A growing number of companies include a long list of “green” criteria in their requests for proposals and consider creative ways to make events more eco-friendly without increasing costs. In 2012, a new milestone should be reached with the expected finalization of the M&E industry’s first comprehensive “green” guidelines, developed by the U.S. Environmental Protection Agency, the Green Meeting Industry Council and the Convention Industry Council’s Accepted Practices Exchange (APEX). In 2011, a final draft had already been released for industry review and comment, offering measurable criteria in nine areas of event planning and management: accommodations, audiovisuals and production, communication and marketing, destinations, exhibits, food and beverages, meeting venues, on-site offices, and transportation. Further, the new ISO 20121 standard for international event sustainability management is expected to be ready in time for the 2012 Summer Olympic Games.

17 Meetings and Events: Where Savings Meet Success, CWT Travel Management Institute (2010)


Rising prices in most categories and regions

According to projections made by CWT,18 higher prices are likely worldwide, although the situation will vary considerably between regions. All categories will be impacted, with the possible exception of car rental, where prices may be flat or lower in some countries.

Figure 15 summarizes CWT’s pricing forecast for each region and travel category, based on a statistical model interpreted by CWT market experts.

Figure 15CWT's global pricing forecast for 2012

All projections refl ect anticipated price changes measured against prices for the same time period in the previous year.

North America

H12012

H220122012

+3.5% to +4.1%

+2.4% to +3.1%

+2.6% to +3.4%

-1.0% to +2.5%

GroupSize

Cost perattendeeper day

+1.0% to +4.0%

+5.5% to +6.5%

Europe,Middle East,and Africa

H12012

H220122012

GroupSize

Cost perattendeeper day

-3.0% to +0.0%

-5.0% to -6.0%

+2.1% to +3.7%

+0.2% to +0.9%

+0.1% to +0.8%

-1.9% to +2.9%

+3.6% to +4.2%

Asia Pacific

H12012

H220122012

+3.1% to +3.8%

-1.9% to +2.1%

-0.9% to +0.0%

-1.7% to +3.9%

Latin America

H12012

H220122012

+5.7% to +5.9%

+9.0% to +11.8%

+10.1% to +12.2%

-2.2% to +5.6%

Per-country figures and more comments are available in the full pricing forecast on www.carlsonwagonlit.com.

18 CWT Perspectives: 2012 Travel Price Forecast, CWT (October 2011)

30

Some of the main highlights are as follows:

Average ticket price (ATP). Overall, travel buyers can expect air ATP increases to be limited to single digits, although they may be more substantial in some countries. In Asia Pacific, modest price increases are likely: 3.1% to 3.8% overall, with some of the lowest figures in Japan (0.1% to 2.7%). In Europe, ticket price inflation may be in a similar range (2.1% to 3.7% overall, with increases expected to be below average in Spain (1.1% to 3.2%) and above average in Germany (2.4% to 4.6%). Latin America will see some of the highest fare increases (6% on average), particularly in Colombia (8.0% to 11.4%). Finally, in North America, higher prices (3.5% to 4.1%) will accompany fuller planes as airlines scale back on growth plans.

Average daily room rates (ADRs). A general forecast can be made for different regions, although the most accurate comparison is made city by city since prices tend to be closely linked to occupancy. In Asia Pacific, for example, some of the highest ADR increases will be seen in Hong Kong (an estimated 9% on average in first half 2012). Overall, in the region, strong growth in supply is likely to limit rate changes (-1.9% to +2.1% on average). In Europe, ADRs will remain particularly steep in high-occupancy cities like London (especially during the 2012 Olympic Games), but on average are forecast to increase by 0.9% at most. Looking at specific countries, prices look almost certain to drop in Finland (by -0.7% to -7.0%), but could go either way in other countries (e.g., in Spain, where prices are forecast to change by -0.8% to +4.6%). In Latin America, substantial rate increases are expected (9.0% to 12.2%), with the highest in Brazil (20% in first half 2012, rising to 35% in second half). In the future, prices should ease as new supply becomes available in preparation for the 2014 World Cup and 2016 Summer Olympic Games. In North America, increases are expected to be higher in the United States than in Canada (e.g., 4.7% in northeastern U.S. vs. 2% on average in Canada).

Car rental prices. Buyers can expect flat or lower prices in many car rental markets worldwide. Forecasts for all regions range from a slight decrease to a small increase: -1.7% to +3.9% in Asia Pacific, -1.9% to +2.9% in Europe, Middle East and Africa, -2.2% to +5.6% in Latin America and -1.0% to +2.5% in North America.

Rail ticket prices. Here CWT’s forecast is limited to Europe, where prices are expected to increase by 3.6% to 4.2% overall. In the United Kingdom, the average increase may be higher than the forecasted 2.5% to 3.3% due to recently announced increases of 6% for regulated fares and 5.9% for season tickets from January 2012. Further, available fares may double on some U.K. routes, according to market observers. It is also worth noting the recent decision in France to increase reduced-rate VAT to 7% (up from 5.5%), which will contribute to the forecast fare increases of 4.0% to 6.0%.

Meetings and events. In Europe, Middle East and Africa, the average cost per attendee is expected to decrease by 5% to 6% as events organizers choose fewer international destinations in favor of domestic ones and the average group size stays the same or drops by up to 3%. In North America, M&E spend is expected to continue making a steady recovery throughout the region, including for internal meetings, incentive trips and international meetings. Increases are also expected in the average cost per attendee (6.5% vs. 5.5% in 2011) and group size (+1% to +4%).


Value in social media and mobile applications

19 Rearden Commerce website (November 2011)20 Business Traveler Services: Finding the Right Fit, CWT Travel Management Institute (2011)

New technology, mobile apps and social media are improving the travel experience in practical ways as more business travelers stay connected through their wireless devices and new apps come onto the market.

More widely used mobile apps to facilitate business travel

The use of smartphones, tablets and other Internet-connected devices has risen dramatically over the past few years: a recent survey by PhoCusWright and Rearden Commerce,19 showed that 84% of business used smartphones for business purposes while traveling.

Naturally travelers want to make the most of the available services and in particular the abundance of apps created specifically for travelers (as an indication, more than 40,000 travel apps are available in the Apple App Store alone). These apps are changing corporate travelers’ expectations and making it even more tempting for them to book out of policy.

To promote traveler compliance while enhancing the traveler experience, companies are increasingly deploying dedicated travel management apps, especially for itinerary management and destination information. Travel managers can also promote traveler compliance while enhancing the traveler experience by recommending a selection of suitable apps. (See Page 45.)

According to a CWT survey,20 business travelers particularly value itinerary informatoin, flight status updates and electronic boarding passes among the available mobile services, which may be delivered by SMS or app.

Figure 16Travelers’ ranking of mobile services by importance

Travelers’ ranking of mobile services by importance

0 20 40 60 80 100Respondents (%)

Averageranking

6.5Tourist information 72761 2111

5.1Travel managementcompany contacts

212521 18 8 4 3

4.7Maps 26225 32 9 4 2

4.6Safety and security alerts 35206 22 10 5 2

2.5Electronic boarding passes 53 3 11 2121 36

2.4Flight status updates 31 7 33 33 221

Itinerary information 2.241 9 19 31 351

Most importantLeast important

1234567

Source: CWT Travel Management Institute.Based on a survey of travelers (2,016 responses)

32

For travel managers, the focus in 2012 will be on offering mobile services that not only facilitate logistics for travelers but also improve their experience at every step of the way, from making compliant bookings and accessing an up-to-date itinerary, to receiving security alerts and being able to easily share feedback.

Business travelers and social networking

In 2012, the mobile web will also continue driving the use of social media—according to Nielsen,21 60% of apps used by smartphone owners are related to social networking. With an estimated 800 million Facebook users and 10 million Twitter followers,22 social media will inevitably continue to penetrate the business travel world. CWT research23 dating from the beginning of 2011 shows that at least 17% of travelers in a sample of companies were already using social media for business travel—and more than a third in most cases (Figure 17). The reasons cited were to look for/share information, network, receive feedback, get market intelligence and communicate with suppliers.

Figure 17Travelers’ use of social media for business travel in a sample of companies

Travelers (%)

100

80

60

40

20

0

1721222730303637414243485153

Media and educat

ion

Consumer goods

Consumer goods

Consulting

Bankin

g

Biotechnology

Agricultu

re an

d chemica

ls

Logistics

Food an

d beverage

Service

Retail

Manufac

turing

Aerospace an

d defense

Energy and enviro

nmentType ofcompany

Source: CWT Travel Management InstituteBased on a survey of travelers worldwide (1,791 responses from companies with regional or global travel programs)

21 Social Media Report Q3 2011, Nielsen (2011)22 Facebook (November 2011) and Twitter (September 2011)23 Business Traveler Services: Finding the Right Fit, CWT Travel Management Institute (2011)


Recommendations for 2012

While every year brings fresh challenges and new ways of improving the program, much tried-and-tested advice holds. The following are a selection of tips that CWT suggests for 2012:

Air

Consider separate negotiations on top city pairs to obtain incremental savings despite price increases. Reverse auctions can be conducted to select an airline on each key route, separate from broader preferred carrier contracts.

Continually monitor prices and air spend to maximize program performance. Quarterly reviews can ensure that the company is meeting its market share commitments while taking advantage of spot buying opportunities if appropriate.

Monitor the impact of new entrants, including low-cost carriers and rail operators, on prices.

Understand different ways to evaluate contractual savings. For example, the net effective savings rate (NESR) divides actual savings within the negotiated contract by hypothetical spend using published, non-discounted fares.

Hotel

Aim for last room availability (LRA) deals even if they may be harder to obtain in 2012. LRA rates tend to be higher than non-LRA negotiated rates, but they bring savings by guaranteeing travelers the agreed rate even when available rooms are at a premium. Such clauses are particularly valuable in cities where occupancy is consistently high throughout the year.

Find the right number of properties city by city. Although negotiations can be boosted by consolidating spend on fewer properties, companies need to retain sufficient coverage in terms of location and room availability. If a buyer’s volume is too low to secure significantly discounted rates (typically in secondary cities), the company may have access to the rates negotiated by its travel management company.

Mid-year renegotiations could be possible in some European locations if economic conditions take a significant turn for the worse.

Ground transportation

Consolidate car rental spend. Given continued market consolidation, buyers may have more opportunities to negotiate deals covering a wider geographical scope, with deeper discounts and better services for travelers.

Question any car rental bids that propose a price increase. In addition to CWT’s forecast data, buyers can use industry benchmarking to help make the case for flat or lower rates.

Consider negotiating beyond car rental rates to obtain more premium car types or include amenities like a GPS device.

Consider rail as an alternative for air on any trips under three hours. New opportunities may be available due to developments in high-speed networks.

34

Meetings and events

Focus on a limited number of hotel properties where possible to obtain savings and more consistent quality. While special events may require their own locations, regular meetings often can benefit from deals with preferred properties or chains.

Consider consolidating M&E and transient hotel spend to boost negotiations. Typically companies can target properties located near their main sites to accommodate visiting colleagues and off-site meetings.

Negotiate cancellation and attrition fees, bearing in mind that suppliers may be less flexible for larger groups or during peak periods.

General advice

Include ancillary/amenity fees in both the travel policy and negotiations with suppliers. Such fees are commonplace across the market and can add significantly to the total cost of travel.

Request full data from suppliers to help track program performance and negotiate effectively.

Keep promoting policy compliance. A proven ability to meet market share commitments and drive traveler behavior can add weight during the negotiation process, as well as being a cornerstone of the travel program.

Boost advance booking for all kinds of travel to take advantage of savings opportunities and ensure availability during peak demand. Meetings and events organizers in particular may need to extend their booking windows.

Encourage travelers to book all parts of their travel together to boost compliance with preferred suppliers and booking channels. Combining air and rail tickets where possible can facilitate trip planning.

Consider using mobile apps and social networking to support the travel program. Dedicated tools such as policy and itinerary management apps are now available.

Keep reaching out to your program managers and travel management consultants throughout the year to ensure that the program stays on track as market conditions evolve.


2012: a focus on travel management fundamentals

CWT conducts an annual survey of travel managers to find out which areas of the travel program they intend to focus on and which key actions they plan to implement in the year to come. The results are shared with the business travel community to provide a useful benchmark on program objectives.

This year’s survey, the fourth of its kind, involves nearly twice as many participants, with 290 travel managers answering a detailed questionnaire between October and November 2011.

Overall, the findings show that travel managers intend to focus above all on four key foundations of the travel program: driving air and ground transportation savings, improving traveler compliance, optimizing hotel spend, and optimizing online adoption. In an evolving market, these areas represent savings opportunities even for the most mature travel programs, which explains why they were also top priorities in last year’s survey.

Other areas have moved up or down the rankings, indicating either a slight shift in focus or simply successful previous efforts enabling travel managers to turn their attention to other areas. In some cases, long-term program optimization projects may have been pushed back or scaled down in view of budgetary constraints.

Survey results: travel managers' priorities for 2012

Figure 18Travel managers' priorities for 2012

2012ranking Priority Respondents

2012 vs. 2011 ranking

2011 ranking

3

1

4

2

6

5

7

9

8

10

11

1

2

3

4

5

6

7

8

9

10

11












63%

68%

60%

56%

42%

39%

34%

33%

27%

22%

12%

Notes: CWT asked travel managers to select their top five travel management priorities for 2012 and rank them in order of importance. The responses were weighted to take into account how often each priority was ranked 1st, 2nd, 3rd, 4th or 5th. The “Respondents” column shows the proportion of travel managers who included the priority in their top five.



36

High, medium and lower priorities for travel managers in 2012

Like the results for 2011, the four highest priorities for 2012 clearly focus on cost control. They are: driving air and ground transportation savings (ranking 1st for 2012 vs. 3rd for 2011), improving traveler compliance (2nd vs. 1st), optimizing hotel spend (3rd vs. 4th) and optimizing online adoption (4th vs. 2nd). These priorities were identified by more than half of all respondents.

Four medium priorities emerge, focusing on major travel management “building blocks.” These are: optimizing the travel policy (ranking 5th for 2012 vs. 6th for 2011), enhancing the traveler experience (6th vs. 5th), developing key performance indicators (7th, as for 2011) and further consolidating the travel program (8th vs. 9th). These priorities were identified by more than a third of respondents.

Three lower priorities cover a wide spectrum. Addressing safety and security needs has fallen one place in the ranking since last year (9th vs. 8th), perhaps because many companies have already tightened their procedures in the wake of natural disasters and other events that have disrupted travel in recent times. Tackling meetings and events remains in 10th position, reflecting the fact that strategic meetings management programs, while increasingly common, are often led by departments outside travel management. Finally, making the program more environmentally friendly remains at the bottom of the list of priorities. “Green fatigue” may be the cause, or financial resources being stretched to the limit in tough economic conditions. These three priorities were identified by under a third of respondents.

Regional highlights

The top priorities vary slightly depending on the region covered by travel managers. Those responsible for Asia Pacific or for North America, for example, accord more importance to optimizing the travel policy. Global travel managers make a higher priority of improving traveler compliance. Meanwhile, those responsible for Europe, Middle East and Africa or Latin America place a greater focus on driving air and ground savings.

Figure 19Breakdown of surveyed companies by sector

Media, hotels,restaurants & transportation4%

IT & telecommunications20%

Chemicals, pharmaceuticals& healthcare13%

Consumer products,food & retail12%

Industrial manufacturing17%

Banking, consulting& insurance13%

Aerospace, defense,oil, gas & construction

17%

Other3%



Figure 202012 priorities by travel managers' scope of responsibility

Asia Pacific

Compliance

Hotel

Online adoption

Travel policy

Air & ground

Traveler experience

Safety & security

Consolidation

KPIs

Environment

M&E

75%

66%

53%

53%

47%

53%

38%

34%

25%

25%

13%

Latin America

83%

73%

43%

43%

57%

37%

23%

23%

17%

17%

3%

Air & ground

Hotel

Compliance

Online adoption

KPIs

Consolidation

Traveler experience

Travel policy

M&E

Safety & security

Environment

North America

73%

58%

46%

46%

46%

42%

36%

39%

27%

30%

12%

Compliance

Air & ground

Online adoption

Travel policy

Hotel

Traveler experience

Consolidation

KPIs

Safety & security

M&E

Environment

Sample size: 72 travel managersSample size: 33 travel managers

Sample size: 30 travel managersSample size: 32 travel managers

GlobalBreakdown of surveyrespondents 79%

60%

54%

49%

39%

42%

38%

44%

32%

24%

8%

Compliance

Online adoption

Air & ground

Hotel

Travel policy

Consolidation

KPIs

Traveler experience

Safety & security

M&E

Environment

Asia Pacific11%

Global25%

Europe,Middle Eastand Africa43%

North America11%

LatinAmerica

10%

Europe,Middle East & Africa

69%

67%

60%

63%

45%

34%

28%

26%

23%

24%

13%

Air & ground

Hotel

Online adoption

Compliance

Travel policy

Traveler experience

KPIs

Consolidation

M&E

Safety & security

Environment

Sample size: 123 travel managers

Notes:

CWT asked travel managers to select their top five travel management priorities for 2012 and rank them in order of importance. The responses were weighted to take into account how often each priority was ranked 1st, 2nd, 3rd, 4th or 5th. The “Respondents” column shows the proportion of travel managers who included the priority in their top five.


Regional results include country/regional travel managers.


38

Priorities and planned measures: total sample

Every year, travel managers juggle numerous projects to keep the program running smoothly while pushing forward new ways to achieve savings and improve service for travelers. This survey shows that in 2012, action will be particularly focused on four areas: improving communications, mandating preferred suppliers and booking channels, making the most of new mobile services, and getting travelers to book further in advance. These and other planned actions are described below in relation to each of the priorities identified by travel managers.


Ranking first among the priorities, air and ground transportation will be a key focus area for 63% of travel managers in 2012.

Figure 21Which of the following measures will you take to drive air and ground transportation savings?

Source: CWT Travel Management InstituteBased on a survey of travel managers worldwide (183 responses)

Increase internal communications and compliance

Negotiate multi-year contracts and implement flexible, dynamic negotiations with suppliers throughout the year

Concentrate volume on a limited number of suppliers

Find the right balance between negotiated and restricted fare usage

Tighten air policy (e.g., class of travel, use of connecting flights and advance booking)

Promote alternatives to travel for domestic trips

Evaluate chauffeured transportation spend and transaction patterns and negotiate new contracts

Manage the trade-offs between air and rail

Tighten rental-car policy (e.g., car class, refueling policy and ancillary options)

Negotiate fuel surcharges and ancillary fees

Tighten rail policy

Manage the trade-offs between ground transportation services

Freeze travel

52%

50%

46%

46%

41%

27%

14%

14%

13%

13%

8%

6%

6%


A wide range of measures are planned, starting with increasing internal communications and compliance. CWT research24 has shown that only around half of travelers believe they know their company’s travel policy well, while the majority of travelers who make non-compliant bookings say travel rules are not mandatory and book outside the policy to find lower prices, without considering the impact on negotiated prices, safety and security, traveler tracking and other benefits of well designed travel programs. Travelers need a clear understanding of what is expected of them and how their booking behavior makes a difference. Among the basic steps travel managers make when addressing communications and compliance are explaining the stakes, making the policy easily accessible, organizing training, regularly reporting on progress and providing regular reminders of key policy items.

The next most popular measure is negotiating multi-year contracts and implementing flexible, dynamic negotiations with suppliers throughout the year. In other words, travel managers will be aiming to set up framework agreements that provide a certain amount of stability without ruling out renegotiations during the period if market conditions warrant them.

The majority of travel managers focusing on air and ground transportation savings intend to concentrate volume with a limited number of suppliers to maximize volume discounts. (See Pages 47-48.) At the same time, most travel managers intend to work on finding the right balance between negotiated and restricted fares in order to meet their volume commitments with airlines while taking advantage of other savings opportunities. The ability to permanently track air ticket data plays an important role here.

Tightening the air policy is another common measure that travel managers intend to apply in 2012, according to the survey. One area that may be targeted is the use of business and first-class fares, which has risen steadily over the past few years (Figure 22).

24 Playing by the Rules: Optimizing Travel Policy and Compliance, CWT Travel Management Institute (2008)

Figure 22Usage of business and first class tickets vs. other classes on intercontinental flights (2008‒11)

Source: CWT Travel Management InstituteBased on intercontinental tickets purchased by CWT clients worldwide

2008

40% 35% 36% 38%

2009

January ‒ September

2010 2011

40

Communications on compliance with preferred booking channels and suppliers will be especially important as travelers increasingly use mobile applications, some of which make it easier for them to book out of policy. Recommending a suite of relevant apps to travelers and reminding them of booking policy can be helpful for boosting compliance in this context.

Another area that might require special attention is ancillary fees, which are not always clarified in the policy even though they can be substantial—adding an extra 33% to the total cost of stay in a hotel, for example (based on a CWT analysis of corporate credit card data25). It can be helpful to stipulate which extra charges are reimbursable (Figure 24), as well as which are already included in the negotiated room rate.


Compliance continues to be a top priority, with 68% of travel managers including this area in their top five.

Among the planned measures, the most popular nearly all concern communications: reminding employees of policy, tracking/communicating compliance levels, communicating and providing training on the travel policy, and defining clear, detailed guidelines in the policy. The second most popular measure, engaging management throughout the organization, is another way to ensure that the message gets across regarding the importance of compliance and how different policy items contribute to savings

25 Room for Savings: Optimizing Hotel Spend, CWT Travel Management Institute (2009)

Figure 23Which of the following measures will you take to improve traveler compliance?

Actively remind employees of policy

Engage management throughout the organization

Track and communicate compliance levels

Communicate and provide training on travel policy

Define clear and detailed guidelines in the travel policy

Empower travel counselors to enforce compliance

Implement an online booking tool (indicate compliant options and filter out non-compliant suppliers)

Implement a traveler messaging tool (CWT Program Messenger)

Set up an expense management tool

68%

62%

56%

55%

50%

40%

37%

24%

7%




Sixty percent of travel managers are making a high priority of optimizing hotel spend in 2012. In this area, the most popular measure is mandating the use of preferred hotels, followed by mandating preferred booking channels and negotiating amenities.

Figure 25Which of the following measures will you take to optimize hotel spend?

Mandate the use of preferred hotels

Mandate preferred booking channels

Negotiate amenities (e.g., internet, breakfast and parking)

Consolidate hotel spend on fewer properties to leverage negotiations

Request last-room availability agreements from hoteliers

Consolidate multiple sources of hotel data

Renegotiate more frequently with suppliers

Increase program coverage by adding more hotels

Introduce hotel rate caps per destination

Implement advance booking rules

Introduce or increase GDS audits

Implement a lowest-available-rate policy regardless of preferred hotel status

Replace existing preferred hotels with preferred hotels in a lower category

Introduce room allotments (pre-paid room space)

Implement a dynamic pricing strategy

61%

47%

44%

41%

39%

37%

27%

20%

19%

19%

15%

13%

11%

6%

5%


Figure 24Sample policy regarding extra hotel charges

Reimbursable expenses Non-reimbursable expenses

Breakfast

Business phone calls (although the use of a corporate calling card is preferred)

Laundry (within reason for stays exceeding 5 nights)

Internet access for business purposes

Use of fitness center

Laundry for stays under 5 nights

In-room movies

Recreational activities

Spa treatments

Room-service breakfast (if breakfast is included in the roomrate)

Alcoholic beverages from the mini-bar


42

Source: CWT Travel Management InstituteBased on 2007 transaction data for two companies with similar room night volumes

26 Room for Savings: Optimizing Hotel Spend, CWT Travel Management Institute (2009)

Figure 26Companies pay a lower average room rate with an LRA agreement, even if the negotiated rate tends to be higher than non-LRA rates

174 199 249

178 206

274

Average room rate: US$215 (+8.3% vs. negotiated rate)

Average room rate: US$200(-2.8% vs. negotiated rate)

Company A (non-LRA) Company B (LRA)

215 200

Average room rates paid by 2 companies with similar volumesat the same hotel in Paris in 2007

Average room rate

(US$)

ARR < negotiated rate ARR = negotiated rate ARR > negotiated rate

Relatively few travel managers (19% of those focusing on hotel spend) plan to introduce city caps, despite the proven savings opportunities. CWT research26 shows that companies that set city caps and update them at least once a year save on average 4% of hotel spend. Experience also suggests that hoteliers may lower their proposed rates to meet city cap requirements if they are aware of them.

Even fewer travel managers (5%) plan to implement dynamic pricing deals with hotels, reflecting CWT research that shows companies' reluctance for reasons including the need to monitor prices, a fear of higher room rates, potential resistance from travelers who might not accept fluctuating prices, difficulty in budgeting hotel costs, and a lack of clear-cut value brought by these deals.

Another measure worth highlighting is requesting last-room availability agreements from hoteliers. CWT research shows that even though rates negotiated with LRA are slightly higher than non-LRA rates (typically by 5% to 10%), they tend to lower the average rate paid over the year because they enable companies to obtain the negotiated rate more often, as shown in Figure 26. When LRA rates are not possible, advance booking is particularly important.


Figure 27Which of the following measures will you take to optimize online adoption?

Figure 28Few companies introduce medium- to long-term change management to support online implementation

Enhance communication/training

Increase the scope of online booking tool (OBT) implementation

Track and communicate OBT usage

Encourage travel counselors to steer travelers to OBT

Mandate OBT usage

Enhance OBT features

Review and update OBT configuration/settings periodically

Deploy best-in-market OBTs

61%

54%

53%

48%

43%

41%

38%

18%

Multiple actions in the mid-term(about 2 years)13%

Permanent/lasting change management actions(e.g. coaching/training)13%

Actions for permanent/lasting changeactions focusing on only one area or target audience8%

Don't know/not applicable7%

3-5 actions in the short-term(a year or less)18%

1-3 actions(e.g., a memo at launch)18%

No specific action23%

Breakdown of companies by change management/communication programto drive online booking adoption


Source: CWT Travel Management InstituteBased on a travel program diagnostic survey for 152 clients


Fifty-six percent of travel managers consider optimizing online adoption a priority for 2012. Among the planned measures, communication again features highly: enhancing communication/training, and tracking and communicating online booking tool usage.

Currently, few companies look beyond the immediate launch stage when considering communications to support online booking. According to CWT research,27 only 13% plan communications or change management action in the mid-term (lasting about two years) and 21% in the longer term. Yet effective change management (in which communications play a key role) is critical to the success of an online strategy, by preparing employees for the new processes, explaining the processes and creating buy-in (Figure 28).

27 Business Traveler Services: Finding the Right Fit, CWT Travel Management Institute (2011)

44

Figure 29Which of the following measures will you take to optimize your travel policy?

Address advance purchase behavior

Standardize the policy regionally or globally

Aim for best-in-class policy guidelines

Address restricted (penalty) fares

Introduce more mandates

Define criteria for using travel alternatives

Introduce hotel rate caps per destination

Address connecting flights (stop-overs) for international travel

Define rules for ancillary services

Strengthen travel comfort rules (trip duration, length of stay and night/day travel)

72%

45%

41%

37%

27%

24%

20%

18%

13%

12%


28 Playing by the Rules, Optimizing Travel Policy and Compliance, CWT Travel Management Institute (2008)

Mandating OBT usage comes low down in the list of planned measures, although it is still mentioned by 43% of travel managers focusing on online adoption. Mandates do not suit all company cultures, but when they are implemented, they can be very effective in boosting usage. As a starting point, mandates can cover bookings for the simplest types of bookings (e.g., point-to-point trips).


Forty-two percent of all travel managers will be focusing on optimizing the travel policy as a top priority in 2012.

Among the planned actions, addressing advance purchase behavior stands out, mentioned by 72% of respondents. This result suggests that while travel managers are well aware of the savings benefits brought by advance booking, many policies may need to clarify the requirements or reinforce compliance in this area. Effectively, CWT client data indicates no significant improvement in advance booking over the last few years. Yet research shows that travelers book on average 1.6 days earlier when the travel policy stipulates 14-day advance booking, generating 2.2% savings on average.28

The next most frequently planned measure is standardizing the policy regionally or globally—another proven way to bring savings while promoting a consistent level of quality and security for travelers in different regions.

Half of the travel managers focusing on the travel policy will be aiming for best-in-class travel policy guidelines, benchmarking their policies with those of comparable companies (similar industries and corporate cultures). One best practice that companies frequently overlook is providing regular policy reminders, bearing in mind that many employees travel only a few times a year for business and even frequent travelers may not have the policy top of mind. In terms of emerging best practices, policies may list the responsibilities of the company and the traveler for safe, cost-effective travel, and remind travelers of basic safety advice or recommendations (e.g., avoiding hotel rooms on the ground floor or on the highest levels of tall buildings). In addition, more companies will introduce mobile applications so that travelers can consult their policy while on the go.

Surprisingly perhaps, few travel managers say they intend to define rules for ancillary services, despite their increasing importance in the total cost of stay.



Thirty-nine percent of travel managers consider enhancing the traveler experience a priority for 2012. More than half of them intend to offer mobile services, reflecting the arrival of new apps specifically designed for corporate travelers within managed travel programs. These include:

Apps offering a suite of travel services such as itineraries, flight alerts and mobile check-in, as well as maps, weather forecasts and information on local restaurants.

“Apps of apps” or best-in-class travel apps, organized in a single app, providing travelers with practical help ranging from advice on destinations and information on local taxis to tools such as a currency converter.

Travel policy apps providing corporate travelers with mobile access to their travel policy.

Figure 30Which of the following measures will you take to enhance the traveler experience?

Offer mobile services

Offer a web-based traveler portal

Provide emergency assistance

Implement social media tools/apps

Offer a traveler profile management tool

Provide VIP services

Offer additional pre-trip services (e.g., taxi, parking, restaurant, airport lounge and Wi-Fi cards)

Relax travel comfort rules

50%

29%

26%

26%

22%

20%

20%

6%


46


Thirty-four percent of travel managers will make a priority of developing key performance indicators.

Figure 31Which of the following key performance indicators will you monitor?

Missed savings on air travel (paid vs. lowest logical air fares)

Restricted fare usage (vs. flexible)

Average ticket price evolution and benchmark

Avoided trips (through phone, video or telepresence meetings)

Non compliant entities/travelers

Market share allocation vs. targets set by airlines on top routes

Modified/cancelled bookings and related costs

Missed room-night bookings

Year-over-year carbon footprint emissions

Cost per mile evolution and benchmark

Fuel surcharge evolution

Hotels’ “greenness”

63%

56%

56%

41%

38%

36%

34%

31%

24%

23%

14%

8%


Missed savings, restricted fare usage and average ticket price (ATP) are essential indicators for efficiently monitoring the travel program. It is striking that travel managers still follow program performance in air more than hotels. Indicators should be fine-tuned to take into account each company’s specific travel program and policy, with the relevant mandates.

Fifty-six percent of respondents say they intend to monitor their average ticket price, which is critical for tracking spend, evaluating program performance and negotiating effectively with airlines. For best results, companies not only follow their own ATP but also benchmark their performance against the industry average. (See the example in Figure 32.)


0

14

%

12

10

8

6

4

2

Continental

Business Economy

Intercontinental Domestic Continental Intercontinental

8%

5%

6%

8%

7%

4%

13%

10%

8%

2%

12%

11%

2%

5%

4%

5%

7%

8%

1%

Asia Pacific

Europe, Middle Eastand Africa

Latin America

North America

* Price comparisons were made using constant exchange rates, as volatile currencies significantly impact prices

Concentrate the number of suppliers

Standardize processes

Globalize volumes and contracts

Standardize tools

Consolidate sourcing

Extend the program’s geographical scope

Standardize travel policy

51%

47%

45%

45%

31%

28%

27%

Source: CWT Travel Management InstituteBased on worldwide data for the top 20 city pairs by category


Figure 32Year-on-year evolution in average ticket price (January ‒ September 2011)*

Figure 33Which of the following measures will you take to further consolidate your travel program?


Thirty-three percent of travel managers consider consolidating the travel program a high priority for 2012.

48

Around half of these respondents intend to concentrate the number of preferred suppliers—a measure that saves companies on average 7% of overall travel costs according to CWT research.29 The aim is to increase the volume allocated to each airline or hotel property to obtain larger discounts while ensuring appropriate coverage for travelers in terms of city pairs and room nights.

For the best deals in air sourcing, companies may use a “de-linked strategy,” combining a limited number of preferred carrier agreements with separate deals for each of their top routes, often negotiated through reverse auctions.

The next most popular planned measure is standardizing processes, which appears to be the single largest contributor to savings achieved through consolidation. By aligning travel rules and sharing best practices across different business units or regions, companies cut on average 12% from their travel spend, and in some cases up to 30%, based on a sample of 50 companies.

Figure 34Companies save on average 12% by standardizing travel policy and processes

Declared savings achieved through

standardization of travel policy and processes

(% of travel spend)

Companies (%) Average savings: 12%

0%

2%

10%

38%

10% 12%

5 -0 -10 - 15 - >20%

10%5%15% 20%

28%


Other popular measures in 2012 include globalizing volumes and contracts, and standardizing tools. Both are proven ways to achieve savings: consolidated sourcing can offer savings of up to 8% of air spend and 13% of hotel spend when companies move from local to global sourcing.

29 Global Horizons: Consolidating a Travel Program, CWT Travel Management Institute (2007)



The need for effective safety and security measures has been highlighted over recent years by major disruptions to travel linked to major natural disasters and political unrest. In 2012, 27% of travel managers will make a top priority of addressing safety and security needs.

Sixty-five percent intend to implement traveler tracking and real-time notifications, which are invaluable in the event of an emergency or day-to-day disruption to travel. With traveler tracking, companies are able to quickly locate travelers and provide the necessary information and assistance to ensure their safety and comfort. However, this system requires traveler profiles to be kept up-to-date with the correct mobile numbers and other personal details—an ongoing challenge for many companies.

The next most popular measure (57%) is providing destination information to travelers. Recommendations on local customs, places to avoid and preferred local suppliers (e.g., taxis) are particularly important for travelers visiting an area for the first time but can also be valuable for frequent travelers.

Figure 35Which of the following measures will you take to address safety and security needs?

Implement traveler tracking and real-time notifications

Provide destination information to travelers

Implement a disaster/crisis response plan

Provide medical assistance and security services

65%

57%

43%

34%


50

Figure 36Which of the following measures will you take to tackle meetings and events?

Capture and track M&E data through multiple sources

Centralize M&E management

Leverage M&E technology

Engage management throughout the organization

Seek synergies with transient business travel management

Delegate negotiations with hotels, airlines and other end suppliers to specialized M&E agencies

Negotiate more effectively with the help of procurement experts

63%

61%

56%

44%

39%

30%

27%


30 Meetings and Events: Where Savings Meet Success, Travel Management Institute, 2010

Unsurprisingly, the most popular measure is capturing and tracking M&E data through multiple sources (e.g., the travel management company, credit card providers and other suppliers). Accurate data is a basic foundation for effective M&E management and ideally covers wide ground:

All types of events organized by different departments or business units in key countries, for a clearer vision of overall budgets

Both budgeted and actual spend, which is important for evaluating supplier performance and checking that negotiated rates have been applied

Clear company-wide cost categories, to help identify main spend areas and savings opportunities

As indicated by CWT research,30 successfully centralizing M&E organization takes time. Three main guidelines are worth considering:

Involve a diverse panel of stakeholders in a collaborative decision-making process. This is important to take into account a wide range of needs and ensure that cost considerations do not overshadow strategic objectives.

Implement a continuous change management program, including obtaining senior management support, communicating objectives to stakeholders and sharing information on progress to build and maintain momentum.

Leverage technology (e.g., an online meetings management tool) as an enabler of consolidation.


Twenty-two percent of travel managers say tackling meetings and events will be a priority for 2012. This figure is significant, considering that M&E responsibilities are typically dispersed across organizations rather than centralized within travel management departments. Increasingly, companies are turning their attention to M&E, recognizing the benefits of approaching this challenging area in a more strategic way.



Making the program more environmentally friendly ranks bottom of the list of priorities, representing a key focus area for only 12% of travel managers.

Figure 37Which of the following measures will you take to make your program more environmentally friendly?

Take environmentally friendly travel options (e.g., rail, hybrid cars and green hotels)

Implement or expand the usage of virtual meetings

Communicate to travelers on their carbon footprint

Control carbon dioxide emissions through CO2 reports

Offset travel-related CO2 emissions

66%

57%

49%

23%

17%


52

Priorities and planned measures: regional highlights

Some interesting differences emerge depending on travel managers’ geographical scope of responsibility. These differences concern both the order of priorities and the planned actions.

Asia Pacific

For travel managers in Asia Pacific, driving air and ground transportation appears less important this year than the other three top priorities identified by the full survey sample: improving traveler compliance, optimizing hotel spend and optimizing online adoption. Optimizing the travel policy is the 4th most popular priority.

Figure 38Travel managers' priorities for 2012 (Asia Pacific)

Priority Respondents

2

3

4

5

1

6

9

8

7

11

10

1

2

3

4

5

6

7

8

9

10

11












75%

66%

53%

53%

47%

53%

38%

34%

25%

25%

13%

+

+

+

+

-

=

+

=

-

+

-

2012 Asia Pacific

vs. total sample ranking

2012ranking among

total sample

2012Asia Pacific

ranking

Source: CWT Travel Management InstituteBased on a survey of 32 travel managers in Asia Pacific (October – November 2011)

The greater focus on optimizing hotel spend reflects challenges such as particularly high occupancy rates in this market and a significant proportion of independent hotels not being listed in GDSs.

Among the other differences worth noting, travel managers in Asia Pacific attach slightly more importance to enhancing the traveler experience and less to developing key performance indicators. Interestingly, making the program more environmentally friendly is a priority for more than twice as many travel managers for Asia Pacific than the full survey sample, in line with the increasing attention paid to carbon emissions in the region. (Plans have been announced to roll out an emissions trading scheme in several regions by 2013, while a Chinese government think-tank has recommended the introduction of a carbon tax.)


In terms of planned measures, the following regional differences stand out:

To optimize the travel policy, more travel managers will be benchmarking and aiming for best-in-class guidelines(+18 points). Compared to the full sample, however, Asia Pacific travel managers are less interested in defining specific rules concerning ancillary services.

Tightening the policy (+19 points) is also the top measure planned for tackling air and ground transportation savings, reflecting the relatively lower levels of compliance in Asia Pacific compared to other regions. Travel managers in Asia Pacific are ruling out travel freezes, unlike their colleagues in Europe, Middle East and Africa, and global travel managers.

Emergency assistance and VIP services are more often planned in this region (+21 points) as way to enhance the traveler experience.

Europe, Middle East and Africa

Travel managers in Europe, Middle East and Africa place slightly more importance on optimizing hotel spend and optimizing online adoption. Driving air and ground transportation savings remains the top priority with an even higher score in this region compared to overall (69% vs. 63%). On the other hand, improving traveler compliance, and addressing the traveler experience are lower priorities.

Figure 39Travel managers' priorities for 2012 (Europe, Middle East and Africa)

Priority Respondents

2012 Europe,

Middle Eastand Africa vs. total sample ranking

2012ranking among

total sample

1

3

4

2

5

6

7

8

10

9

11

=

+

+

-

=

=

=

=

+

-

=

1

2

3

4

5

6

7

8

9

10

11












69%

67%

60%

63%

45%

34%

28%

26%

23%

24%

13%

2012Europe,

Middle Eastand Africa

ranking

Source: CWT Travel Management InstituteBased on a survey of 123 travel managers in Europe, Middle East and Africa (October – November 2011)

54

Among the planned measures for 2012, the following stand out as being more popular with travel managers in this region:

Negotiating more frequently (+10 points) with suppliers to optimize hotel spend.

Delegating negotiations (+9 points) with hotels, airlines and other end-suppliers to specialized meetings and events agencies.

Managing the trade-offs between air and rail (+4 points) to drive savings, which underlines the importance of rail in the region.

Offering pre-trip services (+6 points) to enhance the traveler experience.

Latin America

Travel managers in Latin America pick the same top four priorities as the overall sample, although optimizing hotel spend comes higher than improving traveler compliance.

The top priority, driving air and ground transportation savings, was selected by 83% of respondents (vs. 63% overall) against a shifting air market landscape that will likely impact negotiations (notably as TAM Airlines, a member of Star Alliance, completes its merger with LAN Airlines, a member of oneworld). Also worth noting, developing key performance indicators emerges as a higher priority in Latin America than other regions.

Figure 40Travel managers' priorities for 2012 (Latin America)

2012Latin America importance

ranking Priority Respondents

2012 Latin America


2012ranking among

total sample

1

3

2

4

7

8

6

5

10

9

11

1

2

3

4

5

6

7

8

9

10

11












83%

73%

43%

43%

57%

37%

23%

23%

17%

17%

3%

=

+

-

=

+

+

-

-

+

-

=

Source: CWT Travel Management InstituteBased on a survey of 30 travel managers in Latin America (October – November 2011)


Certain measures stand out as more popular among travel managers in Latin America than other regions:

To tackle air and ground transportation savings, travel managers will focus on negotiating multi-year contracts and implementing flexible and dynamic negotiations with suppliers throughout the year (+6 points), rather than tightening the travel policy (-13 points) or freezing travel (no responses).

Among the indicators that travel managers plan to monitor in 2012, restricted fare usage (+9 points) is the most frequently cited, while modified/cancelled bookings and related costs (+19 points) are mentioned more than in all other regions.

Addressing advance purchase behavior (+28 points) is a measure planned by all Latin American travel managers who consider optimizing the travel policy a top priority for 2012. This reflects the need to book ahead to ensure hotel availability in high-occupancy cities, as well as room for improvement in advance purchase booking behavior in this region. Figure 41 shows the difference in performance between different regions, with Latin America slightly behind Asia Pacific, and significantly more tickets booked at least 14 days earlier in Europe, Middle East and Africa, as well as North America.

Figure 41Percentage of tickets booked at least 14 days in advance

0

70

60

50

40

30

20

10

Domestic Continental Intercontinental

36%

42%

35%

53%

44%

16%

31%

19%

55%

61%

53%

66%

Asia Pacific Europe, Middle East and Africa Latin America North America

Source: CWT Travel Management InstituteBased on tickets booked by CWT clients worldwide (January ‒ September 2011)

56

North America

In North America, the highest priority is improving traveler compliance, followed by driving air and transportation savings and optimizing online adoption. Optimizing the travel policy overtakes optimizing hotel spend, which drops to 5th place.

Among the other priorities, further consolidating the travel program appears more important in North America than among all respondents.

In terms of the planned measures that stand out:

To optimize hotel spend, more than in any other region, travel managers in North America intend to consolidate spend at fewer properties to leverage negotiations (+32 points) and request last-room availability agreements from hoteliers (+21 points).

To optimize online adoption, travel managers will focus in particular on enhancing online booking tool features(+32 points), while encouraging counselors to steer travelers to the OBT (+12 points). It is worth remembering that OBT usage is more mature in North America than other regions.

To tackle meetings and events, travel managers will focus on seeking synergies with transient business travel management (+31 points) and engaging management throughout the organization (+16 points).

Figure 42Travel managers' priorities for 2012 (North America)

2012North America


2012 North America


2012ranking among

total sample

2

1

4

5

3

6

8

7

9

10

11

1

2

3

4

5

6

7

8

9

10

11












73%

58%

46%

46%

46%

42%

36%

39%

27%

30%

12%

+

-

+

+

-

=

+

-

=

=

=

Source: CWT Travel Management InstituteBased on a survey of 33 travel managers for North America (October – November 2011)


Global travel managers

Improving traveler compliance will be the highest priority for global travel managers in 2012, with 79% placing this in their top five. Since many global travel managers have already worked on optimizing their travel policies, it is natural they are now more focused on compliance—a task that requires continual efforts.

Optimizing online adoption and further consolidating the travel program will also be higher priorities for this group compared to travel managers overall. Lower priorities include driving air and ground transportation and optimizing hotel spend (although these still come in the top four), along with enhancing the traveler experience.

Figure 43Travel managers' priorities for 2012 (global travel managers)

2012 global TMs


2012 global TMsvs. total sample ranking

2012ranking among

total sample

2

4

1

3

5

8

7

6

9

10

11

1

2

3

4

5

6

7

8

9

10

11












79%

60%

54%

49%

39%

42%

38%

44%

32%

24%

8%

+

+

-

-

=

+

=

-

=

=

=

Source: CWT Travel Management InstituteBased on a survey of 72 global travel managers (October – November 2011)

58

The surveyed global travel managers typically identify more measures than other respondents. They also intend to implement more measures to drive consolidation/standardization (including online booking) and extend the scope of the program, given their roles as orchestrators across different regions. The following actions stand out:

To further consolidate the travel program: concentrating the number of suppliers (+9 percentage points compared to the total sample), globalizing volumes and contracts (+15 points), standardizing tools (+12 points) and extending geographical scope (+25 points).

To optimize hotel spend: consolidating hotel spend on fewer properties to leverage negotiations (+19 points) and consolidating multiple sources of hotel data (+12 points).

To drive air and ground transportation savings: negotiating multi-year contracts and implementing flexible, dynamic negotiations with suppliers throughout the year (+15 points).

To drive compliance: engaging management throughout the organization (+10 points) and tracking/communicating compliance levels (+11 points).

To optimize online booking: increase the scope of their online booking tool (+25 points) and enhance OBT features(+15 points).

To enhance the traveler experience: implement social media tools and apps (+27 points).


CWT Travel Management Institute The CWT Travel Management Institute conducts in-depth research into effective travel management and meetings and events (M&E) practices to help clients worldwide derive the greatest value from their travel and M&E programs. Drawing on the global resources of Carlson Wagonlit Travel (CWT), the institute provides a regular flow of business intelligence and best practices, offering actionable insights into the eight key levers to effective travel identified by CWT.

To this end, the CWT Travel Management Institute publishes original research, white papers and case studies, as well as a global periodical CWT Vision. Research publications include: Business Traveler Services: Finding the Right Fit (2011), Meetings and Events: Where Savings Meet Success (2010), Room for Savings: Optimizing Hotel Spend (2009), Playing by the Rules: Optimizing Travel Policy and Compliance (2008), Global Horizons: Consolidating a Travel Program (2007) and Toward Excellence in Online Booking (2006).

All research published by the CWT Travel Management Institute

is available on

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Travel Management Priorities 2012

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