South African businesses are all set to go global, but they’re bumping into higher price tags that might have them thinking twice about the next face-to-face meeting. The latest research from the Global Business Travel Association (GBTA) shows a massive 47% leap in corporate travel spending in 2022.
Budgets are being stretched thin, and the burning question on everyone’s mind is, what’s fuelling this rise in travel expenses, and how can firms steer back into a financial comfort zone?
Unpacking the numbers, Bonnie Smith, GM of Corporate Traveller, lays out the maze of factors that have conspired to send the costs of South African business travel soaring.
Smith shares that there’s a burst of pent-up demand from employees keen on switching virtual meetings for face-to-face interactions. Although online tools were handy, they didn’t match up to the perks of in-person mingling with clients, partners, and colleagues.
The appetite for business travel has increased. However, this hunger is meeting a short supply of airline seats and hotel rooms. This mismatch lets suppliers up the prices. Business class fares have felt a noticeable bump, but economy seats are also on the rise. “The situation makes it challenging for travel managers to secure corporate discounts that were available previously,” says Smith.
Additionally, the cost of flights, ground transport, and accommodation has seen a climb, thanks to broader economic factors like a little snag in oil supply and the ever-present inflation. Locally, the effects of capacity cutbacks are still being felt, making it a tad slower to revive the full supply of travel-related services. Consequently, South African companies face a slightly higher price tag for the same business trip services than in 2019.
Smith also highlights a shift in employee behaviour and preferences. With remote and hybrid work arrangements becoming common, many travellers now extend their business trips for leisure to reduce the time away from home. Travel managers are now handling more requests for weekend hotel stays and rescheduled flights, increasing lodging costs, meals, and other expenses.
Furthermore, after experiencing the lockdown life, it’s understandable that employees now value comfort, convenience, and flexibility when travelling. The requests for a plush seat on a business-class flight, a comfy bed in a high-end hotel, and a smooth ride in an executive car are rising, even when the budget leans towards economy options.
Lastly, outdated administrative processes continue to be a challenge for many travel programmes. Manual booking and reimbursement processes lead to last-minute and more expensive travel arrangements. The lack of integrated reporting also obscures expenditure oversight.
“In addressing the rising travel expenses, adopting straightforward modern solutions is key,” Smith notes. “Utilising updated corporate booking tools, implementing pre-trip approvals, and employing mobile expense reporting are some options,” says Smith.
To navigate this spending surge, Smith proposes several strategies:
- Develop detailed forecasts of potential business trip demand based on past spending, growth trends, and financial scenarios. Allocate extra budget to handle unexpected changes or rising prices.
- Renegotiate discounted airfares and hotel rates annually using projected travel volumes. Aggressively pursue the best deals with airline and hotel partners.
- Research and adopt user-friendly mobile booking and payment tools that suit the business needs of South African companies. Set clear policies for employee usage.
- Encourage travellers to book the lowest fares, share rooms, and manage costs efficiently. Implement pre-trip approval processes to enforce policies.
- Train employees on cost-saving policies and send regular reminders on responsible booking, reporting expenses, and changing plans as needed.
- Enhance data collection on trip spending by traveller, department, destination, etc., to identify wasteful spending and find savings.
- Plan for routine disruptions by adding buffers to budgets and preparing contingency plans for major crises like weather or health issues.
Smith suggests that firms collaborate with a corporate travel management company (TMC) to tackle these challenges effectively.
She elaborates, “With the notable uptick in South African business travel spending, it’s imperative to take steps such as reassessing demand, renegotiating with suppliers, fine-tuning policies, and making good use of data. However, this is not a journey businesses should undertake solo. A partnership with a TMC can be a game-changer. They offer the advantages of discounted rates, simplified booking procedures, thorough reporting, and support for travellers, all of which are instrumental in reigning in costs.”
For more information about Corporate Traveller, or to interview Corporate Traveller South Africa GM Bonnie Smith, call Dorine Reinstein on 083 278 8994 or email [email protected]