Amex 2012 european business travel barometer

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BAROMETRE EUROPEEN DU VOYAGE D’AFFAIRES 22nd edition – November 2012

Groupe Concomitance : Tel : +33 (0)1 78 16 52 30 or [email protected] This report is protected by copy right - any full or partial reproduction is subject to prior authorisation of Amex and

acknowledgment of Groupe Concomitance in its role in the preparation of this report

EUROPEAN BUSINESS TRAVEL BAROMETER 2012

Concomitance Group

November 2012

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Contents

Executive summary .................................................................................................... 3

Methodology of the barometer .................................................................................. 4

Part 1: Economic trends and travel budget developments ..................................... 5

Economic trends: Eurozone recession in 2012, slow recovery expected in 2013 .............................. 5

Travel expenditure unchanged in Europe in 2012 despite the drop in GDP ....................................... 5

Moderate growth (+1%) in business travel expenditure in Europe, with a range of contrasting

situations ............................................................................................................................................. 6

The proportion of unchanged budgets has increased, giving rise to arbitrage .................................. 8

1/3 of the companies measure the return on investment and 1/4 consider that business travel

contributes to their development ....................................................................................................... 9

Most travel expenditure needs to be more tightly managed ........................................................... 10

Budget optimisation factors mainly affect direct costs .................................................................... 11

Travel policies are broadly implemented and cover all phases of trips ............................................ 12

Companies use TMCs for support ..................................................................................................... 13

Part 2: An increasingly complex value chain ......................................................... 14

A complex value chain, but still managed manually to a large extent .............................................. 14

Multiple and incomplete reporting sources ...................................................................................... 16

Part 3: Security and mobility issues ....................................................................... 17

Traveller security is a key concern for companies ............................................................................ 17

Mobile solutions are becoming fully established .............................................................................. 17

Summary ................................................................................................................... 19

Company maturity is still closely linked to the size of their travel budget ....................................... 19

Part 5: 2013 Prospects ............................................................................................. 20

2013 prospects: more wait-and-see strategies, +0.5% growth forecast .......................................... 20

Key issues for 2013: development of international travel and expense management .................... 20

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Executive summary The 2012 barometer opens in a period of economic uncertainty in Europe, with negative GDP growth in the Eurozone despite a range of contrasting situations. Despite this, European business travel budgets are still growing, albeit slowly, but at an average rate of 0.5 points above GDP, yet again demonstrating the resilience of the market. Overall, the business travel budgets of the companies interviewed have increased by 1%. Unlike in 2011, small and medium-sized companies enjoy a better situation than large businesses. As can be expected in this context, business travel expenditure management is central to the concerns of the companies.

Travel budgets are not increasing overall, but they favour client base development

63% of the 2012 budgets have remained relatively unchanged from 2011: the trend already observed in previous years has become more marked.

3 out of 4 companies now consider business travel as a cost for the company rather than an investment. However, they recognise that this cost is essential: this explains why more than a quarter of them have increased their expenditure on developing new clients/markets, even if this involves cutting their internal business trip expenditure. In a period of economic uncertainty, business travel is perceived as a real growth factor.

Business travel costs are increasingly monitored and restricted

Although only 30% of the companies measure the return on their business travel investment, almost all of them (89%) have established an expenditure monitoring process. This development should be seen against the increasingly frequent tendency to enter business travel expenditure under Purchases or Finance.

Items weighing heaviest in relation to overall expenditure are the most closely monitored, but these are also the least well managed (e.g. MICE).

As the primary means for expenditure restriction and control, it is logical that travel policies have been established in almost 9 companies out of 10, including the smallest. In general these policies are very well implemented and cover all business trip phases.

Companies are opportunistic in optimising their budgets

Although advance booking is still the main factor in optimising company budgets, searching for best buy takes second place (as opposed to 6th place last year) despite the induced risks of hidden costs. The use of rail travel when possible (in 5th place and rising) and low-cost companies (among the first 10 optimisation factors) exemplify this preference for levers affecting costs directly on booking, focusing on the short term perspective.

Nevertheless, the value of more structured factors is equally well recognised, such as online booking, using preferred suppliers or renegotiating supplier agreements.

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Mobile solutions are becoming a fully-fledged booking option Applications provided by mobile tools increasingly cover pre-trip, on-trip and post-trip phases and are turning this option into a real alternative for a growing number of companies (14%, as opposed to 9% last year). Security is becoming a major issue Driven by increasingly stringent legal obligations, companies are increasingly integrating security issues in their business trips. These issues are now the 6th most frequent component of travel policies (for 83% of the companies) and are even among the 3 priorities for 2013. Prospects for 2013: more wait-and-see strategies Over 7 companies out of 10 anticipate that their 2013 travel budgets will stagnate. Growth expectancy is diminishing, at +0.5%. Here again the situation is more favourable for small and medium-sized companies.

Methodology of the barometer

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Part 1: Economic trends and travel budget developments

Economic trends: Eurozone recession in 2012, slow recovery expected in 2013 2012 is synonymous with recession for the European zone, with GDP down 0.4% from 2011. France registered a GDP growth of approximately 0. Although slow recovery is anticipated in 2013 (0.2% growth in Europe), the economic outlook is still strained. During this year the IMF reduced its Eurozone growth forecasts on two occasions.

The United States enjoy more favourable dynamics, with 2.2% growth, representing progress from 2011 observations. In Asia, Japan is recovering after a difficult year in 2011, showing 2.2% growth. Although China no longer has two-figure growth, the level of GDP growth is still much higher than for other regions, increasing by 7.8% for 2012.

Travel expenditure unchanged in Europe in 2012 despite the drop in GDP The volume of expenditure for the 3 main European countries during this year remains unchanged at 127 billion USD. The French market, amounting to about 36 billion USD, has grown very slightly by about 0.6%.

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Overall, the increase in business travel expenditure is still 0.5 points above GDP; this confirms the resilient nature of business travel, as already observed in 2011. The Global Business Travel Association (GBTA) forecasts slow growth for Europe in 2013, which should allow a return to 2008 expenditure levels, or approximately 131 billion USD. Caution is still the order of the day, however, as a number of financial analysts anticipate that GDP will increase less than the IMF's + 0.4% forecast due to weak exports and restrictive budget policies. In the United States, business travel trends also reflect the GDP trend. A total of 257 billion USD will have been spent in the United States in 2012. This expenditure has grown constantly in the country since 2009. As in 2011, China has the strongest growth. Expenditure increased by 22 billion USD from 2011 to 2012. In this respect, China is growing by the equivalent of the French budget every 2 years. It is forecast to overtake the United States in 2014, making it the country with the highest business travel expenditure in the world.

Moderate growth (+1%) in business travel expenditure in Europe, with a range of contrasting situations The interviewed companies increased their budgets by +1% on average during 2012, but the situation varies in several respects.

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Geographical contrast: - Germany and the northern countries in particular took the lead in terms of growth, with

an increase in budgets of over 2%; - Southern European countries are marking time with diminished budgets; - Interviewed companies in the UK have also seen their budgets reduced by -1% to -2%.

Contrast in types: - Growth in the budgets of small and medium-sized companies and industries has been

the most significant at 1.6%; - For their part, growth among large businesses has been sluggish at +0.1%. The largest

budgets (over €20 million) have even dropped by 5%, unlike in 2011 when they led the growth figures with a +6% increase. The growth mechanism has thus been completely reversed. This is one of the striking facts in the 2012 barometer.

Finally, a contrast between sectors:

- The construction, manufacturing and luxury sectors show above average growth of 1.9%;

- Conversely, the finance and health care sectors have seen their business travel budgets diminish by 1.6%.

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The proportion of unchanged budgets has increased, giving rise to arbitrage 63% of the companies declared that their budget was largely unchanged in 2012. The proportion of these companies has doubled in two years from 29% to 63%. In 2011, "only" 1 out of 2 companies had anticipated this budget stability for 2012; the phenomenon is thus even more marked.

Even so, this does not mean that all budgets have been frozen; unlike in 2010, the dynamics of the market remain positive with a higher proportion of companies declaring growth in their budget than those declaring a budget cut: 23% against 14%. The stability of the budgets is driving companies into arbitrage. Client base development benefits most from increased budgets, with the development of new markets and clients being the primary growth factor, followed in second place by maintaining existing clients. This type of arbitrage is at the expense of business trips within organisations or internal events, the primary budget reduction factors. Business travel is therefore still a lever for company growth and is used as a determining factor in company strategies.

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1/3 of the companies measure the return on investment and 1/4 consider that business travel contributes to their development Currently 30% of the companies declare that they measure the return on their investment on business travel. In 80% of cases, this involves measurements on all business trips in a particular department or division. The return on the investment on each separate business trip is much less frequently measured.

Measuring the return on investment is closely linked to the company's travel budget. The larger the budget, the more important it is to measure the benefits. 43% of large companies (with travel budgets exceeding €3 million) measure the return on investment; this figure even reaches 53% for global businesses with budgets exceeding €20 million. 3 out of 4 companies still consider business trips as a necessary cost rather than an investment. However, two facts should be borne in mind: - The number of those undecided has decreased sharply. There were 6 times more of

them two years ago than today; - The proportion of companies considering business travel as a major contribution to

company development is steadily growing. This demonstrates development in the perception of business travel expenditure. Companies are increasingly aware of the contribution made by business travel. Indeed,

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companies today no longer consider reducing the number of trips as a way of optimising the budget. Travel management companies (TMCs) have a crucial role to play in this changing perception: only 15% of companies without a TMC consider that business travel makes an important contribution, while 26% of companies using a TMC hold this view. Working with a TMC has a direct impact on the perception of business travel as an investment.

Most travel expenditure needs to be more tightly managed The 3 expenditure categories subjected to more stringent monitoring than last year account for 75% of the travel budget. As can be expected, these categories are the largest items in the travel budget and attract the attention of companies.

Air travel is still the most closely monitored category, with a total of 57% of companies subjecting it to a more tightly management. This result is still fairly logical, as this item accounts for 40% of the budgets of the interviewed companies. The two major issues in this monitoring are above all accommodation and MICE. Hotel expenses are still a poorly managed category. It still appears relatively limited in size but its real weight is difficult to assess for two reasons: - The large number of booking channels (travel agencies, booking centres, direct

suppliers) prevents companies from obtaining an overview of their hotel usage. For

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example, a study on the hotel industry commissioned by American Express among travellers shows that travel policies do not impose any particular booking channel on 2/3 of employees;

- The fact that companies use numerous payment methods is a hindrance to consolidating these expenses.

This particularly applies to large companies, for which accommodation only accounts for 20% of expenditure, but of which 54% declare that they monitor hotel expenses more stringently. Small and medium-sized companies and industries tend to favour rail travel, which is still generally a well-monitored and controlled item. The perceived proportion of MICE expenditure (Meetings, Incentives, Conventions and Events) remains small in terms of the attention devoted by companies (in particular accounts in excess of €20 million, 41% of which wish to monitor this item more closely). In fact this type of expenditure is difficult to consolidate and is hence under-evaluated for two main reasons: - Orders within the company come from multiple sources; and - This expenditure is often outside the scope of activity of the travel manager. This item can represent up to 30% of real travel expenditure in some sectors such as the pharmaceutics or automobile industry.

Budget optimisation factors mainly affect direct costs

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In the current context, and unlike what happened last year, companies increasingly prioritise economic levers. As in 2011, companies still favour advance booking as a means of optimising their travel budget. In most cases, this can generate savings of 25% without affecting traveller comfort. Studies show that between 2011 and 2012, the proportion of reservations exceeding 21 days increased from 43% to 46% for long haul trips. This development is even more striking on the European rail network, with an increase of 11% from 2011 to 2012. Predicting trips is thus essential for budget optimisation, but is a long-term approach as it involves a change in the behaviour of travellers. The largest increase is in factor 2: resorting to the best buy policy. In 2011 this factor was only in sixth place. But obtaining the best buy has its own consequences: companies should be aware of the hidden costs involved, such as for altering or cancelling tickets. In addition, this factor can have a significant impact on the economic conditions set out in the contracts negotiated with some preferred suppliers. The use as mentioned of online booking is in third place, relatively unchanged from 2011. This factor has a double impact: on prices and on the implementation of company travel policies. The resulting reduction in costs can achieve up to 20% savings on average. This is also a structural factor, considering that an investment in an online booking tool pays for itself within 2 years on average. Other structural factors are also among the most widely mentioned: - Use of preferred suppliers: down one place to fourth place; - Use of centralised means of payment: within the top 10. These two factors also show that companies have a long-term vision on budget optimisation within the scope of their partnership with their TMC.

Travel policies are broadly implemented and cover all phases of trips Travel policies occupy 7th place among the means of optimising budgets. As can be expected, these policies still represent an essential frame of reference for business travel and for its monitoring. Overall, 80% of the companies have a travel policy and implement it properly, with 2/3 of companies reporting an implementation rate of over 70%. This impressive implementation figure is linked to the broad scope of the travel policy, which includes all business trip phases.

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This year has seen very significant developments affecting the very structure of travel policies. The first striking development concerns accommodation. This year hotels have become the primary component of travel policies for 88% of the companies, ahead of air travel. They only occupied 6th place in 2011. Taking into account the difficulties in consolidating and monitoring this category, travel policies are still the primary means of laying down rules. The second major development concerns security, which now figures in 82% of travel policies (see the point on security on page 17). Finally, another major issue is expenditure monitoring. This appears in the travel policies of 87% of the companies. Monitoring is applied both before and after the trip.

Companies use TMCs for support As can be expected, companies use their TMCs for the major issues of the moment: online booking, employee security, cost control. In this framework, travel agencies increasingly occupy a partnership position: 50% of the services purchased by the companies are strategic advice services for sourcing programmes, the purchasing strategy, the workflow audit, or building the travel policy.

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With a view to ensuring employee security, over half of the companies engaged their TMCs to provide 24-hour support, while almost 40% of them used TMCs to repatriate their employees or to re-route travellers during their business trip.

Part 2: An increasingly complex value chain

A complex value chain, but still managed manually to a large extent The value chain is the combination of all phases, from authorisation of the trip to reconciliation of the expenses. At least 50% of the companies have organised procedures or even established instruments for each phase in this value chain, both pre- and post-trip.

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However, there are major disparities: - Apart from online booking, the public sector has a more structured approach to all of

the phases. This is clearly linked to the regulatory framework of the administration; - In the private sector, large businesses are more organised than small and medium-

sized companies in the post-booking phase. This is to be expected, as they have both the resources and the tools required. Small and medium-sized companies and industries focus more on online booking, benefiting from increasingly accessible technologies.

Even if processes are in place, they are still managed manually or through partial automation and using frequently disparate solutions (originating from different sources): this is still the case for 79% of the companies. One possible explanation for this relates to the market offer: very few suppliers are yet capable of providing a fully integrated solution. Despite this, progress has been made since 2011. For example, 41% of the large companies declared that their management is completely automated. This figure was 28% in 2011. This trend is expected to increase, as over 50% of the companies wish to improve their value chain management from now on, moving towards improved forecasting, monitoring, measurement and consolidation of their travel budgets. Travel agencies have an essential role to play in integrating these solutions.

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Multiple and incomplete reporting sources Companies now receive reports from multiple sources.

The main source is still travel agencies, particularly for large companies and small and medium-sized companies and industries (respectively 65% and 54% using travel agencies). The second source of reports is internal, through company financial systems. As companies have not usually made a clear choice regarding their means of payment, problems arise in consolidating data, driving the companies to engage their internal departments in order to obtain an overview of their expenditure. As can be expected, only 55% of the companies receive a single, comprehensive report on their entire travel expenditure. Progress remains to be made at a time when the prime objective of 80% of the companies is to control their expenditure.

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Part 3: Security and mobility issues

Traveller security is a key concern for companies Recent events such as the nuclear disaster at Fukushima, hurricane Sandy and the hostage crisis in Mali emphasise the importance of business travel security. Companies are legally required to ensure the safety of their travellers. In France this obligation was reinforced by legal precedent following the Karachi terror attack in 2007.

Companies have genuinely improved their awareness of this issue over the last 2 years: 83% of them now include security in their travel policy, as opposed to 74% in 2011. Irrespective of their size, they have been establishing procedures to ensure immediate localisation and repatriation of their employees. Their level maturity in terms of business travel thus has no impact on establishing security measures. The public sector, however, appears to lag behind slightly; this difference is probably linked to the fact that most public sector business travel is not international.

Mobile solutions are becoming fully established Mobile business travel support solutions are today being adopted in full. Mobile solutions have adapted to business travel needs: - in the pre-trip phase for booking and payment; and

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- in the post-trip phase for reporting and expense management.

As can be expected, 14% of the companies now consider mobile tools as real alternative booking options, as opposed to 9% last year.

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Summary Company maturity is still closely linked to the size of their travel budget

This matrix typifies the maturity of the various categories of companies with regard to business travel, from the use of a travel agency (the first phase in the maturing process) to measuring the return on investment, through implementing the travel policy or using dedicated payment methods. It also compares the rates of use according to the size of company travel budgets, from less than €250,000 to over €3 million. Firstly, the traditional business travel phases (use of an agency, expense management procedure, existence and implementation of the travel policy) have now been established in the vast majority of the companies. On the other hand, payment, booking and expense management tools and solutions are still largely a prerogative of large companies. Thirdly, small and medium-sized companies and industries appear quicker to adopt mobile technologies, which are lighter and easier to put into operation. Most of the companies still share one challenge: measuring the return on investment. The increasingly frequent allocation of the travel budget to purchasing and finance departments should facilitate awareness of this issue.

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Part 5: 2013 Prospects

2013 prospects: more wait-and-see strategies, +0.5% growth forecast

The economic context is still strained and there is a growing tendency for companies to adopt wait-and-see strategies. While 63% of the companies declared a largely unchanged budget in 2012, prospects for 2013 put this figure up to 71%. The proportion of increasing budgets is anticipated at 16%, as opposed to 23% in 2012. The mean increase in budgets looks to be around 0.5%. As in 2012, dynamics are on the side of small and medium-sized companies and industries, while on the other hand companies of over €20 million are banking on a 1.8% budget reduction. This sluggish growth is consistent with forecasts for very moderate price increases. The air travel sector, in particular short- and medium-haul flights, is only expected to increase fares very slightly: 2% for economy class and 1% for business class. Fares for long-haul flights are unlikely to increase to any greater extent. Moderate price rises are also expected in the hotel sector: between +1 and +4% in general.

Key issues for 2013: development of international travel and expense management In 2013, 52% of the companies planning to increase their business travel budget will do so to support their international activities, as opposed to 31% on the domestic market.

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For example, 850 French companies are currently established in China, which in 2020 is expected to become the second-largest commercial outlet for France after Germany.

This development on an international level will make travel management more complicated; as can be expected, this complexity is reflected in company priorities for 2013. These priorities mainly focus around controlling costs and optimising and consolidating expenditure. Further company priorities include employee security during their business trips and, to a lesser extent, employee satisfaction. Some sectors, such as insurance and services to companies, take more account of satisfaction. For these companies, the travel policy also represent a means to attract and keep talented personnel. In conclusion, three issues emerge for the business travel industry in 2013: - Organising business trips to support the growth of European and international

companies; - Controlling and measuring the costs that may be involved in such international

development through improved technological integration and improved support throughout the value chain;

- The final major issue concerns travellers themselves: their trips must be facilitated and made safe to ensure maximum efficiency.

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About the barometer The 2012 barometer was prepared by Concomitance on the basis of a telephone survey conducted from 18 September to 15 October 2012 among persons in charge of travel budgets ranging from less than €250,000 to over €50 million (Finance Directors, Purchasing Directors and Travel Managers) in 567 European companies based in 11 countries: Germany, Great Britain, France, Belgium, Luxembourg, the Netherlands, Spain, Italy, Denmark, Sweden and Norway. About Concomitance Concomitance is a service company specialised since 2001 in marketing, commercial, sales and client relations research, consultancy and performance development. Concomitance has teams specialised in several activity sectors such as telecommunications, travel and business travel, banking, distribution, etc. Since its establishment, Concomitance has stood out in terms of its capacity to transpose commercial and marketing issues into action plans which are immediately effective and comprehensible to all players. This capacity is a direct result of Concomitance's DNA: the prior business experience of our consultants allows us to formulate recommendations and share them with our clients in line with the maturity of their organisation.

Amex 2012 european business travel barometer

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