While uncertainty can be unsettling, it also creates an opportunity to drive change. Change enables you to optimize your travel program to control cost and provide a positive travel experience. It’s essential to review supplier partnerships, use data and shift travel.
In the wake of the COVID-19 pandemic, worldwide airline capacity has decreased by 80% compared to 2019 levels (almost 90% for international flights). The return to air travel is expected to be gradual and slow – starting with domestic markets and followed by international markets. In this challenging environment, airlines are fighting to survive.
Many airlines will resume operations, but their network might significantly shrink. We expect to see consolidation within the industry, especially in Europe and Asia. As we’ve learned from the past, consolidation reduces market competition by increasing the number of monopolistic routes in a corporate managed program.
What does this mean for air programs? How are preferred air suppliers navigating through the crisis? Are some of them at risk of bankruptcy? How will this decline in competition level impact travel program coverage, average ticket price, and leverage with air suppliers?
How can you prepare for the new air industry landscape?
Start with assessing the level of risk with preferred carriers. Understand the risk of grounding, considering their cash availability, government support, and network impact due to border closures and safety regulations. The scope of risk assessment should extend to non-preferred airlines as well, since they may have a direct impact on the competition level of flown markets.
Track current and future network changes for key airlines. Most airlines will not fully recover for two to three years, which means carriers will restart operations with a reduced network of flights and destinations. During this period of slow recovery, some preferred suppliers may no longer have the capacity to fully cover travel needs in certain markets. Tracking these changes in service will be paramount in adapting the travel program and potentially seeking alternative suppliers. Using a tool like Advito’s Air Fare Predictor will enable you to monitor the evolution of bookable flights, seat capacity changes, and future pricing points on a daily basis.
Once business travel is ramping up, you should align your global travel footprint with the changed industry landscape to secure optimal coverage and competitive pricing as the program is gradually rebuilt. This will require ongoing negotiation with suppliers to protect your top routes from volatile or uncompetitive pricing.
Beyond savings, you can ask airline partners how they can contribute to mutual success by being easy to do business with. If necessary, add additional negotiation points around refunds, credits and vouchers – and advocate for fuel surcharge and distribution surcharge termination. Review health and safety measures to help travelers gain trust in air travel, and most importantly, do not use the traditional air RFP process. A key factor to success for travel programs in a post-COVID-19 world will be agility.
The hotel industry will continue to change as a result of COVID-19. While savings are still important, cleanliness and safety concerns are taking precedence. Hotel chains are responding with a vast array of cleanliness programs, protocols and partnerships.
The same questions are on everyone’s mind: What does COVID-19 mean for managed hotel programs? Is someone available to negotiate rates? Instead of sourcing, should we consider extending our rates indefinitely?
We’ve talked to hotel chain transient sales teams, our client base and colleagues to get their views on all these questions. And as we’ve formulated a strategy for an industry hungry for answers, we’ve considered those views as well as our deep consulting expertise and the data we continue to gather on market trends.
Our strategy for the new future of hotel programs
As early as January and February, we were seeing steep declines in APAC – up to 50% drops year-over-year in some markets. And by April the rest of the world was in a similar situation. In New York, the epicenter of the outbreak in the U.S., April 2020 rates were down 40-45% vs. April 2019. Those declining rates mean static rates are no longer competitive.
We have built a strategy that takes us from where we are today into a post-COVID-19 travel era. The path we’ve outlined is certainly not the only path – but we believe it is the best path. It covers everything from sourcing to traveler well-being, how to create a booking process that drives smart buying decisions, and duty of care. The strategy considers the time and resource limitations present for hoteliers but also allows for companies to take an active role in managing their hotel programs.
Beginning today, get your tools ready before the decision to travel is made. Update your OBT and add rate targets. Devise your Health, Safety and Duty of Care Strategy. When building your timeline, determine when to release your hotel RFP. We recommend you launch when your company determines travel is imminent. Don’t think of the RFP process as a traditional approach. Be dynamic with your requests. It’s not just about sourcing anymore, be active in your hotel category management on an on-going basis.
Online check-in and digital room keys
Face masks for guests and employees
Source: BCD Travel Research & Innovation online survey of 1,260 business travelers, May 2020
Ground transportation program
Every traveler needs ground transportation at some point in their journey, whether it’s a rental car, chauffeur, shared service or taxi. Most ground transportation services aren’t receiving financial support from the government in the wake of COVID-19. This industry has a high fixed cost and high capital investment; when cars aren’t moving, money isn’t coming in. This presents an opportunity for you to reassess your ground transportation strategy. With large supply and a low demand, these companies are willing to relook at corporate contracts. They need to cover their fixed costs.
For expanded coverage on ground, see the recently published
article from Advito.
Travelers are changing their habits. Instead of taking public transportation, they are opting for rental cars or personal vehicles. Many travelers are not willing to get on a plane, and on routes that they would normally fly they are now opting to use ground transportation. An eight-hour drive may be the new future. When considering your ground strategy, you can anticipate a substantial increase in volume, which in turn will increase your leverage to negotiate with suppliers. But while rates may be negotiable, duty of care and health and wellness are not. All suppliers – including any ground transportation – need to be thoroughly vetted. You should review safety protocols and develop a process to verify them for every trip. Each risk factor should be reviewed in this analysis. Is your supplier financially stable? How often are drivers being tested for COVID-19? What do travelers need to feel safe?
Travel by rail has gained significant share over the last 20 years in Europe and Asia. This has been driven by business travelers’ preference for rail over air for trips of less than three hours, the development of high-speed rail services (HSR) and corporate sustainability initiatives to reduce carbon emissions. Rail’s expansion isn’t slowing down. More and more countries are investing in HSR infrastructure, including Morocco, Saudi Arabia and Turkey. China, home to the world’s largest rail network, is adding thousands of kilometers of track every year. In turn, we expect market share for rail to increase, with many new benefits that are attracting travelers:
- On-board experience Travelers perceive a number of experiential benefits, such as easier social distancing, freedom to walk around, fresh air from windows and quiet cabins with fewer disruptions. Various surveys project travelers’ tolerance for longer trips on rail to increase to up to five hours, meaning more uptake for this mode of transport.
- Attractive fares and convenience Already often less expensive than air, rail may become even more competitive, especially if governments continue promoting rail service. If airlines continue to keep middle seats empty, it may lead to an even larger price advantage for rail. Travelers also enjoy the convenience of trips from city center to city center.
- Sustainability Rail is generally considered the “greenest” way to travel. This is especially true in countries where electricity powers the high-speed networks.
Webinar: How to boost cash flow
Waiting for travel to pick up again? Use your time to free up some cash! In this webinar, our panel of experts explain how to respond to cash flow challenges using one of your company’s largest spend categories: travel and expense. Hear from our experts and learn how to:
- Increase liquidity through airline refund options
- Optimize your tax collection to increase cash flow
- Rethink your payment strategy as payment behaviors shift
What you can do
Spend management checklist
What BCD Travel is doing
Health and safety measures have top priority for travelers throughout their journeys. Incorporating these into sourcing strategies is key to building confidence.
Executive Vice President, Global Sales and Marketing, BCD Travel