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Apr
07

Business travel

Comprehensive cost consideration

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Hans-Ingo Biehl, chief general manager of the VDR German Business Travel Association, on cutbacks in business travel and the lack of a formula to calculate the cost of a trip and the likely benefit.

TW: The United Nations has forecast economic growth of 2.4 percent this year. In the aftermath of the disaster on the financial markets and the ensuing economic crisis a third of all German businesses last year axed business trips. Is that trend solidifying this year or are there signs of an increase in business travel again?

Biehl: Since the crisis erupted in autumn 2008 the VDR has asked its member companies at regular intervals about the repercussions of the financial and economic crisis on business travel behaviour. This reveals a clear trend that bottomed out in the first half of 2009. Meanwhile the mood is one of cautious optimism again. According to the results of our latest membership survey, a quarter of respondents expect their own volume of travel to increase at the beginning of 2011. And half the participants in the survey even reckon on an upturn this year. But of course, the last year was a difficult one for many businesses. But when things start to pick up, the reins must be loosened a little. The VDR’s members are not economising quite so rigorously any more, with only eleven percent axing all trips that are not absolutely necessary. So in many companies business travel is on the agenda once more – which makes sense from a business perspective. After all, business travel is instrumental in building up and strengthening business relations and boosting revenues.

TW: A third of corporate business travel is related to conferences and events and in the association sector fully two-thirds. What areas have been hardest hit by the cutbacks in business trips?

Biehl: Companies naturally have smaller budgets available for their events. For the time being I do not expect the funds set aside for this to be increased in 2010 either. Some German and international firms have already reduced the number and duration of their business trips, both promotable travel (for trade shows, meetings and congresses) and traditional trips. However, cutbacks in the event sector do not come first when travel restrictions have to be put into practice. The VDR’s business travel analysis has shown that economies on trade show appearances, customer events and the like are only the fourth most frequent measure, after reductions in the volume of travel, virtual conferences and tightening up travel guidelines.

TW: Are business trips also tending to become shorter in Germany?

Biehl: Especially in a downswing it is important to cultivate existing contacts and create new leads. But each trip must be assessed on its own merits: is personal contact important in this case, or can the meeting be held in the form of a conference call or a video conference? Those who opt to travel will of course try to combine several appointments or to shorten the trip to save on accommodation costs. But we must not lose sight of what can reasonably be expected of the traveller. It is doubtful whether a negotiation will go well if the business traveller has had to get up at 3 o’clock in the night to arrive on time for the appointment.

TW: Is there any indication that companies are tightening up their travel guidelines even further to cut costs?

Biehl: The crisis has made greater demands of travel managers to seek out latent savings potential. They have become more professional in their organisation as they recognise how important meticulous planning and analysis is to optimise business travel as a cost item over the long term. The economies have been accepted at board level and by business travellers. Further stringency will not be necessary – whereas maintaining the status quo or indeed relaxation in certain areas would certainly not be misplaced. One of the biggest challenges that travel managers now face is to give comprehensive consideration to the costs a business trip entails – to develop transparency in their business and to preserve it. When the going gets tough, management’s demands to calculate the value of a trip become more insistent than ever. But we don’t yet have a formula to calculate the overall cost of a trip and then, on the basis of this, to deduce upfront with any certainty the benefits that it can be expected to yield.

TW: Is the substitution of business travel by video, web and telephone conferencing on the increase?

Biehl: The intelligent avoidance of travel is a part of professional travel management. Web, video and phone conferencing certainly seem to be a suitable way of cutting travel costs. A third of the VDR member companies surveyed are now using these technologies as a substitute for business trips. Another twenty percent are pursuing this cutting-edge trend for other reasons, such as improving communication within the company.
Interview: Dirk Mewis