Business Travel Review of 2011

By Gary Bowerman

One morning in July, I stood sweating on a platform at Osaka rail station in the oppressive humidity of a Japanese summer. Around me be-suited commuters waited patiently for the shinkansen ‘bullet’ train bound for Tokyo. It arrived with impeccable timing, and the platform emptied with polite, orderly efficiency. Several boarding passengers smiled at me. Nobody else seemed bothered by the heat.

The ordinariness of that experience was striking, because four months previously Japan had suffered one of the strongest earthquakes in living memory. The resulting tsunami wiped out small villages on the northeast coast and caused such damage to the Fukushima nuclear power plant that total meltdown was feared. March 11 – known locally as the Great Eastern Earthquake – deeply impacted Japan psychologically and forced a rethink of the energy policy of the world’s third largest economy.

World impact

As I sped towards the Japanese capital, I reflected that news coverage through the first half of 2011 reflected an impacted planet. The violent street protests and uprisings in Tunisia, Egypt, Syria, Yemen, Bahrain and Libya had convulsed the Arab World. The Japanese earthquake in March followed shortly after a destructive seismic shake in the Canterbury region of New Zealand. Meanwhile, the Eurozone was confronting real crisis, North American growth remained weak and the pillar economies of Asia were dealing with price inflation and growth slowdowns.

By definition, business travelers thrive on positivity and opportunity, however, so I resolved to enjoy Japan and return to base feeling energized and upbeat. OK, so maybe American Airlines would later file for Chapter 11 bankruptcy and Qantas would ground its global fleet, but let’s try to be optimistic about the future. After all, travel and tourism data for the first half of 2011 had been largely positive.

Internationally, the second half of 2011 was dominated by the protracted toppling of the Gaddafi regime in Libya, ongoing unrest in Syria and other Arab nations and increasing governmental saber rattling in Iran. The worsening economic climate in Greece, Spain and Italy severely destabilized the Eurozone and threated to destabilize the banking structure and choke consumer demand across the continent. In August, one year ahead of the 2012 Olympics, London would be rocked by street riots, and cities across the globe would be ‘occupied’ by anti-capitalism protests in November. Hurricane Irene in August – described as “a major wake-up call for the business travel community,” by Joe Bates, GBTA Foundation senior director of research, with interrupted business trips resulting in a total GDP loss of “about $675 million” – and monsoon flooding in Thailand extending through late summer and fall, would later wreak natural destruction.

On a lighter note, US Secretary of State Hillary Clinton visited Burma, which is showing signs of political and economic reform and is considered to be Asia’s “next big thing” business and leisure tourism destination.

More visible technology

In 2011, business travelers witnessed even greater ubiquity of advanced technology across the trip experience – especially at airports. The rollout of personal check-in kiosks continued across the globe, while innovations like virtual concierges, self-boarding solutions, interactive InfoGates, facial recognition security and real-time baggage tracking moved onto the radar worldwide. The proliferation of Smartphone travel apps, meanwhile, seems limitless.

Ultimately, this technological upscaling results in a de-personalization of travel – globetrotters will experience more ‘wireless interface’ and less face-to-face contact en route around the planet. The greater reliance on multifaceted technologies rather than human labor is largely branded as ‘enhancing’ the customer experience, though the longer-term cost savings from these ‘passenger processing’ technologies are equally critical. Technological advance has yet to find a more effective means of transaction settlement than currency, and some relatively good news for US business travelers has been the sustained value of the Dollar compared to other major currencies. According to XE.com, during the first 11 months of 2011, the Dollar remained relatively stable against the British Pound, Euro and Singapore Dollar. The Dollar rose 7.22% against the Brazilian Real, but fell 3.77% against the Chinese Yuan and dropped 4.81% against the Japanese Yen. The obvious effect is that traveling in China and Japan became more expensive, while Brazil was a cheaper place to visit.

Eurozone vs emerging economies

The airline industry experienced a mixed year. In December, IATA predicted that the global industry would earn total profits of $6.9 billion in 2011. Regional differences widened in 2011, IATA noted, reflecting “the very different economic environments facing airlines in different parts of the world.”

In North America, yield and load factor improvements were a result of ‘tight capacity management.’ In, Asia Pacific ‘stronger though varied trading conditions’ prevailed and Japan’s domestic market ‘still has not fully recovered from the March earthquake.’ European carriers are “by far in the most challenging position,” IATA notes, due to “higher passenger taxes and weak home market economies.” Low profitability has been despite European airlines being one of the fastest growing regions in terms of traffic in 2011.

For 2012, IATA downgraded its profits forecast from $4.9 billion to $3.5 billion – and added a runway-sized caveat. The Eurozone crisis “puts severe downside risk on the outlook,” IATA says. “In a worst-case scenario, should the Eurozone crisis evolve into a full-blown banking crises and European recession, the global aviation industry could suffer losses exceeding $8 billion in 2012 – the largest since the 2008 financial crisis.”

Setting aside the ongoing economic uncertainty, let’s finish on a positive note. The GBTA has called 2011 “a year of resurgence, with business travel spend expected to grow 6.9% compared to 2010.” If traveler sentiment counts for anything, the legacy of 2011 may be that business travel continues on an upward trajectory in 2012. Indeed, Deloitte’s 2011 Business Traveler Survey reported that 22.1% of respondents expect to take more trips in 2012 when compared to 2011, 62.8% expect to take the same number of trips – and only 15.1% expect to travel less.

While Europe’s economic troubles may be a drag on travel growth, strong travel demand is predicted domestically in the United States (although expect further capacity reductions, and the likelihood of higher ticket prices) and to the emerging economies of China, India, South East Asia, Brazil and Russia.

This blog has been commissioned by AmEx.

About Gary Bowerman: Oxford-born Gary Bowerman has travelled the world in search of a good story. After cutting his teeth in legal and tax publishing in London, Gary moved on to edit international business and travel titles before relocating to China in 2004. Resident in Shanghai, he has recently been a contributor to CNN Traveller, Business Traveler, CNBC Europe Business, New York Times, Travel & Leisure,  and South China Morning Post. Editor of the Singapore Highlights and Beijing Highlights guides, Gary is also one of the founders of Hong Kong and Shanghai-based media and marketing communications agency Scribes of the Orient.