As clouds of recession hover over both sides of the Atlantic, companies are turning travel-shy. Corporate travel management firms like Carlson Wagonlit and FCm point to a 15-18% decline in business trips during June-August as companies attempt to save costs amid economic uncertainties.
Technology companies, which have the highest share of 40% in the corporate travel pie, are axing travel budgets. ?Corporate travel dipped around 18% during June, July and August, even though September was much better. Companies are being cautious, avoiding travel,? says Rajesh Panekar, head (operations), FCm Travel Solutions, a business travel company. There is little business travel during the festive season, which is currently on.
The worsening economic scenario in Europe and the US has hurt IT companies with foreign clients and multinationals based in Europe the most, prompting them to slash executive travel. ?Companies are streamlining travel policies and focussing on efficiencies,? says Sumit Singh Bisht, head of sales, Carlson Wagonlit Travel, a leading business travel management company.
Company heads deny that there is an across-the-board clampdown on travel, adding some are avoiding employee travel. ?The business economy is reviving and we are not facing any recession. Yes; there are some companies in the financial sector which are not spending. The general mood is positive; however, it is the smaller IT companies which may be facing some problems, and cutting down on travel expenses, especially with the rising unemployment in the US,? says Ganesh Natarajan, vice-chairman and CEO of Zensar Technologies.
An analyst with a brokerage house points out that in IT hubs such as Bangalore and Hyderabad, hotel room rates have not picked up. Though one reason for softening room rates in these cities is oversupply, another is the slowing demand from IT companies. The slowdown in corporate travel comes at a time of high inflation and low factory output growth.
Says PR Srinivas, Deloitte’s India head for tourism, hospitality and leisure, ?Many companies curtailed investments at the beginning of this year, a time when corporate travel also dipped. Now that quarterly results look better, the situation might improve.? Travel heads point out that while corporate travel is currently weak, downgrading ? where executives entitled to business class travel are moved to economy class or from a five-star to a four-star hotel ? is not happening yet.