ILLUSTRATION: By Bernard ChauThe High Life - A stringent travel budget could keep Hong Kong companies flying high for longer
BUSSINESS TRAVEL - Hong Kong companies' operating costs could be reduced by a quarter if they placed greater emphasis on controlling travel and entertainment (T&E) costs, according to the 2001 Survey of Corporate Travel Management released by American Express Consulting.
Similar to the findings in the 1995 and 1998 surveys, T&E expenses remained the second largest controllable cost faced by businesses, after salaries. In 2000, the annual average T&E spent by Hong Kong firms was about HK$2.04 million (US$262,000), representing a 29% increase over 1998 and nearly twice the average spending in 1995.
As in the 1998 survey, meals and entertainment continued to make up the largest share of the T&E budget, accounting for 45% of the total - 1% reduction from 1998. Air travel remained the second largest T&E spending category, totalling 30% of annual T&E compared with 25% three years ago.
However, more companies have started to develop better travel management practices to cut T&E spending.
Companies, for example, are sending their executives in economy class, rather than business. The 2001 survey revealed 77% of air travel was in economy class compared with 68% in 1998, as the percentage of business class air travel dropped from 27% to 18%. Similarly, three and four-star properties accounted for 86% of hotel accommodations compared with 71% in 1998, which indicated fewer companies provided five-star hotel accommodations for employees travelling on business.
"With the increase of T&E expenses under a slow economy, there is clearly a pressing need to better control and manage such expenses to improve the bottom line and reduce operating costs, which are the priorities for many companies now," says Jim Georges, head of American Express Consulting, Asia Pacific.
Hong Kong is yet to reap the full benefit of an effective travel management program and key opportunities for improvement. For example, 92% of companies surveyed were still highly reliant on traditional booking methods; while only 7% of travel bookings are made using semi-automated or interactive booking systems.
More importantly, most Hong Kong companies have yet to designate a single travel management company for employee travel arrangements to ensure full compliance with the company's policy.
Only one in four companies employed such an arrangement and 46% of these companies still made bookings outside the designated agency.
"Having a single designated travel management company for employee travel enables companies to capture travel data that is vital to evaluating and directing the travel management program," says Georges. "This helps them negotiate preferred rates and implement programs for air travel, hotel accommodation, and car rental, thus achieving cost savings. It is truly a travel management best practice that companies should seriously consider and follow."
Meanwhile, American Express has released its 2001 fourth quarter Airfare Index results, which not surprisingly, has shown travellers in the region have been hit hard by the US terrorist attacks and the collapse of Ansett Airlines.
In the Asia-Pacific region Business Class fares increased 2.3%, full Economy was up 2%, discount Economy was up 2.4% and lowest peak-season and off-season excursion fares also increased, 3.2% and 3% respectively.
"The terrorist attacks of September 11 plunged the airline industry, already reeling from the economic slowdown, into an acute crisis," says Georges.
"Travellers are less confident in the safety and reliability of air travel and this has caused a number of Asia-Pacific airlines to struggle amidst reduced traveller demand... many announcing sweeping cuts in capacity and elimination of many services and significant redundancies.
"Although economic conditions will remain tight [in 2002] companies can ill afford to sacrifice face-to-face meetings in the longer term. Business travel remains vital for developing and winning new business. Companies cannot afford, and do not want, to stop travelling," says Georges.
The report says the collapse of Ansett, which carried about 13 million passengers a year, put an end to heavy airfare discounting that Australian domestic travellers had been enjoying.