The recession has impacted upon the Business Travel industry in a number of ways. This post discusses the subject of Corporate Cards.
The 2010 Business Travel Survey reports that Corporate payment charge volumes in 2009 painted a clear picture of travel spending cuts, though issuers expect those volumes to rebound this year.
2009 for Corporate Card Issuers
Most major corporate card issuers saw volume decreases in 2009. American Express reported that overall commercial card volume worldwide was down almost 9 percent from 2008 levels, while U.S. Bank reported its volumes fell almost 16 percent. Jeff Rankin, senior vice president and senior sales and marketing officer for U.S. Bank’s corporate payment systems unit, said the bank was able to mitigate some of that by growing its client base. “U.S. Bank was the leader of the pack in terms of being a good, strong, solid financial institution,” Rankin said. “We continue to see a flight to quality, whereas customers in the past might have accepted a commercial card service based solely on the pricing.” AirPlus International, the leading issuer of the Universal Air Travel Plan, reported its global charge volume dropped by €17.1 billion, about 6 percent. “2009 was a year where travel managers reacted severely to the recession,” said AirPlus CEO Patrick Diemer. “Volume from existing customers was down 20 percent, half of that because of lower ticket prices and half of that because of less travel.”
The Outlook for 2010
Payment issuers and networks are optimistic about volumes this year. All issuers who responded as to their expectations for 2010 said volumes would rise from 2009 levels. AirPlus CEO Patrick Diemer said he expects to see two-thirds of the volume lost in 2009 return this year. “With a little bit of luck, this year will come back to a 2008 situation,” he said.
U.S. Bank’s Rankin expects double-digit percentage volume growth this year. “Customers are still being very judicious about their airline contracts and preferred hotels, and we’re seeing better management today than we’ve ever seen in the past,” he said. “Even with that, our customers are working on growing their business, and we expect to see that continue through the remainder of the year, depending on the economic situation.”
A 2010 CFO Research/American Express Global Business and Spending Monitor, fielded in February, indicated that 26 percent of 479 financial executives surveyed said they plan to increase travel spending this year, part of 57 percent overall who either will maintain or increase such spending. In a similar survey in 2009, only 2 percent of respondents expected an increase in travel spending. “Overall, we’re seeing some positive signs of stabilization and growing optimism about recovery,” according to Wendy Prewitt, vice president of American Express’ global commercial card sector. “Companies are really balancing that with some of the policies, controls and disciplines they put into place over the prior year.”
Go Native Comments
The recession hit every industry hard and made companies rethink their current policies, operations and structures. Spending was closely examined and many Corporates looked for alternatives to their existing way of doing things instead of continuing with potentially outmoded and unecessarily expensive options.
Serviced Apartments are Cost-effective: with travel budgets under pressure, Serviced Apartments offer excellent value and staff can keep within their travel expense budget more easily – they can avoid expensive hotel breakfasts, hotel bar bills and room service and choose instead to entertain clients or host meetings in the dining area of the apartment and cook for themselves when desired.
The average Go Native customer pays £45 per night compared with £89 for a similar specification hotel. Plus, per diem and administrative costs are reduced.
Links of Interest