WILL 2017 prove to be a strong year for business travel? Are travelers moving away from hotels? Will the integration of expenses and payments change the way business travelers spend?
Here’s what we know about this year’s corporate travel landscape so far.
Shift towards Airbnb
There’s no doubt that Airbnb is expanding faster than we can mutter “Airbnb”. In a recent Morgan Stanley report, Airbnb is a bigger threat to the hotel industry and online travel agencies (OTAs) than we initially predicted. According to the report, “Airbnb usage has increased more than we thought it would and cannibalization of traditional hotels has also been higher.”
Brian Nowak, executive director of Morgan Stanley Research, wrote: “While still small, we believe Airbnb has been almost double the threat to hotels in 2016 than previously believed, and the threat is growing.”
Additionally, Airbnb for Business is a rising force, catered to provide business facilities for travelers. Properties with good reviews and low cancelation rates to their belt that are equipped with business-friendly amenities and services such as WiFi, a working desk, and late-check-in are qualified to be listed on Airbnb for Business.
Not only do companies get to save, millennials tend to warm up to the friendlier, community-driven ethos employed by Airbnb compared with the more homogenous outlook of chain business hotels. Staying in a neighborhood rather than in the heart of the city could also help business travelers tap into the mindset of thriving local markets.
According to new research, 32 percent of business travel buyers will have more money to spend in 2017 compared with the 29 percent last year. Airline budgets will also escalate to 40 percent of buyers, the highest percentage in the last three years.
Despite the rise in budgets, the pressures to cut cost while maintain quality will remain a challenge for buyers. The report said: “This may explain significant increases in the use of budget airlines, Uber and car rental services, and mid-range and budget hotels.”
On top of that, the use of low-cost carriers will remain unchanged for the third year running at 86 percent. At the same time, 38 percent of buyers booked fewer business class flights.
Rocketrip, a business travel start-up that incentivizes employees, predicted that business travelers will spend more in 2017 despite airfares remaining stable. One of the reasons travelers are projected to be paying more is the rise of “dynamic pricing” of airlines.
Forbes reported that inventory management means airlines can significantly increase fares during peak periods, which will affect last-minute bookers, a category where business travelers notoriously fall into.
On top of that, costs of ancillary services have been continually rising since 2010. Whether it’s cancelation fees or the cost of a teabag on-board, airlines will continue to raise add-on and penalty fees, making it more expensive for travelers whose business plans can sometimes be flaky.
In a separate finding revealed at The New York Times Luxury Conference in Singapore, it was shown that young, affluent millennials are more willing to spend on luxury experiences rather than luxury goods. Needless to say, ” luxury experiences” entail premium airline seats.
Seamless expense reporting
Forrester found that 80 percent of the firms they reviewed relied on data that was manually entered after the event by the employee – something that is both time-consuming and highly error-prone. Time is significantly cut short with the use of smartphone apps and expense management tools such as Xpenditure, Expensify, and AwardWallet.
It’s not just employers dipping their feet into digital expenses – services that embrace the sharing economy model are also looking to apps and programs to help their clients file corporate claims.
For instance, Concur, one of the “leading providers of integrated travel and expense management solutions”, struck a partnership with ride-sharing company Uber to help employers gain visibility into into their employees’ Uber usage. This way, employers have direct access to trip summary dashboards while employees have access to organized tabulation of their expenditures.
Rise of virtual payment
The virtual payment trend is slowly but surely picking up, especially so in the world of business travel. While not entirely novel in 2017, virtual credit cards are becoming an increasingly popular method for paying travel expenses like car hire, hotel reservations, and plane tickets.
One of the reasons travelers are turning to virtual payment methods is added security and control. Virtual cards are set to specific, predefined parameters so that it makes it difficult, if not impossible, for them to be misused. And because of their ‘virtual’ nature, they can’t be lost, stolen or cloned either.
Despite the rise of virtual cards, it’s still not a universally accepted mode of payment, particularly in Asia. Many restaurants, airlines, and stores are yet to adopt virtual payment services, so limitations do exist. However, if demand escalates among corporate travelers, 2017 could be the year where we see more merchants warming up to the idea.