CFOs Less Optimistic About Biz Travel Spend
CFOs Less Optimistic About Biz Travel Spend

CFOs Less Optimistic About Biz Travel Spend

Chief financial officers are less bullish about travel spend this year than they were in 2011, reversing two years of increasing optimism, according to a new global survey.

However, a return to the deep corporate travel spending cuts of 2008 and 2009 is not likely, a business travel payment solutions expert told Travel Market Report.

Instead, many companies are adopting a more strategic approach designed to extract maximum value from the money spent on business travel,

Travel spend confidence drops
Over half of CFOs globally (58%) said they would spend the same or more on business travel over the next 12 months compared to last year, according to the fifth annual American Express/CFO Research Global Business and Spending Monitor, The New Era of Value Discipline.

That’s down from 64% in 2011 who said they planned to maintain or boost the current travel spend.  And 42% of CFOs said their companies planned to spend less on travel in 2012 than last year.

Less confidence in economic growth
It’s not that CFOs expect the global economy to collapse any time soon, but expectations that soared in 2010 and 2011 have moderated.

Where 75% of global CFOs expected their local economies to expand in 2011, only 64% expect growth this year.

Higher expectations in North America
Expectations in North America are considerably higher than in other regions, with 75% of CFOs expecting growth in 2012. However, that is down from 78% who expected better times last year.

Among European CFOs, only 50% expected economic growth in 2012, an 11% drop from 2011. In Asia/Pacific, 63% of CFOs expect 2012 growth, down 13%. And in Latin America, 73% of CFOs expect economic expansion, a 15% drop from last year.

Not a return to 2009
While expectations are down, it doesn’t signal a return to the deep travel spending cuts made by companies in 2008 and 2009, Kevin Tait, senior manager for payment strategy and emerging products for BMO Spend & Payment Solutions told Travel Market Report. (Montreal-based BMO Financial Group runs Diners Club as part of its MasterCard corporate card business.)

 “Organizations have recognized that they hurt themselves in 2009,” Tait said.  “Those deep travel cuts cut back on opportunities to meet clients face to face. The last couple of years have been about optimizing travel, being more efficient with travel, maybe seeing more clients in a single trip. They realize that just cutting travel is not good policy.”

Price hikes account for spending increases
Noting that business travel spend for the first half of 2012 is holding steady or showing single-digit increases compared to 2011, Tait said even those small spend increases are deceiving,

For most companies, increases in travel spend this year have more to do with price hikes by hotels, airlines and other suppliers than with increasing travel volume, he explained.

Emphasis on ‘value discipline’
Even as overall travel volume holds steady, many companies are growing more vigilant about their spend. The Amex/CFO survey found that CFOs are pushing companies to adopt what it called a “value discipline, guiding their companies to extract maximum value from their business spending.”

Value discipline is a new mindset, the report concluded. The message from CFOs during the global downturn was to run a lean and tight operation. That meant slashing costs, streamlining operations and processes and delaying investment.

The new message from finance is to create a strategic vision that focuses on returns and value for money spent over the long term. And when it comes to travel, nothing creates value like meeting with clients.

Closer scrutiny
Not surprisingly, the single largest category of travel spend, 38%, is to meet with current or prospective customers, CFOs reported. The next highest category was to meet with suppliers or vendors (22%), attend industry conferences or other events (21%) and attend internal meetings (17%).

Even customer travel is coming under closer scrutiny, Tait said. Companies learned during the recession that travelers are willing to live with more restrictive mandates on preferred vendors and booking tools.

“It is all about putting controls around travel,” Tait said. “We are seeing more mandates for online booking instead of agent assists and more preferred vendor mandates. Increasingly, online booking tools won’t let you pick a non-preferred vendor or will tell you at the time of booking that you are out of compliance.

“On the payment side, a best practice is to mandate corporate card use. Employees don’t like giving up personal cards with the rewards, but over the last three years, they have understood that companies need to optimize travel.”

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The last couple of years have been about optimizing travel, being more efficient with travel, maybe seeing more clients in a single trip. They realize that just cutting travel is not good policy.

Kevin Tait, BMO Spend & Payment Solutions

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