Corporate Agents in Canada See Growth – and Challenges

This is the second in a two-part series of Canada’s corporate travel market.

The corporate travel market is expected to rebound more rapidly in Canada than in the U.S., and some agents are already seeing an uptick. They say that Canada’s current economic climate favors business travel, though there are challenges.

Brian Ruttle of Bramalea Travel in Bramalea, Ontario, is among those with a favorable outlook. Corporate travel comprises 80% of the agency’s $5.9 million annual sales, and so far this year, corporate sales are up 12% over last year.
 
Bramalea Travel is booking a lot of international business travel right now, Ruttle said. “Where we are, pharmaceutical is very strong and expanding internationally as well – to the Middle East, Asia South America, Europe and India big time.”

Economic climate
Overall, domestic business travel is picking up across Canada, but international business travel is increasing even more, especially from western Canada, where companies extract natural resources and sell them worldwide.

Unlike the U.S., Canada isn’t struggling to recover from a profound mortgage and banking crisis. Some also see Canada’s regulatory environment helping to stabilize the corporate travel market.

Tony Fragapane, owner of Voyages Concierge Deluxe Travel in Montreal, noted that Canada makes it easier than the U.S. to transact trade treaties with other countries, so travel is especially strong to Asia and South America.

Another factor is Canada’s “stable and very strict” banking system, Fragapane said. “They don’t give out money very easily, but when they do, they do it generously (both to individuals and businesses).”

Also, he said, “a lot of our larger industries that hire hundreds of thousands of people are subsidized by the government in a major way. That’s good for the business, because more people are employed and more people travel.”

Challenges remain
But even in an economic environment that is quite promising, it’s not all easy going.

A major challenge facing Canada’s corporate agents in the months ahead will be tussling with suppliers over rates.

“The suppliers will continue to be demanding of travel buyers. They’ll want to see recovery of their rates, and they’re going to make more demands [in exchange for] reduced rates,” said Annemarie Reininger, managing director of A. Reininger Consulting in Markham, Ontario.

Prices going up
The “2012 Canadian Business Outlook Report” projects a 2.1% increase in corporate lodging rates within Canada, while car rental rates will remain relatively flat.

Corporate domestic airfares are expected to rise an average of 3.1% this year and international airfares by 3.7%, according to the report, which was issued by the Association of Corporate Travel Executives and the Conference Board of Canada.

Competing for clients
Rising fares aren’t the only challenge created by the airlines, agents said.

“Airlines are going directly to our corporate clients,” said Nilufer Mama, president and CEO of Millenium Travel Group in Toronto.

“We groom a corporate client, work hard with them and live on their commissions and backend. An airline figures out what we’re doing, then swoops in and takes over. And then all we’re left with is a service fee,” Mama said.

Limited supply
Another challenge on the air front is the fact that Canada only has three domestic carriers. This can pose problems if one of the three encounters troubles.

“Probably the main thing that’s always worrying people is airline stability,” said Richard Orinuk, director of sales for Executive Worldwide Travel in Ottawa, where corporate travel comprises about 60% of its $7 million to $8 million total volume.

“During the last year we’ve had a few problems with Air Canada, such as labor and strikes. I had someone the other day who, even though there’s no problem with Air Canada right now, didn’t want to book it.”

Zak Sheikh, president of Executive Worldwide Travel, said he anticipated changes to Canada’s airline supply in the near future.

“WestJet is creating quite a challenge for Air Canada,” he said, adding, “Air Canada is going to come up with a low-cost carrier, I think this year, and Westjet has already captured quite a good market.”

U.S. election a factor
While most corporate agents interviewed for this article said business travel was on the upswing, that wasn’t the case for everyone.

Things were a bit quiet at Able Travel in Mississuaga, Ontario, said manager Keith Murray.

His agency’s corporate travel sales also are running about the same as last year in terms of dollar volume. The agency derives about 70% of its annual $8 million sales volume from corporate travel.

“Every four years, when the U.S. has an election, everyone puts on the brakes; they wait and see. We’ve seen a reduction in travel from the early part of this year. As soon as November comes around, and they know who’s in charge, it picks up again,” Murray said.

Right place to be
In spite of the challenges, the corporate market remains the focus of many Canadian travel sellers.

“Corporate is the only sustainable business you can have in the travel space these days,” said Millenium’s Mama. “Corporate travelers want the support of a good travel management company to keep everything in order.”

See Part One, “Canada’s Biz Travel Market Is Poised for Growth,” August 16, 2012.