Press Release Summary = Business trips account for a significant share of world tourism, and this Market Assessment report reviews the demand for business travel to, from and within the UK. It considers the main factors that influence this demand, both broad trends and developments in specific product markets.
Press Release Body = The Business Travel Market - Market Assessment
Business trips account for a significant share of world tourism, and this Market Assessment report reviews the demand for business travel to, from and within the UK. It considers the main factors that influence this demand, both broad trends and developments in specific product markets. Also considered is the structure of the industry that supplies the needs of business travellers resident in or travelling to the UK, including airlines, the hospitality sector and other supporting services.
Many recent changes in behaviour by international business travellers have occurred widely across several different geographical markets, including a resistance to higher business and first class fares, an increasing use of the services of low-cost airlines, growth in the use of air taxis and business jets and the use of the Internet for booking business travel.
Traditionally, business travellers have purchased travel and accommodation services through the internal travel department of their company, or through intermediaries such as business travel agents, but now travellers are increasingly booking many elements of their trips online.
The advent of the new low-cost airlines, such as easyJet and Ryanair, has radically changed the rules of the game, such operators using the Internet to cut out the middleman. By way of response, the established scheduled carriers have also adopted this technology as part of their distribution strategy. Moreover, not just airlines but hotels and surface transport operators are encouraging their clients to make reservations online, while online agencies are also currently handling small but growing volumes of business travel.
Since 2001, business travel demand has received a number of blows, including the terrorist attacks in the US in September 2001 and the slowdown in world economic growth in 2002 and 2003.
One lasting effect of the September attacks has been a heightened attention to security, especially in the US, where until then the population had little direct experience of international terrorism. These events led to a disproportionate fear of foreign travel, even to places unlikely to be at particular risk of terrorist activity, and to a more intrusive approach to the security issue in the US compared with most other countries. Several problems have been created for business travellers as a consequence. There have already been incidents where flights have been cancelled due to suspect names appearing on passenger lists. Furthermore, as well as more stringent screening of both people and baggage at departure airports, visa requirements have been tightened and there are increased delays at arrival airports, currently mainly in the US, as fingerprint and other identity checks are introduced.
There are also fears that security concerns could soon affect online travel reservations, with fingerprinting and other forms of identity becoming a requirement before tickets can be purchased online. Another consequence of the terrorist threat is that a further boost will be given to the use of alternatives to travel in the conduct of international business, such as webconferencing and videoconferencing in situations where face-to-face contact is not required.
Since the early 1990s, transport markets within the EU have been progressively liberalised as a result of legislative change at both European and national level, so that operations of member states of the EU are opened up to competition from airlines based in any other EU country. This new regime has also encouraged the emergence of low-cost scheduled airlines, such as Ryanair and easyJet, that compete with the existing operators in business as well as leisure markets. Even the established carriers have been forced to enter this market in an effort to retain business that would otherwise have been lost to the new entrants. This liberalisation now extends to the new EU member countries in Eastern and Central Europe, creating a new breed of low-cost carriers based in those countries.
There are still issues to be resolved before a completely level competitive playing field is achieved even within Europe. One remaining concern relates to the extent to which national governments can be permitted to subsidise companies that are unable to compete on equal terms in the harsher deregulated climate.
IT advances have been among the most significant developments affecting the business travel market over recent years. Such developments have included continued improvements to computer reservations systems and their reinvention as global distribution systems (GDSs), the development of the Internet as a means of direct access to travel information and booking facilities, the electronic ticket (ticketless travel) and webconferencing and videoconferencing, reducing the need to travel.
The role of the travel agent and the growth of direct selling to the public has been a recurring theme in the travel industry for many years. However, new mechanisms are now available to the general public and to individual business travellers that facilitate the obtaining of travel information and the ability to make bookings direct with suppliers of transport and accommodation services without the intervention of a third party. This has again called into question the role of the travel agent. Fresh from disputes with airlines regarding the level of commissions, travel management consultants are now also in conflict with GDS providers.
Many future developments affecting the business travel market will represent a continuation of current trends. Some of these will influence demand, others will represent constraints or stimulus to the supply of business travel services. Examples include the influence of demographic and economic factors on demand and the influence of technological developments on supply. Other influences are likely to prove less predictable, the result of unforeseen events, mainly in the political field.
Recovery in business travel demand worldwide now seems well under way, fuelled by global economic recovery, and UK business travel demand seems set to increase on the basis of that recovery. In the longer term, the hospitality industry is one sector of the UK economy that is expected to show above average growth over the next 5 years.
The market for UK domestic business travel is relatively mature, meaning only slow growth in volume terms is expected over the period to 2009. The UK market for overseas business travel is expected to recover in parallel with the anticipated continuing recovery in the growth of the world economy as a whole. Business travel to the UK by overseas residents, hit hard by the events of 2001, is estimated to have returned to the levels achieved in 2000 before the end of 2004.
2025
