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The Business Travel Market Market Assessment 2002
Key Note Publications Ltd, Jan 2002
Although leisure tourism represents by far the largest sector of the world travel market, there are many countries where business trips make up a significant proportion of total foreign visitor arrivals. This means that business travel, while having a much smaller share of the total travel market than leisure travel, constitutes an important world industry in its own right. The geographical distribution of business travel, between the main regions of the world, largely reflects the distribution of global economic activity. US domestic travel is the largest market, followed by travel within Europe.
In this report, Key Note reviews the market for business travel to, from and within the UK. UK domestic travel, although by far the largest of these three sectors, is the least dynamic, while UK travel abroad is the fastest growing.
2001 was a year that saw several crises affecting travel demand, including the foot-and-mouth epidemic and the economic slowdown in the UK, together with the US terrorist attacks of 11th September. Some of these events, notably the foot-and-mouth crisis, had a more serious effect on leisure travel than on business travel. The events of 11th September seriously affected the market for overseas business travel to the UK and, to a lesser extent, the UK market for business travel overseas, but had little effect on UK domestic business travel.
Immediately following the terrorist attacks in the US, there was a dramatic decline in international business travel by air, but recovery has now commenced and, across Europe, airline capacity has been largely restored to previous levels.
Other difficulties suffered by the UK business traveller, during 2001 included the disruption to services caused by the need to carry out work on the UK rail infrastructure, following several serious accidents. Rail travel through the Channel Tunnel did not suffer from such problems, although there were some delays caused by industrial relations disputes and some relatively minor technical difficulties.
Deregulation in the air transport industry has led to increased price competition and other forms of marketing activity in business travel markets. Initiatives, adopted by airlines and hotel groups alike, include frequent-flyer and customer-loyalty schemes targeted at business travellers, which make up the core of the frequent traveller market.
Hotels and airlines, especially the 'no-frills' carriers, are making increasing use of the newer technologies to market and distribute their services. Railtrack and individual rail operating companies, including Eurostar, also provide timetable and fares information and sell tickets via the Internet. Electronic ticketing (e-ticketing), a system particularly favoured by the no frills low-cost airlines, is being increasingly adopted and is particularly appropriate where online bookings are made.
Although the question of UK adoption of the euro continues to be a major issue in UK politics, it is likely that, from the corporate travel viewpoint, the short-term effect of such a move would be favourable, reducing the costs and inconvenience of currency conversion, and enabling a closer cross-border comparison of hotel and other prices. Longer term, the likely impact of this move on domestic and intra-European travel would depend on the strength of the euro.
Contrary to public perception, business travellers frequently do not travel in business class when flying. Low-cost, no-frills carriers are growing in importance in the UK business travel market, with a high proportion of business travellers who have not yet used such services being prepared to contemplate doing so in the future.
In February and March 2002, Key Note commissioned exclusive research from NOP to establish the extent of business travel undertaken by individuals. Key findings were that a high proportion of frequent travellers, both domestic and overseas, were in the 35 to 44 age group and that Internet use was particularly high among frequent business travellers abroad.
Although most travel industry advertising is aimed at leisure travellers, hotels and airlines advertise features of their business products, such as seating standards, in-flight entertainment, hotel leisure facilities and value-added services. In 2001, UK expenditure on travel advertising in both newspapers and on television, was badly affected by the terrorist threat. British Airways' (BA) advertising expenditure accounted for nearly half of all airline business product advertising in that year, reflecting BA's leading position in the provision of international business travel to and from the UK.
Constraints on the growth of business travel have been apparent for many years. They include limits on European airport and air traffic control capacity, UK road congestion, problems with the financing of needed investment in the UK's railway infrastructure and the maintenance of the existing track and signalling system.
Among the many influences on the market for travel to, from and within the UK, macro-economic factors are likely to be among the most important. Current forecasts of the main economic indicators point to continued growth in the main business travel markets, while industry opinion suggests that growth in most business travel markets will be back on trend by early 2003 at the latest, by which time they will have fully recovered from the effects of the difficulties experienced in 2001.
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