Middle East corporate travel outlook looks bright (page 1 of 2)

The financial crisis prompted many companies across the globe to restrict business travel in 2009 as part of efforts to trim corporate budgets. Employees generally were told to take fewer trips, fly coach rather than business class, and trade down when booking hotels rooms.

However, as the economy in the Middle East shows signs of recovery, an increasing number of companies in the region are lifting their restrictions on travel. The trend is welcome news for the travel industry, as corporate trips are a major source of revenue for the sector.

According to a survey conducted earlier this year by MEED, 62% of companies with business interests in the Middle East said they expect to spend more on business travel in 2010 than last year. Less than 16% of those surveyed reported further cutbacks to travel budgets this year, while 38% said that travel allocations will be more than 10% higher for this year, the survey found.

Meanwhile, over a third (35%) of those surveyed said they will spend $50,000-$200,000 on corporate travel this year, while a further 17% of those polled expect the figure to be even higher. Overall, the majority of companies surveyed expect to make up to 25 visits to countries in the Middle East and North Africa region during 2010.

Business class traffic rises

Despite the lingering effects of the downturn and the fallout from the disruptions caused by the volcano in Iceland, the airline industry is seeing a recovery so far this year. A report by the International Air Transport Association (IATA) said global airline revenues improved in the first six months of this year partly due to of a sharp increase in business class fares.

The study estimated that average ticket costs for business class flights climbed 8% in the first half of 2010. Business travellers make up 8% of overall passenger numbers but contribute 27% of ticket revenue, IATA said. "This market segment is key to profitability," the group noted. "Year-on-year premium revenues have been improving during the first half of the year."

IATA said the number of passengers seated in premium class remained 8% below the pre-recession peak, though economy travel is now 3% above its pre-recession level. "Most of the economy passengers are travelling for personal purposes, but growth in this travel class continues to be driven by business travellers sitting on economy seats rather than holidaymakers," it said.

Further reflecting the resurgence of corporate travel in the region, BCD Travel's Advito consultancy has raised its forecast for business class fares in the Middle East. In a third quarter update on its 2010 Industry Forecast, the consultancy said it saw 'striking growth' of between 30% and 50% in airfares across all categories in the region during the second quarter of this year.

As a result, Advito revised its 2010 forecast for the region upward, projecting that intercontinental business fares will move up 6.5 percentage points to a 9% increase this year, while regional business fares will move up 7 percentage points to a 10% increase.

For 2011, the consultancy predicts that the sharp growth seen in the second half of 2010 will flatten, leading to moderate fare increases of 3%-6% in all categories.

Focussing on hotels, Advito expects average daily rates in the Middle East to climb 4.5% in 2011, boosted by rising corporate travel demand, following a projected drop of 2.6% in 2010.

Positive forecasts

Executives from hotels and airlines in the Middle East are similarly upbeat in their assessment of a recovery in the business travel market in the region.