Amadeus cautions business on pitfalls of cost cutting

BANGKOK – Companies who cut their travel budgets to mitigate the impact of the global economic slowdown are treading a fine line between cost savings and productivity losses, says Peter Smith, vice president, Business Solutions Group, Amadeus Asia Pacific.

Smith told TravelMole that even though times are tough, and companies are taking steps to reduce expenditure, they need to be aware of the dangers of unproductive cost cutting.

“What’s the point of saving 1000 euros on an airfare if the employee has to spend 10 hours waiting at an airport for a connection? There is loss of productivity time and an impact on the employee’s morale.”

Smith said it is clear that the economic downturn that had its birth pains in North America is now having a dampening down effect on Asia.

“The result will see business travel retracting in 2009,” he said.
“We’re starting to see companies put a focus on essential business travel. If travel is not absolutely essential, they are choosing alternative means of communication, such as video conferencing, and online training.

“Where travel is being sanctioned, we’re seeing companies reducing spend by the class of air travel or taking their spending on hotel accommodation down a notch.”

Smith said one of the positive things to happen as a result of the credit squeeze was that it was forcing companies to take a closer look at their travel policies and tighten them up.

“There’s a more dynamic culture of compliance happening in many companies. There is a focus on who’s taking the good deals and who’s not taking the good deals.”

Smith said there is “a very emotional element to travel”.

“People aren’t emotional about the petrol they put in the company car, but when it comes to travel they are much more emotionally engaged. They don’t want to have to get up at 4am in the morning to catch a plane just because it will save the company 200 euros.”

Cost Control and Beyond, a new report published by CFO Europe Research Services in collaboration with Amadeus found that CFOs believe that corporate travel managers should better balance travel service quality with cost cutting, driving direct cost savings through improved supplier negotiations and a tighter view of travel spend across the company.

The report is based on the results of an online survey of more than 120 senior finance executives in Europe (50%), Asia (25%)
and the US (25%), and on in-depth interviews conducted with executives from leading companies.

The report found CFOs want their travel teams to focus on enhanced employee productivity and integrated corporate IT systems.

More than 70% of CFOs believe it is very important to integrate travel technology with expense management systems, however just 18% say their companies have highly integrated these systems.

Smith said Amadeus was working with the corporate sectors in the Asia Pacific to achieve their aims of reducing costs without draining productivity.

Amadeus is investing heavily in its own research and products. “We see this time as something of an opportunity,” Smith said.

He said that corporations needed to go the extra mile at this time and effective business technology was an essential part of that journey.

by Ian Jarrett