South African business travellers feeling the pressure of inflation and rising global costs

Though the business travel landscape may have pressure, there strategies to ensure smooth travelling. Picture: Unsplash

Though the business travel landscape may have pressure, there strategies to ensure smooth travelling. Picture: Unsplash

Published Oct 24, 2023


Businesses are feeling the pinch due to inflation and rising global prices.

FCM general manager Bonnie Smith said South African business travellers were starting to feel the pinch as rising inflation ate into corporate travel budgets.

The financial squeeze could be seen in the shrinking value of daily allowances, or per diems, which covered things like meals, lodging and getting around while on business trips.

“With the South African rand trailing by 6% against the US dollar over the past year and domestic inflation clocking in at 7.8%, overseas jaunts and local travel are packing a pricier punch.

“The standard per diem, once a solid cover for meals, comfortable lodging and transport, is finding itself at odds with the escalating global prices.”

Smith said the the FCM Global Trend Report 2023 Q2 further revealed that surging airfare prices were further adding fuel to the fire for South African corporate travellers.

“Among the sore spots are the surging airfare prices, with North American business class prices ramping up 13% and economy class 16%. Europe is just a little behind, with business class up 15% and economy flights 17%.

“And it’s a steep climb in the Middle East and Australia, where business-class seats have seen prices rocket by a third since 2019,” she said.

Smith said the report highlighted a notable mismatch between the average daily rate in accommodation in key business travel destinations and the per diem rates by which many companies operate.

“For instance, the average daily room rate stands at R2 484 ($129) in London, R2 253 ($117) in Dubai, and R2 214 ($115) in New York. Closer to home, the outlook is equally glum, with Lagos hitting an average daily rate of R2 850 ($148) and Cape Town R2 330 ($121) for a hotel room.

“In contrast, the current standard GSA (the US General Services Administration) per diem lodging rate is R1 849 ($96) per day (excluding taxes).

“For meals and incidental expenses (M&IE), the rates wobble between R1 059 ($55) to R1 464 ($76) per day, depending on the destination. The standard rate for incidental expenses, covering tips and fees, is pegged at R96 ($5) per day,” she said.

Smith said some corporations were trimming down on travel expenditures to balance the books, however, the route ran the risk of dampening traveller morale and productivity, and outdated per diem rates might usher employees towards fast-food chains rather than healthier restaurant choices and less comfortable accommodations, leading to a weary and less productive workforce.

She said that it was important to strike a balance between costs and comfort as business growth lay with the people, so ensuring their travel allowances were sufficient was imperative.

“In light of the glaring discrepancies between the standard per diem rates and the actual daily rates in various cities, companies need to revisit and potentially revise their travel policies.”

Smith said that adopting flexible booking strategies might do the trick since by planning ahead and choosing less busy travel days, companies could save on airfares and accommodation costs.

“It’s a balancing act for South African business travel in the current economic climate. However, with prudence and a focus on staff welfare, business trips can remain productive without overstretching corporate budgets.”