A new study by Wakefield for SAP Concur revealed that new macroeconomic challenges in South Africa and globally are threatening the recovery of SMEs and business travel, unfortunately.
Despite this, the consensus is that business travel is essential for companies to retain a competitive edge, and most plan to lean into the opportunities.
Corporate Traveller general manager Bonnie Smith revealed that business travel in South Africa is currently exceeding pre-Covid levels.
“If we look at July this year compared to July last year (2021), numbers were up by 265%,” said Smith.
She said that it is important that travel managers understand the trends and challenges affecting travel so they can adjust their policies accordingly and she also highlighted that using a travel management company (TMC) can mitigate many of the challenges associated with planning business travel.
According to Smith, these are the factors that businesses need to consider when planning corporate travel.
Rising inflation
According to the South African Bureau of Statistics, inflation in South Africa reached a 13-year high in June, putting tremendous pressure on small businesses, with travel budgets an easy target for cost savings.
“Before you cut your travel budget, take a close look at your company’s travel costs to prevent potential revenue leakage,” said Smith. A travel management company can help companies keep track of costs and ensure employees follow the rules.
Higher travel costs
Currently, demand for air travel far exceeds the supply. There are not enough seats to accommodate everyone wanting to travel, and airline ticket prices have increased by 20%-30%. Car rental prices have also taken a hit. Petrol prices are a contributing factor, of course.
Smith said that opting for an interest-free billback service is a straightforward way to help save money while travel costs are rocketing.
The pressure on the rand
The latest update to The Economist’s Big Mac Index shows that South Africa’s currency is one of the most undervalued globally. Based on the index’s findings, the rand is undervalued by as much as 54.5%, and should be trading at a ‘fair’ value of R7.75 v the dollar, or R9.85.
“Negotiating preferred agreements can be a smart way to reduce a company’s travel expenses and navigate the currency fluctuations,” said Smith.
Labour shortages
According to the FCM Consulting Global Quarterly Trend Report Quarter 2-2022, many airports are struggling to hire staff with travel rapidly rebounding, resulting in a labour shortfall of 2 million. Airports are therefore forced to limit the number of travellers per day, pushing prices up.
If you want to save money on travel, booking your tickets well in advance is best. Smith recommends planning 1-3 months in advance for domestic travel and 2-8 months in advance for international travel.
Load shedding
Stage 6 load shedding, last seen in 2019, made an unwelcome return in July. Alexander Forbes chief economist Isaah Mhlanga estimates that stage 6 load shedding wipes around R4 billion from South Africa’s GDP per day.
“The post-pandemic travel landscape is more complicated than anyone would have imagined and once again underlines the importance of working with a professional travel management company. With the right travel partner by your side, it is possible to have a flourishing business travel programme that shows a clear return on investment,” said Smith.
Read the latest issue of IOL Travel digital magazine here.