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Travel to emerging markets presents unique challenges

Profile Photo By: H L
August 20, 2013

Travel to emerging markets presents unique challenges

Travel Adam Schacter always stays in international chain hotels when he travels to China. ?That?s where I?m most comfortable and I feel safest,? expains the president of FHE (Fresh Home Elements) Inc. in Toronto. But on a recent trip to rural China, no such accommodations were available, so he spent the night in a Chinese-branded hotel.

His first clue that something was up was the karaoke bar in the lobby, crowded with young, scantily dressed girls. ?Hello handsome,? they called to him in broken English. ?You want to go on karaoke date?? His next clue: instead of the standard soap dish on the bathroom counter, he found a jumbo package of condoms. Finally, to add one more level of cheesiness, the shower head lit up in multi-coloured lights. ?I slept in my sweatpants and a sweatshirt with a hood on zipped to the top,? Schacter says.

When it comes to travel, emerging markets such as Latin America and Asia present unique challenges. Flights are long and expensive and accommodation and dining standards may not live up to Western expectations. And yet, these countries are attracting a growing number of business travellers.

BRIC countries recording highest growth in business travel.?Around the world, business travel spending is slated to grow about 8% this year and continue to rise by a little more than 7% a year until 2017, according to the 2013 Global Business Travel Association?s annual report. But the bulk of the growth is coming from China (15%), followed by Brazil (14.2%), India (10%) and Russia (8.5%).

By contrast, the developed nations are recording lacklustre growth. The expected rate of growth for business travel in Germany was 5.1% for 2013, followed by the United States (4.5%), Canada (2.2%) and the U.K. (1.9%). Although the U.S. still tops the chart for business spending overall, that is changing. ?China is projected to overcome the U.S. as the top business travel destination in the world by 2016,? says Tad Fordyce, head of global commercial solutions for Visa.

Prices on the rise.?Given the kind of growth emerging markets are experiencing in business travel, it?s no surprise that travel costs are rising. Planes are packed. And ?hotel room costs in China have soared so incredibly that the Westin in Manhattan is cheaper than in the middle of China,? Schacter contends.

Carlson-Wagonlit Travel (CWT) predicts a moderate rise in worldwide travel costs for 2014, but a recent report points out that emerging markets in Latin America and Asia could experience far higher increases ?due to high projected GDP growth and significant inflationary increases.? Hot spots include:

Latin America: CWT predicts as much as 4% increase in airfares overall, with Venezuela and Argentina seeing the largest hikes of anywhere in the world; 8% and 13%, respectively. Hotel rates in Latin America are expected to rise 5.8%, driven by Venezuela (16%) and Brazil (8.4%).

The Asia-Pacific region:?Airfare is expected to rise 4%, with prices in China jumping 7% as the growing middle class drives up leisure travel, putting pressure on capacity. In addition, given the region?s occupancy rates have been the highest in the world for several years now, hotel prices are set to rise as much as 4.9%.

Russia:?Airfare is expected to rise almost 8% and car rental rates, 4%.

Balance cost with quality.?With expenses ramping up quickly in emerging market countries, business travellers may be tempted to cut costs any way they can. But there are dangers associated with that approach, says Dr. Brian Quigley, a medical director for traveller assistance plan International SOS. A global study shows the BRIC countries fall into the top 20 high-risk areas for health and security concerns. ?Their infrastructure [highways, sanitation and health care] hasn?t kept pace with the economic traction,? he says.

Joel Wartgow, senior director, CWT Solutions Group Americas, suggests business travellers balance cost savings against long-term goals. ?It?s not worth compromising safety by choosing a cheaper hotel or ground transportation provider that may not have the safety standards of a more reputable supplier,? he says.

He?ll get no argument from Robson Grieve, executive vice-president of worldwide marketing for travel and expense management provider Concur. ?If you have a consulting business, where your talent is what you?re selling, then putting them in Seat 55J on the discount ticket of the red-eye flight may not be the best solution,? he says.

It helps to track patterns of expenses, Grieve says. If you have good systems for measuring and benchmarking data, ?you have insights you can build from.?

Pre-trip authorizations and approvals, for example, help businesses better project expenses, avoiding high-ticket surprises that can put pressure on cash flow.

If you know you?re spending a lot of money on hotel rooms in Russia, you can call the hotel you always stay at and ask for a bulk rate or you can take an apartment there, he says. Ultimately, you may even look at alternatives to travel, Grieve says. ?Maybe you need to hire someone who is in the market there.?

Schacter keeps airfare and hotel costs to a minimum by booking well in advance, but moves heaven and earth to fly business class. He won?t skimp on meals either. ?I eat in the hotel restaurants,? he says. ?My trips are so short, I can?t afford to get sick. I?ve got little kids at home so I leave for China on a Sunday morning and I?ll be home for T-ball on Thursday night.? At least his elite status at Westin gives him access to the business lounge with its free breakfast. ?Even that can cost $50 in China,? Schacter says.

Source Financial Post

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