Rigging successful cost containment in travel
According to media commentary, oil and gas companies in the Middle East are under pressure to evolve their processes and take on not just new starters but acquired companies too. With so much to consider, cost containment has never been so important.
Throw into the mix, rising airfares and hotel accommodation rates, and travel programmes are now being heavily scrutinised – line item by line item. Companies impacted by rising supply chain, operational, and travel costs are looking at every opportunity to save.
With business travel one of the big spend buckets for oil and gas firms, it’s fair to say this expense needs to be managed strategically.
Picking up on trends cited in the Quarterly Trends Report Q4-2022 issued by FCM Consulting, it’s evident that while the travel industry is opening up even more, prices are on the up. These are some of the travel trends that the oil and gas sector should be aware of.
Changes for air and hotel contracts
Airlines and hotels have been forced to reassess their contracting arrangements post-pandemic. As a result, the contracting environment has well and truly shifted. Airline contracts have changed, so make sure you’re reading the fine print with regards to items such as:
- Spend thresholds
- NDC (new distribution channel) requirements
- Non-performance penalties
- Change requests
In the hotel space, FCM Consulting has seen a 45% increase in the use of Non-Last Room Availability (NRLA rates). With demand for accommodation on the up and hotel occupancy in most countries (except Mainland China) sitting at or above 80%, it’s important to keep an eye on your contracts. Otherwise, you may end up paying rates up to US$30 more, depending on the hotel and city.
Hotel rates stabilise
Average room rates soared in the Middle East in the final quarter of 2022 and were back to 2019 levels. Riyadh hotel night prices increased on average 86% in Q4 2022 vs Q3 2022, with Abu Dhabi seeing an 82% increase too. With the exception of Nairobi and Windhoek, major cities across Africa saw prices rise too, although by single-digit percentages.
Just like the oil and gas industry, the travel sector continues to grapple with labour shortages. This was the biggest challenge for hotels in 2022, which is set to continue into 2023.
More energy spent on managing travel budgets
With forecasts indicating travel cost increases, oil and gas firms need to make sure they’re spending their travel dollars wisely. This means working with your TMC to find opportunities to save or at least contain costs.
Corporates will be encouraged to look at their buying behaviour, processes, and management of everything from air and hotel contracts to air credit management and out-of-policy expenses. A good starting point is to check whether you’re buying the best fare or rate of the day and if your travellers need to be travelling during off-peak time rather than high-peak periods when travel costs more. In such situations, it is beneficial to work with your TMC so that they can provide you with access to discounted fares or specially negotiated fares for travellers from the Oil and Gas industry. Additionally, having a travel policy that specifies guidelines on booking last-minute travel can help ensure that the costs are kept within acceptable limits.
The traveller experience gets a boost
Now the global travel industry is getting things back in order and up and running, suppliers are finally coming up for air. Air, hotel and car hire operators will be breathing new life into the traveller experience in 2023 - looking at ways to make travel options more personal and tailored.
The ‘traveller-first’ mentality will filtrate through the corporate travel experience from new distribution channel (NDC) content from airlines to more personalised hotel experiences driven by smart technology and traveller-centric travel programmes designed to keep travellers happy, healthy and comfortable.
Further tips to find those vital business travel savings:
- Change up hotel options in high-demand locations to reduce accommodation costs.
- Using a ‘continual sourcing’ approach to ensure rates for companies in industries such as yours where projects and teams are regularly on the move, remain competitive.
- Reviewing rates in cities when new hotel properties come online or where supply is steadily increasing.
- Consideration of the total cost of the trip and reviewing value-adds such as lounge access, meals, parking, food, and beverage discounts, etc.
