With a weak economy, and clouds of uncertainty on the horizon, the travel industry expects the current downturn to get worse before it gets better, writes SIMON NGAN

Prolonged economic depression has led many businesses to adjust their budgets to offset the effects of the economy, and travel has been one of the first areas to go under the axe.

Budgets for non-essentials, such as business entertainment, have been shrinking for years, but in general, the number of business trips that executives take have also been reduced. Those who cannot avoid travelling now opt for cheaper classes of fares and accommodation, says Jochen Krug, general manager -- sales and marketing, Schenker International (HK).

Airlines and travel agents have responded by changing the way they do business. This has led to new categories of travel on airlines, such as "special business class" or "special first class."

"These are essentially a lower-priced version of the conventional class of travel but with few trimmings," Nancy Chung, chief operating officer, P&O Travel, said.

In the case of travel agencies who rely on business travel as their bread-and-butter, adding value has become almost second nature. Lily Agonoy Yau, deputy general manager, Farrington American Express Travel Services explains: "To compete, travel agents have to go beyond merely providing booking and ticketing services to managing the full spectrum of their clients' travel need."

This includes compiling management reports and providing analysis on travel-related practices, frequency, destinations and expenses to determine how cost effectiveness can be achieved. In their extended roles, agents also act as consultants and work to find the best possible deals for their clients. "The bottom line is to provide hassle free solutions for our clients while helping them lower costs," she added.

Travellers are reaping the benefits from these changing times and are finding as more and more services are being introduced to woo their business, they have a wider range of options to choose from.

For example, Mr Krug says travellers flying on Lufthansa via Schenker or Lufthansa City Centre get an extra 10kg baggage allowance.

"We also offer total business trip planning services for our customers," he said. "We know their exact requirements and preferences such as morning or evening travel, seating arrangements, down to the category of bed they want at a hotel. We keep a file so that whenever they ask us again we make the right bookings without them having to tell us again. So in a sense we offer a personalised service. In addition to free upgrades and bonus mileage offered in cooperation with partner airlines, we also guide travellers on how to put their rewards to good use."

Other ways businesses are looking to reduce their travel-related costs is to outsource their travel needs. This is particularly the case for companies with large annual travel volumes who have to hire dedicated staff. To "integrate" into a client's operations, appointed agents must know the organisation's travel policies. For example, air travel on economy class within Asia or of less than six hours is becoming the industry norm. Stays in luxury hotels are being eliminated other than for special occasions. While cost-cutting remains a priority, Mr Krug cautions against being overzealous in curtailing spending on travel.

"One should take into consideration the circumstances and goals of business travel -- long haul flights in economy class may save money, but result in a manager who arrives in bad shape and cannot concentrate 100 per cent on what needs to be done. Sometimes it is better to allow the traveller one day's rest before starting work even if it incurs an extra day's hotel but results in the job being done much better," he said.

Technological advances have also impacted the traditional business trip with the most significant change being the foregoing of the trip completely. Instead, organisations are opting for virtual meetings through such means as video- and tele-conferences.

As Mr Krug points out, "Due to better communication technology there is less need for business travel. For example, a well planned one-hour online conference can save three days' travel."

Although video conferencing is becoming popular in Asia, the region still lags behind the U.S. and Europe. In addition, with the culture of person-to-person interaction so pervasive among the majority of Asian societies meetings in cyberspace cannot completely supplant face-to-face meetings.

Where technology has had its effects felt the most in Asia is in online booking. "More and more business trips are being booked online and not via a real travel agency, especially for straight forward bookings. Budget saving measures are increasing the demand for last minute bookings to save money which very often is done online," Mr Krug said.

Ms Yau echoes his comments: "Technology equals speed and speed equals money saved."

Technology also means that travellers can obtain a better match on their requirements and the best deals on offer. "With technology, we can track the volume of our clients to see if they are entitled to special rates whether on their own accounts or by pooling with other accounts to achieve savings," Ms Yau said. "We also employ Customer Relationship Management software to consistently deliver a high standard of service to our customers."

Despite the inroads made by the Internet and other online applications in managing travel information and reservations, Ms Chung observed that these have had little impact on payment transactions and the issuance of tickets. "People are still reluctant to give away credit card information on their computers. There are also such things as e-tickets but it remains to be seen whether these will take root. In addition, Hong Kong is a compact place which means buying and paying for a ticket is quite easy," she said.

And what about the recent introduction of a "name-your-price" service in Hong Kong? The consensual view was that this service was more suited to the leisure market. Mr Krug explains: "If I go on a business trip I have schedules to follow that are usually very tight. I may also have preferences on the airlines I fly and the hotels I stay, which I want information on before I go on a trip."

As global economies wobble their way to recovery, the outlook for corporate business travel purchasing continues to remain weak. Uncertainties surrounding a possible U.S.-led campaign against Iraq together with earnings and governance problems in corporate America have prompted analysts to say conditions could get worse before they get better. However, some in the industry are cautiously optimistic with China cited as the one bright spot amidst the world-wide gloom.