Business travel leading industry out of recession

Business traffic is leading the travel industry out of recession, according to latest figures from Amadeus.

The global distribution system also predicted that airlines would continue to diversify their distribution strategies.The past three quarters have seen GDS bookings rebound by 8.8%, 9.6% and 9.5%, following four successive quarters of declines, the worst of which was a 13.4% plunge in the fourth quarter of 2008.

With business travel mainly coming through the GDSs, Amadeus believes the recovery is being fuelled by the return of the corporate traveller.
International air traffic trends closely follow that of countries’ gross domestic product, which have been in recovery since the fourth quarter of 2009.

However, recovery has been quicker and more substantial in emerging economies, while advanced economies have lagged behind.

Speaking to Travolution during a visit to Amadeus’s nerve centre in Erding, Germany, where it houses its huge data centre, Ian Wheeler, marketing and distribution vice-president, said: “We are particularly looking at faster growth in the emerging economies. It appears the world’s travellers are returning, which is good news for the industry.”

Corporate customers are key to the airline industry because without these premium customers operators would not be able to sustain much of their flying programmes.

But Wheeler said airlines would have to find ways to improve yields as the spectre of rising fuel prices returns to haunt the industry, and GDS bookings through agents will be central to that.

“We think the shift direct to providers from travel agents has slowed down, if not reversed. We estimate it is roughly 50:50, with the fastest-growing sector online travel agencies.

“We think the economics have got to a certain level that the yields are there in the agency model, so it’s probably not in the airlines’ interests to be too overweight in one channel.

“We believe airlines will get a better yield if they are exposed to multiple distribution channels.”

Helping suppliers to drive down the rising cost of distributing online is one area in which Amadeus feels it can work more closely with its partners.

“You need different sources of traffic. If you are just reliant on Google in the future you are going to pay a fortune,” Wheeler added. He estimated some airlines were paying Google as much as £25 a ticket.

Amadeus also sees potential growth in the integration of rail into the GDS – announcements about this are planned later this year – and in hotel information technology.

Its growing technology services arm will also continue its research and development in its extreme search technology and social media, which Wheeler predicted would transform the industry.

“We are at the start of an evolution that in five years’ time we will look back at and say has had a massive impact on travel,” he said.

Wheeler said Amadeus’s ability to increase its market throughout the recession was a sign of the strength of the business. However, he admitted to being fortunate during last year’s partial stock market flotation, which coincided with a lull in uncertainty in the world’s financial markets.

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