Many businesses are reviewing and adjusting their travel budgets in light of spending predictions for the coming year. In terms of benchmarks, the Global Business Travel Association (GBTA) puts the average global spend at around $829 per business trip (R14 922). A closer look at South African statistics from FCM Travel between August and October 2023 reveals a more nuanced picture. According to FCM data from this period, South African companies typically spend an average of R15 138 for each domestic trip and R34 943 for trips abroad.
This disparity highlights the unique challenges faced by South African businesses in the global market.
Bonnie Smith, GM at FCM Travel, says, “In South Africa, our domestic travel costs are disproportionately high due to limited airline capacity. Coupled with a weaker rand, we find ourselves paying premium prices for domestic travel, which is a stark contrast to global markets.”
Understanding these costs is important when companies are projecting expenses in 2024 without jeopardising their business travel goals. Achieving this balance requires a strategic approach to managing travel expenditures, says Smith.
This may involve negotiating discounted rates with hotels and airlines to maximise savings. Companies can also establish guardrails for costs like accommodation and meals to prevent overspending. The overarching goal is to maintain employee mobility for client meetings and projects without inflating expenses. In other words, keeping travel momentum up and the costs down.
What does this mean for travel budgets in 2024?
There’s inflation to consider, but there’s good news there. In South Africa, the headline inflation rate for 2023 was revised down to 6.0%, with a forecasted decrease to 5.0% in 2024, stabilising at 4.5% in 2025.
However, inflation is just one piece of the puzzle when considering average spending on a business trip. International travel, while essential, also comes with its own set of challenges and expenses. Being geographically distant from key business markets often leads to higher airfare and visa expenses. This makes spend efficiency an especially critical component of travel management in South Africa, adds Smith.
While cutting some international trips from the calendar might seem like an immediate solution for cost reduction, the reality of global business dynamics suggests a different approach. The GBTA report highlights countries far from global markets or suppliers, like South Africa, may require more business travel to maintain strong business relationships and market presence. This shows how important it is for South African companies to view business travel as a strategic essential.
Where can the savings be made in international travel?
The solution lies not in drastic budget cuts but in strategic management of travel expenses, says Smith; “Working with a corporate travel partner connects you with their global network, so you have access to bulk rates and deals.”
She adds, “Companies should focus on enhancing spend visibility and negotiate better prices with service providers. For example, although direct international flights may be pricier, they offer time savings, lower carbon emissions, and improve the productivity and wellness of travellers. It’s a delicate balance of cost versus benefits.”
Smith concludes: “You don’t know what you don’t know. Without effective travel management software, companies may be in the dark about their actual spend, so they have no sense of where savings can be found. By breaking down every cost, from the significant to the seemingly minor, it provides a comprehensive view, transforming raw data into insights. This level of understanding is so important to ensure your spending on travel makes sense.”