Global Insights: India in motion

India is the coming nation in business travel – in more ways than one. The country has registered the fastest-growing corporate travel spend of any major market for each of the past six years, according to the annual GBTA BTI Outlook, expanding by double-figure percentages every 12 months. But that’s just the start. Any complacent assumptions that countries outside North America and Western Europe are only ever on the receiving end of the gospel of travel management may soon need revision. “Increasingly the regional or global travel management role is moving to India,” said Gaurav Sundaram, president of the consultancy ProKonsul and whose CV includes stints as India country director for both Egencia and GBTA. “It’s a kind of knowledge process outsourcing” – a trend helped by English being the lingua franca of India’s educated classes as well as the global business community.

That’s also the view of Jafles Pacheco, who oversees travel from headquarters in Zurich, Switzerland as global head of indirect material spend for the high-tech industrial group Oerlikon. “There is definitely a growth in global travel managers based in India,” Pacheco said. “We have people taking on responsibility for procurement in Europe even though they are based in India. They still cost less than a European travel manager even if they have to travel more. It will become a threat to European travel managers.”

Pacheco is also deeply impressed by the technology developed by Indian travel management companies and other providers, which he believes will eventually be exported to other markets. He has come close to buying in Indian tech tools for his own programme. “They are very flexible at customising technology for customer requirements,” he said. “From a cost and quality point of view I was very interested. The only big concern was compliance with the European Union’s General Data Protection Regulation. My data privacy lawyer said no.”

Indians use their smartphones for booking leisure travel but business trips continue to be booked by phone or e-mail.

Land of contradictions
Yet despite these pockets of leadership, it would equally be wrong to portray India as a country where travel management is uniformly practised to a high standard. Sundaram estimates 10-20 per cent of Indian companies have travel programmes comparable with those of better-managed businesses in the West. Others, he said, “are still very elementary.”

If there is one word which summarises this highly complex marketplace, he continued, it is “diversity”. India is often portrayed as a land of contradictions, hardly surprising when a single country is home to one in six of this planet’s inhabitants. Deprivation remains a major challenge  in the most populous nation after China, yet the proportion of citizens living in poverty halved to 28 per cent in the ten years to 2016. At the same time the middle class has swelled to, by some estimates, 400 million or more, bigger than the entire population of the United States, which is third on the global list.

It is this fast-growing demographic that is driving the boom in business travel, both as travelling employees themselves and as the consumers whom multinational companies are piling into India to serve. “India has seen significant industrialisation of its economy and become more investor-friendly,” said Sundaram. “The last ten years were about big companies coming in but now we are seeing tier 2, 3 or even 4 companies setting up shop here as the middle classes demand a higher standard of services and products.

Mumbai

Hotels in the biggest business markets, such as Mumbai (above), Delhi and Bangalore – are almost always full.

“The government is encouraging outward investment too. A lot of companies that were formerly for the domestic market only now have global footprints: businesses like Tata, Infosys and Wipro. They are employing more people and paying better salaries, so they need to win more business outside the country.”

And here is where another of those many contradictions can be found. Despite Indian travel managers starting to be sought for multinational roles by Western companies, in their own country they enjoy limited recognition.  “The biggest challenge is that senior management does not have a significant focus on business travel,” said Sundaram. “They regard it largely as a fulfilment activity rather than a strategic issue. The travel manager is not regarded with a great deal of respect.” Consequently, travel may not be managed strategically even in some of the country’s largest businesses, and is instead handled by secretarial or clerical staff in general administration or facility management departments.

There are, however, signs of evolution. “Day-to-day travel is usually handled by a travel manager at larger companies and an admin manager at smaller companies,” confirmed Ajay Bali, managing director of BCD Travel India. “But the new thing is procurement guys are taking part in negotiations and deciding which TMC will provide the service. They are very hard bargainers.

The biggest challenge is that senior management does not have a significant focus on business travel. They regard it largely as a fulfilment activity rather than a strategic issue

Perhaps the biggest contradiction of all in Indian business travel is summed up by BCD’s Bali. “It’s a very high-touch market,” he said. “People want to have their hands held. But they also want the cheapest fare. It’s a paradox.”

Pacheco agrees. “Travellers expect their assistant to complete their visa application form, even though mistakes are more likely,” he said. “It’s the same with their mileage programmes. They will send an e-mail to the agent to make sure the mileage has been accrued. You have to accept this. It’s part of the way of doing things there, and there are so many agents thirsty to win and maintain the business to keep it that way. I know of travellers contacting the agent on the way to the airport and asking to be checked in.”

Yet another contradiction relates to technology. “The same person behaves differently in a B2B and B2C environment,” said the head of travel for a large Indian tech company, who asked not to be identified. Bali agrees. “Indians use their smartphones for booking leisure travel but business trips continue to be booked by phone or e-mail, even though employees use apps for information purposes such as itineraries, flight schedules and messages,” he said.

A lot of TMCs don’t provide quality management information, and it’s not given priority by travel managers even if they do

In the past, the ultra-low cost of clerical assistants meant there was little incentive to switch to self-booking, but, said Sundaram, “labour costs are no longer very low in India as it moves towards a knowledge economy.” Instead, he said, resistance to self-booking “stems from a sense of entitlement. Managers consider it beneath their dignity to plan and book their own travel.”

When it comes to international travel, there is also a compelling practical reason to organise through a human travel agent rather than online. Foreign business trips are nearly always complicated by Indians enjoying visa-free or visa-on-arrival access to only 59 countries, few of them significant business destinations. Compare that with, say, 188 countries for Germany or 184 for the U.S.

Expense management is a similar story to online booking. Sundaram estimates the proportion of businesses deploying a self-service expense app, though growing, to be no more than five per cent. However, the consensus is that change is coming, especially among a younger generation less interested in questions of status and more attracted to the efficiencies of self-service. “When managers are educated about how much easier their life becomes by using tech tools, they adapt very quickly, but you have to articulate the benefit to them,” said Sundaram. The tech company travel manager agrees. “Over the last two years we have seen a definite change, and implementation of self-booking tools is becoming better,” he said. “In the next three years it will change completely to match B2C.”

10-20% of Indian companies have travel programmes comparable with those of better-managed businesses in the West.

Perhaps another reason for slow adoption of self-booking tools has been the high quality of technology deployed by India’s leading TMCs, as noted by Pacheco. Indian TMCs need to be flexible, because distribution is fragmented. Most of the country’s domestic air service is provided by low-cost carriers, whose content has not generally been accessible through global distribution systems, although that is changing. However, even flag carrier Air India is not available through all three major GDSs.

Whereas booking outside a GDS often troubles Western TMCs, Indian ones seem comfortable with sourcing content through application programming interface feeds. “Most travel agents subscribe to some form of mid-office automation where they can toggle between the GDS and low-cost carrier or see them on the same screen,” said Sundaram.

Distribution anomalies are just one reason why, according to Sundaram, “even global travel companies have to modify their approach in India.” Much the same could be said for travel managers. For example, business travel patterns are often different, according to the tech company travel manager. He points to a high incidence of flying on Saturdays and Sundays by the nation’s huge phalanx of outsourced IT workers. “They often travel at the weekend because their billing cycle usually starts on a Monday,” the travel manager said. Late booking (providing yet another apparent contradiction to the philosophy of buying the lowest fare) is also endemic. Reservations less than 48 hours ahead of departure are a common occurrence.

As if these departures from global norms were not enough, travel managers also need to beware treating a country as vast as India as a homogeneous market. It goes without saying that the country’s “metros” (largest cities) are a very different proposition from India’s more agrarian states, but the complexity goes far beyond that.  “The way business is conducted in Kolkata is different from Mumbai or Chennai,” said Sundaram. “Each has different business and cultural practices and languages, and some are more sophisticated than others.”

It is yet another example why the key to success in India is to recognise this increasingly important country’s diversity, appreciate both its paradoxes and enormous potential, and avoid treating it as another standardised slice of a cookie-cutter global travel programme.

Policy practice
“In India, costs takes precedence,” said the IT company travel manager. “It is completely different from Europe and North America, where a lot more freedom is given to travellers.” ProKonsul’s Gaurav Sundaram agrees that policies are much more restrictive. “Companies often try to control and micro-manage travellers,” he said. “The focus of most Indian travel policies is to use the lowest possible prices. A company may use three or four TMCs. It will send a request to all of them and choose the lowest fare quoted.”

There is one main exception to the principle of lowest price. “Unlike the US or Europe, policy is hierarchy-based,” said Geetha Arekal,  head of mobility services supply chain management for Siemens in Mumbai. “Employees in different strata will have access to certain privileges.” These distinctions play out in choice of hotel or airline cabin, where an employee is much more likely to fly in business class because they are a senior manager rather than, for example, because of the duration of the flight.

About 40 per cent of bookings by BCD Travel clients in India are paid through invoice and the rest is on card. This may sound low by Western standards but is exceptionally high for India. Although options like lodge and virtual cards are slowly gaining ground, Sundaram estimates only 20-25 per cent of business conducted by the country’s top 20 TMCs is on cards, and for smaller TMCs the figure will be much lower.

“Despite all forms of card payment being available, they are only a small percentage of the market,” Sundaram said. “There is an intense lack of trust. Financial controllers believe credit cards lead them to lose control. We need to educate about how cards improve the process. The problem is compounded by TMCs not being willing to walk away from a deal.”

Jafles Pacheco of Oerlikon believes this second point is holding back change. “Travel agents will give payment terms of 60 days because they do whatever it takes,” he said. “There is not much incentive to move away. My cash management folks are saying ‘Why should we move to a credit card?’”

Payment arrangements for on-trip spend are also old-fashioned. Cash advances dominate, bringing attendant challenges of reconciliation, although pre-loaded cards are also common.

The philosophy of buying the cheapest on the day means preferred supplier agreements are less common than in North America or Europe. “Vendor maturity is minimal,” said Siemens’ Arekal. “The market works more on relationships.”

For Sundaram “the single biggest problem is there is no data. A lot of TMCs don’t provide quality management information, and it’s not given priority by travel managers even if they do. Reporting is often a fortnightly extension to the billing process, even in very large companies.”

Booming demand from not only business but also leisure travellers, both domestic and from abroad, is making supplier relations difficult for travel managers at present. According to the BCD Travel 2020 Industry Forecast, demand for accommodation surged 7-9 per cent in 2019, meaning that “hotels in the biggest business markets – Mumbai, Delhi and Bangalore – are almost always full. It’s a situation that’s also becoming apparent in the next tier cities, including Ahmedabad, Indore and Chennai,” the report said.

As a result, hotel rates soared 10 per cent in metro cities in 2019 and 5-6 per cent elsewhere. In spite of frantic hotel building, BCD forecasts steep rate rises again in 2020.

With the International Monetary Fund expecting gross domestic product growth to accelerate from 6.1 per cent in 2019 to 7.0 per cent in 2020, expect India to become an even more important part of your travel programme in the years ahead.

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