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July 4, 2008

The Credit Crunch 1:Is it coming to a meetings venue near you?

It is hard to avoid the global credit crunch. Turn on the television or pick up a newspaper and banks, financial institutions and industry leaders are pleading poverty, as the fall out of the US sub prime loans fiasco, coupled with currency fluctuations and ever increasing oil prices, continues to send shock waves across international markets.

The global travel market has already received its fair share of credit crunch casualties, with US business class airline Eos filing for bankruptcy in April.

Silverjet, a UK-based all-business airline that operated flights between London Luton and Newark Liberty International Airport in the US and Dubai International airport in the UAE, became the second big name to fall, as it grounded its fleet on 30 May after failing to secure adequate financing to continue operations. International investment firm Kingplace tabled a rescue deal on 10 June, with a view to restarting operations to both Newark and Dubai in the near future.

Under pressure: the vice like grip of the credit crunch tightens

Bucking the trend
Considering the plight of these all-business airlines it would be easy to draw conclusions that the future of business travel looks uncertain. However, that is not the view of international and regional travel and meetings industry experts.

ICCA conducted a survey of its global membership one week prior to IMEX in April to obtain an overview of industry confidence in the light of the constantly publicised crisis sweeping through financial markets. Over a quarter of ICCA’s 850 member companies and organisations responded, and the overall consensus was an upbeat projection for future business growth.

Fewer than 6% of respondents had suffered a significant downturn as a result of the economic environment, while 60% reported no impact whatsoever. Looking forward, 42% expect their company’s 2008 performance to be better than 2007, a year which previous ICCA surveys had indicated was a record breaker in all regions of the world.

However, when asked what impact the current financial crisis will have on the meetings industry in general, only 6% felt there would be no significant impact at all. Just over half felt there will be significant negative impact but restricted to certain regions, over one third felt there would be significant short-term global impact, while 7% felt there is likely to be significant global impact lasting longer than 18 months.

Uncertainty in the marketplace

“It would seem that optimism about personal business performance is balanced by a far more pessimistic perception of how others in the industry are likely to be affected. There is still a great deal of uncertainty in the marketplace, but it is clear that the financial turmoil has not yet been translated into any noticeable cutbacks among clients. This reinforces other anecdotal feedback we are obtaining from meeting planners which indicates that international meetings are becoming ever more important to companies and associations alike, and they are more reluctant to cut events which have become ‘mission critical’ to achieve their business objectives. If this is so, it will help our industry to weather any future economic downturn,” says ICCA chief executive Martin Sirk.

Closer to home in the Middle East the picture is more positive. YouGovSiraj, a Dubai-based a full-service market research company specialising in qualitative research and online polling, predicts demand for business travel will continue to increase in the next 12 months.

The YouGovSiraj Travel Tracker survey polled business and leisure travellers in the Middle East and North Africa (MENA) region.

Over 60% of the 2,428 business traveller respondents and almost half the 1,416 leisure traveller respondents said they expect their travel to increase. Less than 10% expect to see any decrease.

According to the survey, company travel budgets have increased in the past year for over half the respondents and more expect this trend to continue in the next 12 months.

Moving east
“Regional and head offices continue to move out here and the credit crunch is driving big banking officials out this way. As a result, meetings business for the Middle East will only continue to increase,” says Jane Wilson, director travel & tourism research, YouGovSiraj.

Travel Tracker found that conferences and exhibitions are the most common reasons for a business trip, while sales trips were also seen as essential travel.

“In this region a lot of the travel is sales oriented and essential travel. Our research says that conferences and exhibitions are also likely to increase,” Wilson confirms.

Although travel may continue to increase, travellers are watching their budgets too. YouGovSiraj found that economy class remains the number one sector for both business and leisure travellers, a fact Wilson puts down to the high number of small and independent firms operating in the MENA region.

The next 12 months will be an interesting, and possibly tough time, for the business travel sector, but the region looks well placed to hold its own in the global marketplace.

Look out for more features on the impact of the global credit crunch over the next few weeks.

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