Premium travel weathers gloomy economy

Budgets might be tight, but there is real value in travelling in style


It’s no secret that the South African economy – with knock-on effects for the entire region – is in a tight spot.

Economic growth is unlikely to top a single percent for the year, unemployment remains stubbornly high, and from investment-grade status to power generation the outlook is gloomy. Last year the business confidence index released by Rand Merchant Bank and Stellenbosch University’s Bureau for Economic Research’s dropped to its lowest level in two decades.

And yet, business travel remains surprisingly resilient in the face of these stiff economic headwinds. While demand for some premium sectors of corporate travel has undoubtedly softened as travel managers rein in their spend, airlines and hotels report that demand remains steady as loyalty, service, convenience and value prove increasingly important for travellers keeping a keen eye on their budgets.

An excellent bellwether of the health of premium travel is the demand for first and business class aircraft cabins. While seats up at the sharp end of the plane, or in the executive floors of hotels, deliver lower volumes, premium demand is crucial to the financial health of the global travel industry. Airlines have long prioritised the high-yielding premium cabins, and with good reason. According to the Airlines Financial Monitor released by the International Air Transport Association (IATA) last year, between January and October 2019 premium-class passengers accounted for just 5% of total international origin-destination traffic.

However, that small volume of passengers accounted for 30% of total international revenues.

However, IATA also noted that the gloomy global economy is an ongoing concern. According to the report: “weakness in the global economy and uncertainties related to world trade continued to weigh on business travel. Premium passenger traffic growth outpaced its economy counterpart only in the North Atlantic and Asia-Southwest Pacific markets.”

“The market for premium corporate travel has been weakening in line with the weak economy in the past six to 12 months,” says Kananelo Makhetha, Chief Executive Officer of Club Travel Corporate.

However, it’s not all bad news, he adds, as travellers are often compensating, with “more interest in purchasing ancillary products like priority check-in, business lounge access and seat preferences.”

A healthy demand for premium corporate travel

But on traffic into Africa, airlines report that corporate travellers remain convinced of the value to be found in the premium cabins.

“We have seen a healthy demand for premium corporate travel, both over the past months and looking forward to the first quarter of 2020. This can be considered very positive considering the current economic environment in South Africa,” says Wouter Vermeulen, General Manager: Southern African Region at Air France-KLM.

With many corporate travellers bound by their company’s travel policies, airlines are working hard to ensure their offering aligns with what key business clients desire, and can afford, when it comes to flying long-haul.

“It is the travel policy of the corporate customer that drives their travel behaviour,” says Vermeulen. “Of course there are a number of factors that would obviously help their decision to fly in premium cabins. We are in continuous contact with the corporate team and traveller to tailor our offering with the aim to best serve the needs of the corporate.”

While noting that trends and demand vary enormously between markets, “in general, corporate travel has strengthened over the past 12 months,” adds Tim Cordon, Area Senior Vice-President, Middle East and Africa for the Radisson Hotel Group. “We have however adjusted our approach to corporate negotiations, ensuring that we consider client needs holistically, and client-centricity remains at the heart of all our client interactions.”

In South Africa’s economic hub of Johannesburg, corporate demand also remains bullish at five-star properties. “We have seen a continuous steady increase in corporate travel in the last year,” says Krista North, Director of Sales and Marketing for the Saxon Hotel. “Johannesburg remains a frequently visited business destination, with many international corporate companies that have offices in our city, and the numerous conferences and conventions taking place here. Bookings for the corporate traveller are still often done via the guests’ travel agents, however we have seen an increase of corporate bookings done via online channels too in the last year.”

Investing in premium product

Ultimately it comes down to balancing a competitive price with a product that’s fit for purpose. And on that score international airlines, in particular, have invested heavily into ensuring the premium travel experience justifies the cost, and aligns with the needs of the modern corporate traveller. Good news for travellers flying into continental Europe is that Air France will return its popular Boeing 777 onto the Johannesburg- Paris route between March and October. The aircraft is fitted with the airline’s latest generation of in-flight product, including fully flat beds in business class and large private suites in La Premiere (First class).

“It really is an excellent product,” says Vermeulen. “On top of that we have wi-fi on board our aircraft into South Africa to accommodate working and being online while travelling.”

As part of its £6.5 billion ($8.4 billion) investment into new product British Airways is rolling out major improvements to its services on the ground and in the air. While soft touches – new menus, in-flight amenities and bedding – are already evident on its A380 and 747 services, it’s on the new A350 and 787 services that the most dramatic changes can be seen, with the revamped Club Suite and new First cabin respectively.

On terra firma, late-2019 also saw the opening of the new British Airways lounge at Johannesburg’s OR Tambo International Airport. Taking its cue from similar revamps in New York and San Francisco, the new lounge blends both British and South African design, and features a dedicated dining area for First travellers, lobby bar area for socialising, brasserie dining area, and office space.

“Every detail has been carefully designed and we’ve created a space to meet our customers’ needs,” says Carolina Martinoli, British Airways’ Director of Brand and Customer Experience. “Whether they want to relax with a hot meal, work in peace or enjoy a drink at the lobby bar, the lounge will get their travels off to the best start.”

Loyalty equals benefits

Travel businesses that perfect that blend of product and price can expect to enjoy repeat business. Brand loyalty has become a currency in itself as both corporate travellers and suppliers take full advantage of a symbiotic relationship that offers additional value for the traveller and continued support for the operator.

“A loyalty programme is very important to travellers especially for business travel,” notes Ashish Kapur, Country Manager – Africa and Indian Ocean for Cathay Pacific. “Cathay Pacific’s frequent flyer programme, Marco Polo, is very popular especially given the expanding list of options passengers now have to redeem those miles.”

“It is very important to have a loyalty programme which offers real benefits to the customer and I think this is true for all frequent travellers,” says Vermeulen. “Benefits like business class lounge access and being able to use the priority lane at the airport, for instance, automatically makes travelling easier, quicker and less stressful. Our premium customers know this and understand that loyalty equals benefits. We recently re-launched our frequent flyer programme, Flying Blue, adding more tangible benefits for our customers such as using cash and miles to claim a reward ticket, which our customers have been asking for, and other valuable benefits.”

The hotel industry also sees enormous value in engendering loyalty, regardless of budget.

The Hilton Honors programme allows premium travellers to accrue and spend points at 3,600 hotels and resorts in more than 80 countries, the IHG Rewards Club offers rewards and added-value at more than 5,000 locations, while the Radisson Hotel Group has launched a dedicated Radisson Rewards for Business programme.

“Loyalty remains a key deciding factor for every client level, whether luxury or cost-conscious,” says Cordon. “Radisson Hotel Group’s global rewards programme, Radisson Rewards, offers an enhanced experience from booking to check-out. Members are able to enjoy excellent offers and the ability to earn and redeem rewards remarkably fast which is appealing to all travellers.”

MICE travel fills in the gaps

For many hotels Meetings, Incentive, Conference and Exhibition (MICE) travel remains a key driver of demand.

“Africa is securely on the map for business events with modern convention centres now available in the region,” says Cordon. “The rich diversity of MICE attractions and experiences has seen key business events take place in the destination and we’ve definitely noticed that the booking lead time is growing.”

MICE, and corporate travel, is also an important driver of demand for the Taj Cape Town hotel, notes Taj Cape Town Marketing Manager Nadia Samuels: “There will always be demand for premium corporate travel to the hotel due to our service offering and facilities.

We remain positive and will continue to evolve and enhance our service offering to encourage corporate travel in a very competitive industry in a sector that is extremely resilient.”

However, this valuable premium niche is vulnerable to both economic and geo-political events. Conference and event travel is quick to be cut from travel budgets when times are tough, and security fears can quickly scare away lucrative event bookings. Hotels in Nairobi, for instance, were hit with multiple cancellations and deferments following the terror attacks on the dusitD2 hotel complex in January 2019.

“MICE has seen significant ebbs and flows over the past 12 months and this varies from market to market significantly,” adds Cordon. “We have however found that political unrest and civil action have a long-lasting impact on MICE demand in a destination.”

It’s but one of numerous challenges to the premium travel sector in Africa, but despite the bumps in the road travellers appear to be taking them in their stride. While the outlook for 2020 is cautious at best, corporate business remains bullish.

Luxury in Lagos

The Radisson Hotel Group ramps up its luxury offering in Africa later this year, with the opening of the Radisson Collection Ikoyi Lagos. It will be the first African hotel to join the Radisson Collection of iconic properties that reflect an authentic local influence, design aesthetic and vibrant social scene.

The new property is situated in the upmarket suburb of Ikoyi, and will offer 165 rooms and suites. Alongside all-day dining and specialty restaurants, the new property will offer extensive conference and meeting facilities, capable of hosting up to 400 delegates across a variety of flexible venues.

Private terminals make travel a breeze

For many corporate travellers, private aviation is worth the considerable extra spend thanks to its combination of security, convenience, travel time and comfort. African cities are catering to this sustained demand with the opening of bespoke private aviation terminals aimed at corporate executives and high-net-worth individuals.

In Johannesburg, the Fireblade Aviation private terminal at OR Tambo International Airport offers world-class facilities for charter services. In addition to private lounges, showers, a gym, spa facilities and fully equipped meeting rooms, the bespoke terminal includes an accredited point of entry for customs and immigration formalities to be completed.

In Cape Town both Execujet and Signature Flight Support offer similar comforts alongside hangar and crew facilities, while in Lagos ExecuJet Africa has opened a modern terminal facility at Murtala Muhammed International Airport capable of accommodating an aircraft as large as a Boeing Business Jet.