Managed Travel Programs Gain Ground In Latin America

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July 10, 2014 – 09:15 AM ET
By Michael B. Baker

Managed corporate travel in Latin America is showing new signs of maturity, though developing global travel programs in the region still present some cultural and structural difficulties.

Although its economic growth has slowed in recent years, Brazil remains the powerhouse as far as corporate travel in the region is concerned. In terms of domestic passenger traffic, it is the fastest-growing and largest airline market in the region, and the third-largest in the world, behind only the United States and China, said Eduardo Murad, business development director for Brazilian travel management company Alatur JTB, during a panel at an Association of Corporate Travel Executives global conference in April in Miami.

Brazil also «takes the lead in terms of maturity of travel management, though there are other countries there that are as ready,» Murad said. «Mexico, Argentina, Ecuador and Chile are all moving good.»

Corporate travel also has been on the rise in Peru, where the economy during the past seven years has grown even more than Brazil’s, said Arturo Garcia Rosa, president of the South America Hotel & Tourism Investment Conference. While Peru’s reputation is more of a leisure destination vis-à-vis Machu Picchu, a large portion of its travel market is either corporate or corporate combined with leisure, he said.

While global travel program consolidations conducted by many multinational companies based elsewhere have included Latin America, some firms based in the region now are looking at globalization as well. Fernando Marcomini, director of global sales and services in Latin America for Radius Travel, said his agency is working with an unidentified Brazilian investment bank that he claims is the first client to go global from the region.

«Most of the time, we receive direction from the U.S. and Europe to develop and follow the travel program, but now we are doing the opposite,» Marcomini said. «They are working in a very collaborative way to push the local context into the global travel product and try to define why they’re trying to do that.»

Once that company completes its consolidation and shares its experiences, others likely will follow, he said, adding that Radius is talking with several Brazilian companies exploring travel program globalization options.

Still, travel management in Latin America presents some obstacles. Most local companies, for example, still do not have dedicated, full-time travel managers, with the responsibilities often falling to people in procurement or human resources departments or the administration, Murad said.

At the same time, policies and preferred vendors often contradict the ways top executives in the region are accustomed to conducting their travel, he added.

«You have presidents and high directors in the companies that have a direct relationship with presidents or directors from the supplier side, and they decide some things directly and do not communicate properly to travel management,» Murad said. «It can be an issue, especially when you try to put a global policy in place and it goes against the authority of those local relationships.»

Online booking also remains a challenge in the region, both from a cultural and content standpoint. As with travel management in general, corporate online booking is more mature in Brazil and is present but «not too common» in Chile, Argentina, Peru and Colombia, Marcomini said.

«Email and telephone is very strong,» he said. «They need to develop this trustful relationship before starting any service or request, and they feel technology is very mechanic.»

In regard to content, about 40 percent of hotels in the region are not listed in global distribution systems, Marcomini said. Owners of many of those hotels often prefer to work directly with clients when it comes to bookings.

Airlines, meanwhile, often put part of their content on the GDSs and reserve some for their websites, he said.

On the payment side, companies in the region generally have a high adoption of corporate cards or ghost cards for air travel, but hotels present a more complex problem, Murad said. Even though major hotel brands are increasing their presence in the region, most properties there are independent—in Brazil, for example, only 35 percent of hotels are part of an international chain, he said. As such, many hotels handle payment through invoicing. Car rental payments also often are handled through invoices, even though most of those vendors accept credit cards.

«This affects travel costs, because the travel agency is the one invoicing on behalf of the client,» Murad said, adding that agencies often must have a large staff dedicated solely to fulfilling hotel and car invoices.

The region also lags in automated expense management. Most companies that have a system in place are either multinational or have developed their own, according to Murad.

Supplier Outlook

For Latin American airlines, 2014 is poised to be «more dynamic than ever in terms of landscape,» said Manoel Suhet, Latam Airlines Group sales vice president representing the United States, Canada and the Caribbean.

«You’re going to see a lot of carriers aligned with two codeshare agreements, and most of them also are going to be part of a global alliance,» Suhet said during the ACTE conference. «At the same time, there will be a lot of pressure as more low-cost carriers enter into the market.»

As of April, 388 hotels totaling 63,636 rooms were under development in Central and South America, according to STR Global. More than two-thirds of those rooms are in Brazil, with construction ramping up on properties due to be finished in time for the 2016 Olympic Games in Rio de Janeiro.

Speaking this month at the New York University International Hospitality Industry Investment Conference, Blackstone global head of real estate Jonathan Gray named Colombia as one of three emerging markets—alongside India and China—presenting the most opportunity for hotel investors.

«It’s a very well-run country, fiscally responsible, and there’s been a dramatic turnaround from where it was 10 to 15 years ago,» Gray said. «There’s not a lot of capital in a place like Colombia, so the growth should be high.»

Though hotel companies initially wanted to get their upper-tier brands into the region, Latin America now is seeing more midprice and select-service brands spread. More than 40 percent of the rooms under development in South and Central America as of April were either midprice or upper-midprice, according to STR Global.

South America Hotel & Tourism Investment Conferences’ Rosa said select-service was «the future opportunity all over the region, not just in the main cities. There are a lot of new projects on the table, both individual properties and multi-properties.»

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