The article American Express Releases Annual Global Business Forecast presents the forecast for the global business travel industry (Americal Express, 2008). The article demonstrates that external factors like the global economic slowdown will adversely affect the business. The article discusses the effect of expected external environmental factor’s status in 2009 which would affect American Express Business Travel as well as the overall travel and tourism industry. This essay examines the article and the forecasted factors that the article discusses. This essay will discuss the factors and will try to understand how the forecasts will affect the marketing decision of American Express Business Travel. The essay first discusses the forecasts of the report and then goes on to find the effect it has on marketing.
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Forecast of Environmental factors
The forecasts are divided into two broad categories: environmental factors and technological changes. The environmental forecasts which the article predicts are due to the economic slowdown that world face today. The article states that due to the global slowdown the forecast suggests that “In certain markets, the Forecast predicts a negative increase in 2009 to airfares and hotel rates. Both suppliers and buyers of travel and related services are expected to face new operating challenges in the coming year.” (Americal Express, 2008) The reason that the article presents for this slowdown has both demand side and supply side explanations. As the slowdown of the economy increases, the airplane companies are expected to reduce their capacity. Further due to a decline of demand, as less travellers travel in planes, the airfares are expected to reduce, but the cost of services will remain higher. So the forecast expects that the airfare prices are expected to increase. Further the hotel industries in certain regions will face decreased demand and increased supply due to new entrants in the market which will provide greater bargaining power to the buyers of the service, driving down hotel rates. Another factor that affects the industry adversely is the increase in oil prices which effects the operations of both the hotel and the airlines industry.
These environmental factors are expected to adversely affect the business travel industry. As for American Express Business Travel these factors have a strong impact on their marketing strategies. The marketing decisions that need to be reviewed are related to the four Ps of marketing. The main function of American Express was to provide business travel solution to corporate. Now due to recession, cost cuts have assumed great importance in corporate strategy and so travel costs also are getting affected.
The airline travel in the business class has declined considerably in the past few months and there has been an increase in business travellers travelling in low cost airlines for short haul flights (Brancatelli, 2009). So the main potent of the marketing strategy must be in providing business travel solution at the lowest possible prices. For this the target of the company must be low cost airlines for short haul flights. This goes with the suggested strategy to companies to hold meetings in close proximity (Americal Express, 2008). Then the companies must target the hotels. As the forecast explains, due to decrease in demand for hotel rooms, the occupancy rates have declined. It has further declined due to the entrant of competition which has increased supply in a market where demand was already low, thus decreasing the bargaining power of hotel suppliers. So American Express Business Travel must ensure that they use their competitive power to book hotels at the lowest possible prices. So as far as the product strategy is concerned the company must provide a package of low cost travel in economy class along with hotel stay. As the expected cost for domestic travel to increase 2.8 percent and international cost of 4.3 percent, travelling by low cost airlines will reduce at least the domestic cost. Further the article also states that the air travel operational cost will reduce, but there will be an increase in the service cost. So by opting for low cost airlines the lower price advantage can always be takes. So innovative travel management packages has to be provided for business travel which are cost effective.
Prices for the products must be reduced. This again can be done through innovative product design. As travel packages become costlier, domestic travel prices can be reduced, but the prices for international travel packages will have to increase.
Promotion of the travel packages has to be directed to business customers where the travel desks of the companies should be made aware of the best quality provided at affordable prices. Further, the company must suggest the customers to hold business in areas where the cost will be least.
Forecasts of Technological Change
Technology has made extensive improvement. There are options of having conferencing without the need to travel: “Teleconferencing and social networking sites are gaining popularity as tools to strengthen the interpersonal relationships created through traditional meetings.” (Americal Express, 2008) Technological options like video conferencing and social networking provide pose high threat to the operations of American Express Business Travel. As more and more companies are foregoing traditional modes of travelling to meet clients or associates are been discarded to reduce cost. The new technological options to reduce the distance are low cost, time saving and efficient. The increase in competition and new technology has made the business scenario for the company more unpredictable. For the expected forecast is that more companies will opt for these cost effective means than corporate travelling to face the recessionary pressure. To counter this competition the company must provide more for less so that the corporate stick to the traditional practice. Further the company must also change its target market to companies who cannot forego business travel due to on-sire requirements which cannot be done through digital conferencing.
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Social Responsibility and Ethics
The article does not discuss any social responsibility of the company. But it must be noted that the company has the responsibility to understand the problem of decreasing oil reserve of the world and the present economic recession that cripples the economy. In such an economy it important to keep up business as well as demand so as to help the industry which is facing troubled times can be pushed towards recovery. Further the company must also refrain from utilizing too much of buyer’s purchasing power from the hotel industry as this may lead to distortion of power in a competitive market.
From the article it is clear that the economy is in a recessionary phase which has driven the business houses to employ cost cutting measures (Brancatelli, 2009). Further, this has also led to a decline in demand of air travel especially for business class travel. So the forecast of the article is true and can be validated from the other sources like IATA (Brancatelli, 2009). This shows that with shrinkage in demand in the travel industry, it is important for the company to employ novel marketing strategies to attract business.
Americal Express. (2008). American Express Business Travel Announces Adjusted Results Of Forecast In Anticipation Of Global Economic Slowdown. 2009. Web.
Brancatelli, J. (2009). The Business-Travel Blues. Web.