How time flies! It is almost 2 weeks since we were in São Paulo, Brazil, for LACTE (Latin America Corporate Travel Experience). Let me start with a big THANKS and congratulations to the ALAGEV team (Associação Latino Americana de Gestores de Eventos e Viagens Corporativos) for putting together a great event, top-notch in terms of organization, content, and attendance.
In this post, I want to share some numbers about how corporate travel fared in Brazil in 2015. Expectations for 2016 and what to expect of the Brazilian economy in the next couple of years. This is very important, considering Brazil is by far the largest corporate travel market in the region.
According to the 10th Corporate Travel Economic Indicators (IEVC in Portuguese), corporate travel sales fell 3.6% during 2015. That is following YOY growth of 9.2% from 2013 to 2014 and 13.86% from 2012 to 2013. One of the first sessions gave us some insight into how economic challenges affect travel managers in Brazil. They are in charge of reducing expenses as much as possible. One participant mentioned that travel managers have to become “magicians” to meet their companies’ travel needs.
During this session, the results of a live poll showed that over 60% had seen a reduction in their travel budgets in 2016. When asked how much of a reduction, 28% of respondents said up to 10%. 29.7% of respondents said between 11% and 20%. And 7.8% of respondents said more than 20%. Also, 28% responded that their travel budgets stayed the same as last year. 6.5% saw their travel budgets increase.
This clearly illustrates the challenge that the current economic conditions bring for corporate travel managers. They have to make do with fewer resources. It is also an opportunity for providers to offer solutions to help them become more efficient. Solutions that drive policy adoption and offer alternative products to minimize the impact of a tighter travel policy. Specifically, higher travel friction creates additional costs due to lost productivity, physical and psychological issues on their traveling employees, and increased turnover rates.
On the last day of the event, Gustavo Loyola, former president of the Brazilian Central Bank, gave a presentation about the economic situation globally and Brazil. On the global front, Mr. Loyola mentioned two important factors. One is the normalization of monetary policy in the United States, where he expects the Fed to raise interest rates to between 1.25% and 1.5% by the end of 2016. The second one is China’s growth deceleration, where he expects their growth rate to go down to 5.3% by 2020. Mr. Loyola also mentioned negative GDP growth for Argentina in 2016(-0.5%), as well as GDP growth in Chile (2.2%) and Mexico (2.9%) in 2016.
Brazil’s GDP contracted by 3.8% in 2015. The expectation is that it will contract at least 3% this year. There are hopes to stop the bleeding in 2017 with a 0.1% growth. And finally, 1.1% growth by 2018. Inflation continues to be a problem. Expectations are that it will go down from over 10% to around 7% this year in 2018 to go under 6%. The Real will continue its devaluation. With the exchange rate expected to be about R$4.35 to US$1 by the end of 2016, and R$4.98 to US$1 by 2018.
So… Is the glass half-full or half-empty? The economic situation is indeed difficult. My personal opinion is that a time like this provides us with the opportunity to position our businesses for success. I had the opportunity to meet with some extraordinary people who are very optimistic about Brazil. They are, in fact, positioning their businesses for success during these difficult times. Companies like GBX Capital, Collection Group, HRS, Accor, and others, committed to continuing to invest and support the corporate travel industry in Brazil, are clear examples of it.
We are also optimistic about Brazil. Our ICLP business, a worldwide leader in loyalty marketing and customer relationship management, has a Brazil office. Welcome Real Time is in Brazil, offering award-winning technology that enables the delivery of relevant communications and promotions to consumers at the point of payment and beyond.
And with Priority Pass, we are very excited and proud to participate and support the 2016 ABROAD roadshow season. A series of events that promote corporate travel and MICE training. It is an effort that started in Brazil and has now expanded through other countries in Latin America. ABROAD is organized by Academia de Viagens Corporativas, led by Vivianne Martins and Patricia Thomas, who was elected as ALAGEV’s new president.
I hope this post was informative. Feel free to let me know your thoughts and if you would like to learn more about Priority Pass and Collinson Group.
This article was published on LinkedIn. Also, thanks to thelandofmaps.tumblr.com for the great image.