We recently had the pleasure of helping to deliver a number of the main stage sessions at the Institute of Travel Management (ITM) annual conference. One session in particular saw us provide insights into key political events which lay ahead of us. We got such great feedback that we’d like to share an edited version of that speech…
”One of our past powers was the experts’ ability to make robust predictions about what lay ahead. Until recently it was relatively easy, with the right data, to predict the outcomes of elections, or periods of growth, within a reasonable margin of error. But oh, how things have changed. Let us illustrate…
In 2008 Olivier Blanchard, one of the world’s most recognised and well-respected economists and a professor at the Massachusetts Institute of Technology published a White Paper called The State of Macro, in which he forecast a fairly bright future for the global economy. With the benefit of hindsight, Blanchard’s gaffe was arguably the start of a new era, in which political and economic forecasting became increasingly unreliable.
And since that credit crunch, how many times have you heard the phrase “cautiously optimistic” used to answer questions about the future? Very few economists have been willing to put their reputation on the line when it comes to predicting anything more than a few quarters ahead because things are just so damned unpredictable.
And it’s the same on the political side. Let’s remind ourselves what happened at the Scottish Independence referendum for example: Weeks before the Scottish referendum polls were showing a large majority would vote to stay in the UK – the result was much closer and less predictable. Then in May last year we had the UK general election. It was hard to disagree with the polls who were all returning similar results…a coalition government or a hung parliament, with the SNP holding the balance of power. Then came the exit polls on the night…maybe you can remember poor Paddy Ashdown telling David Dimbleby that he would eat his hat live on TV if the exit poll was right. The Tories romped home and the SNP decimated Labour in Scotland by winning all but one of 57 seats.
Those are just a couple of examples which show that predicting the future is a mug’s game. And that is worth remembering this year…a year in which two major political events are taking place…the results of both which will have an impact on our industry.
Who for example could possibly have predicted the rise of Donald Trump in the last 10 months? When he announced his candidacy, very few people thought he would find much traction and in November last year people were surprised by just how far he’d come, but still didn’t expect him to be in the race after Christmas and yet here we are at the start of May and there is a very real chance that he will become the Republican candidate for the presidency. Could he become president? It’s extremely unlikely but given everything we’ve talked about can anyone say with any certainty that he WON’T be the president? Of course not.
Apart from just the idea having a fox-haired, bigoted, misogynist in the White House, what would it potentially mean for business and managed travel? Well, it basically boils down to two areas: firstly, it would expedite the shift of economic power from west to east. While secondly, it could make business travel much riskier for US citizens in certain parts of the world.
Talking of something altogether different, we also have the small matter closer to home of the referendum on the UK’s membership of the European Union. There are still five or six weeks to go but putting the actual politics to one side for a moment, there some real travel-specific issues to consider in the case of Brexit. If you haven’t seen it already, I recommend you look at a report published in March by Deloitte in association with ABTA. Here are some of the highlights from that report from a business travel perspective:
If the UK chooses to stay in the EU, the country would adopt the redefined terms of membership as negotiated by the Prime Minister. The settlement confirms:
- The UK is exempt from any further political integration;
- Future Eurozone monetary measures would be voluntary for the UK;
- There would be some limits on migrant benefits;
- A commitment by the EU to reduce regulation, and strengthen the internal market.
If the UK chooses to leave the EU, the PM would trigger Article 50 of the Treaty for the European Union and the process of the UK resigning its EU membership would begin.
And whatever your beliefs, the influence on business travel is potentially widespread, with government estimates of over two thirds of business travelers going from the UK to Europe.
At stake is the UK’s involvement in Open Skies, Flight compensation, Mobile phone caps, border free travel and not least, the right to work in the EU without a work permit.
The areas of impact cross regulatory, tax and trade, employment, investment, currency and confidence.
So whilst we can’t predict the outcome, if the will of the people dictates a new, independent Britain you can be sure that great change will be upon us.
Elsewhere domestically, there was no mention of APD in the April budget, even though the Scottish parliament is close to reducing the tax in the next year. This would of course be problematic for airports in the north of England who could lose passengers to Glasgow and Edinburgh airports. On a more positive note, the Chancellor did commit to HS3 and the expansion of the M62 between Leeds and Manchester.
In the rest of the world the rumble of change continues too…
- Brazil was until recently one of the great economic success stories of the 21 century. However, some of its most senior politicians are facing corruption charges, and the economy is slowing at an alarming rate.
- Iran is pulling out all the stops to become a member of the international business community. Delegations of British businessmen and politicians have visited Tehran in the last six months, and British Airways has even decided that a Heathrow-Tehran is worth reintroducing to the network as other carriers do the same.
- China in terms of business can be confusing. We all know what an enormous market it is (It has overtaken the US as the world’s top business travel spend this year) but you won’t have escaped all the negative coverage about its economic slowdown. It’s true the country is having problem, but it will remain a growth market for UK businesses.
- We could spend an hour focusing on Russia…but we won’t. It’s suffice to say that Putin and the economy is experiencing challenging times and UK business travel to Moscow does not show any sign of recovery in the short term.
- I’ve purposely avoided the topic of Syria and the chaos in the Middle East, mostly because we’re all aware of the humanitarian catastrophe and the fact there is no way to predict what is going to happen in the future. Post Paris/Brussels we are all aware of the security implications for European cities…but I think we’re so acutely switched on to this topic that there would be little value in going into the detail. Perhaps it’s worth nothing that post Brussels and Paris we’re hearing about and seeing big investments by TMCs into proactive traveller care technology. But to a certain extent that’s a no-brainer for them and surely it’s only a matter of time until global security drills become as common place as the Wednesday morning fire drill – the office no longer has walls.
- And finally…. connected to almost all of the geo-political events around the world is the price of oil. Economists and energy sector analysts will tell you the price is still unsustainably low, in the same way that $120 a barrel was unsustainably high. Some analysts have forecast a steady increase over the next two quarters, but as we’ve already discussed: what the hell do they know?
So, all of that in mind, we are cautiously optimistic that this information will provide a useful backdrop to planning your travel strategy and tactics in the year ahead. Forecasting the future is extraordinarily difficult. The world in almost every respect, except literal of course, is moving faster than ever.
What’s clearer than ever is the importance to remain agile, focus on nimbleness and flexibility in terms of travel policy and programme, and be prepared for anything in terms of traveller security issues.
We would like to thank Martin Ferguson and ITM for their support in the production of this speech.