Business travel management practices in Europe are more
similar to one another than ever, but cultural and regulatory differences
continue to present challenges. A recent Business
Travel News examination shed light on how travel management is practiced in
eight key markets in a region that shows both consistent tendencies and much
diversity.
Similarities include the high proportion of independent
hotels that don't participate in global distribution systems, a preponderance
of travel agency inplants, heavy use of rail, proliferating airline payment
surcharges and stringent rules regarding data protection. Differences relate to
preferred payment and expense systems, value-added tax reclaim rules and travel
allowances.
[Please click here to
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research report, featuring all charted data, downloadable as a pdf.]
BTN's research
included a survey of those who manage and/or buy business travel in Germany,
the United Kingdom, France, Switzerland, the Netherlands, Spain, Sweden and Russia.
Findings show that Russia clearly is different than the rest, in terms of
infrastructure, regulations and cultural orientation. Germany and the United
Kingdom both have specific laws and practices that create some distinctions in
travel management practices. Differences across the other countries generally
are cultural and along regional lines.
Understanding these differences is essential for effectively
managing programs and communicating with senior management and travelers on a
multinational, pan-European or global basis.
In addition to quantitative surveys, BTN interviewed nearly three dozen industry experts, including
travel managers, consultants, agency executives and other travel suppliers, and
considered research from non-industry sources.
Travel management practices in Europe have become
homogenized for various reasons, ranging from development of the European Union
and a common currency to advancement of travel management technology and a
drive by multinational corporations to globalize policies and operations.
Today, with the exception of Russia, countries covered by
the study have more commonality than disparity regarding travel management
infrastructure and practices. While the most noticeable differences are
cultural, some of the largest and most globalized travel programs substantially
have minimized those differences. But even they must account for differences in
language and national identity by using different communications strategies.
Despite their best efforts, some companies eyeing a globalized travel program
regularly run into obstacles in Europe that prompt them to water down global
objectives.
Accounting For
Culture
Cultural differences that accent European business travel
management should be considered regionally, perhaps by examining the major
areas of Northern, Central, Southern and Eastern Europe.
Cultural idiosyncrasies and language differences always play
a role in thought processes and the ways people operate and embrace new
developments. Dutch author Geert Hofstede's seminal 2001 book "Culture's
Consequences" studied several multinational corporations, including IBM,
and identified various factors contributing to cultural differences that affect
business practices.
• Power distance: inequality, centralization; who decides
what
• Uncertainty avoidance: structuring of activities;
technology, rules and rituals; how can one ensure that what should be done will
be done
• Individualism vs. collectivism
• Ego goals: career, money
• Long-term orientation: thrift
Hofstede found organizations in Belgium and France to be the
most hierarchical, followed by those in Germany, Switzerland and Italy, then
the United Kingdom and Ireland, and finally Denmark, Sweden, the Netherlands,
Norway and Finland. He described the typical U.K. corporate culture as an "adhocracy"
where motivation is based on individual success in the form of wealth,
recognition and self-actualization with a high uncertainty avoidance and low
power distance. Corporate cultures in Germany, according to Hofstede, are
notable for professional bureaucracy and the standardization of skills and
operations, where motivation is based on individual security with a high
uncertainty avoidance and high power distance. He described corporate culture
in France as even more hierarchical with full bureaucracy and standardization
of work processes, but along with Spain, typified by motivation based on
security, relationships and career separate from family.
Hofstede quoted Blaise Pascal, who said, "There are
truths in one country that are falsehoods in another." He also offered the
following quip: "In the United Kingdom, everything is permitted except for
that which is forbidden; in Germany, everything is forbidden except for that
which is permitted; and in France, everything is permitted, including that
which is forbidden."
Travel management experts see similar traits. They note
differences not only in communication styles and attitudes, but also in scale.
Germany, the United Kingdom and France, for example, are more likely to be home
to large corporate travel programs, which tend to be led by more vocal
managers. In the Benelux and Nordic countries, according to one travel
management company executive, people often focus on business and don't
prioritize as highly personal relationships and small talk. Spain remains a
market slowly opening up to the rest of the world, but still is on its own
timetable: doing business is more common in the evening than in the afternoon.
In Russia, anything not distinctly Russian often is suspect. The French also
tend to favor a must-be-invented-here approach to technology. Some French TMCs,
for example, have developed their own online booking tools in order to offer
them in the French language.
Use of corporate online booking tools is highest in the
Nordic countries, followed by Germany and France. The United Kingdom and the
Netherlands also have relatively high adoption rates. Due in part to their
cultures, Spain and Italy exhibit more resistance to such tools and favor more
use of travel arrangers. In Russia, online booking for business travel
essentially is nonexistent.
"The United Kingdom is the closest you get to the
American way of managing travel," according to one French corporate travel
buyer. "That's just cultural. We're trying to change a lot of things here
in France because that is where more than 30 percent of our travel budget is,
but there are cultural issues. In France, pre-trip approval is more common"
than in other European countries.
The buyer noted that his company uses the same agencies and
the same tools across various markets, and added that airline negotiating is
similar from one country to the next as carriers infringe on each other's
territory. "The differences for me lie in policy and process and are more
cultural," the buyer said. "From what you can get the traveler to do
and what they resist, you can see differences by country."
His company currently is "trying to radically change
our travel policy," and differences are evident. "In the United
Kingdom, you just do it. In France, you have to show it at least to the unions
and let them give their comments, even though you basically can do what you
want. In Germany, you basically have to do it with the workers council.
"Southern Europe is definitely less technology-focused,
but Spain is one of our higher-performing countries," he continued. "They
have been able to drop the price of their tickets by about 17 percent in the
last 11 months, making it our best performer in Europe. What they have had to
go through over the past two years regarding the financial crisis has been and
still is pretty tough. Their ability to adapt quickly their behavior has been
quite easy and would be more difficult to do in France. Yet our operation in
Spain still doesn't have an online booking tool in place, even though it would
drive down those costs even further."
RUSSIA
Part of the reason Russia is the most dissimilar when it
comes to travel management is that such practices there still are in relative
infancy. Though negotiating with airlines is relatively common today—even with
some regional carriers—business travel management did not exist before economic
reforms made possible Russia's first airline deal, forged in 1998 between Shell
and KLM.
Russia has a fragmented travel distribution market. Bookings
for international airlines including Russia's Aeroflot, TransAir and F7 can be
processed by one of the three primary GDSs—perhaps market leader Amadeus—and
via the International Air Transport Association's Bank Settlement Plan. Russia
also has a computer reservation system, Sirena, for local airlines that don't
have the means to support a global GDS, and a separate local railroad
reservation and settlement system, Express. Sirena is united with local BSPs or
transportation clearinghouses to serve regional carriers. Each TMC must support
these separate reservations and settlement systems, which requires
sophisticated IT infrastructure, accounting and investment.
Corporate online self-booking is practically nonexistent in
Russia. Instead, bookings are requested by telephone or email. Rules regarding
paperwork and signatures are a major impediment to travel automation.
"In Russia, the rules haven't caught up with the
technology," said one payment industry expert. "Like in Germany and
many other countries, you still have to keep all of the original receipts for
10 years in case you are audited, even though technology allows you to make an
electronic image of the original receipt. Beyond that, the employee in Russia
is always required to sign something, so you cannot just do an electronic
submission. You actually have to print something and sign it. It's very
labor-intensive. Before you take a business trip, you have to have a travel
request with a unique identifying number created. You can't go on a trip unless
you've submitted the request and received the approval of the appropriate
approver."
One corporate travel buyer said his company a few years ago
tried but failed to introduce an online tool in Russia. "The travelers
wouldn't use it," he said. "They were focused on talking to the
travel agent. The technology is not as effective because if you are issuing a
ticket, you have to reconfirm it anyway. You cannot just book it online, you
have to call the day before and then they will confirm the ticket. There are a
lot of manual processes involved in Russia."
Local financial and tax regulations further complicate the
document flow.
More so than in other countries covered by BTN's research, Russian companies prefer
to work with other Russian companies, and companies looking to work in Russia
need local partners or to yield to local control.
Although "Russia is a market that is rapidly catching
up with best practices and tools," according to one corporate travel buyer
whose company operates in the country, "it also is a market that still has
problems linked with lack of transparency and corruption."
Russia also has a hotel market even more fragmented than
those in most countries. Only 10 percent of its hotels are listed in a GDS,
compared to 40 percent to 50 percent in Germany and more than 60 percent in the
United States, according to a Russian TMC executive.
GERMANY
Travel industry infrastructure in Germany is not very
different from the rest of Western Europe. Its work rules are the
distinguishing characteristic. The power of its labor unions goes well beyond
that of other countries. In Germany, each company's workers council must give
approval before companies use individually identifiable data for business
purposes or make changes to travel policies and reimbursement rules.
The workers council's role is bolstered by German government
guidelines for data protection. In addition to complying with the requirements
of Europe's data privacy laws, a company acting as a data controller also needs
approval from each individual data subject before releasing data to a third
party, such as a travel supplier. German companies must not copy or store
personalized data for too long or in too many locations. Restrictions also
limit the use by airlines of clients' competitive marketshare data.
German tax regulations regarding the use of frequent-flyer
miles also are more stringent than those in other countries. Companies that
allow people to use miles from their business trips for personal use must
inform employees that it is considered taxable income and remind them to pay
the taxes (or else the government will ask the company to pay). As a result,
some companies have stopped using card-based frequent-flyer rewards programs.
Lufthansa and Airberlin, however, have started paying a lump sum to the
government based on the miles that people use for tickets through their loyalty
programs.
Germany also more rigorously approaches travel allowances
than most other European countries, although companies can decide whether or
not to follow the German travel allowance regulations, which dictate how much
the employee can be reimbursed based on the number of hours and days of the
trip as well as the location.
UNITED KINGDOM
One look at an electrical outlet in the United Kingdom
demonstrates how the country differs from the rest of Europe. Of course, it
also has a different currency and is separated by water from the continent's
mainland. In culture and law, the United Kingdom resembles the United States
more than Continental Europe.
But more so than in the United States and the rest of
Europe, travel managers must be more serious in their approach to duty of care
and risk mitigation. This involves plenty of bureaucratic work, such as
assessing potential risks associated with preferred hotels and ensuring effective
crisis management procedures are in place. However, there is an upside for
travel managers. "We find duty of care a very useful tool for enforcing
travel policy," said one travel manager.
Enacted in 2008, the U.K. Corporate Manslaughter And
Corporate Homicide Act enables prosecution of an organization for "gross
systemic failures in health and safety management." Previously, only
individual managers could be prosecuted for gross negligence leading to an
employee's death. The law has prodded U.K. companies to take a much more
systematic approach to assessing and mitigating risk. In the case of travel,
this typically has taken the form of establishing risk assessments for trips
and introducing controls on when and how employees drive automobiles while on
company business. However, the legislation does not apply only to U.K.
companies. It applies to any employer whose employee dies in the United Kingdom
or on British-registered ships or aircraft.
Another piece of legislation, the U.K. Bribery Act, which went
into effect last July, applies to corruption of private and public employees,
both in the United Kingdom and overseas. Perhaps most importantly, companies
can be charged with "corporate offense" if they are shown to have not
taken adequate procedures to prevent the making or acceptance of bribes—not
only by employees, but also by any "associated person," including
subsidiaries, agents, contractors, partners and third-party providers.
While the U.K. government said the legislation would not
outlaw routine hospitality, such as hosting clients at a sports event or
dinner, more extreme hospitality, such as sending a client on a holiday, would
be unacceptable. Another problematic area is making facilitation payments for a
meeting, for example to smooth the passage of conference equipment through
customs. Travel managers should mitigate potential liability by conducting a
risk review of their activities and communicating to stakeholders about
acceptable behavior.
Another legal issue that sets the United Kingdom apart from
the rest of Europe is its more aggressive enforcement of Transfer of
Undertakings Protection of Employment Regulations (TUPE), an EU directive that
protects employees when a business is transferred from one owner to another. It
is most pertinent to travel when a corporate travel buyer changes its travel
management company. If the outgoing TMC's consultants served the account for
more than a certain percentage of their working week, the incoming TMC may be
obliged to rehire the same staff on the same terms and conditions as before.
Meanwhile, the United Kingdom is the only major market among
the eight researched where Amadeus is not the dominant GDS; Travelport is
recognized as the leading U.K. GDS.
Other Commonalities And
Differences
Differences in travel management practices across the other
five European countries researched by BTN
are more nuanced and EU legislation likely will continue to bring about more
commonalities. For example, many travel managers in the United Kingdom, Germany
and the Netherlands have joined those in the Nordic region in actively
monitoring sustainability and carbon emissions. Soon, EU's Emissions Trading
Scheme will mean that all companies will be required to make such measurements.
Hotel Distribution
European hotel distribution is far less consolidated than in
the United States, with far smaller percentages of properties listed in GDSs
and a greater use of independent hotels. Instead of GDSs, many corporate travel
buyers use specialist hotel bookers or agencies' booking departments. Even in
the United Kingdom, where there is a greater presence of hotel chains than
elsewhere in Europe, hotel booking agencies often are used in preference to
corporate TMCs, largely because of their payment-by-billback approach but also
because of their extensive relationships and online booking capabilities. Such
arrangements also are popular in Germany, where hotel distribution is even more
fragmented than in the United Kingdom. Hotel participation in Greece, Italy and
Spain in GDSs also is limited.
"There are still a lot of individually owned hotels in
Europe that because of their locations get a lot of corporate business,"
said one European corporate travel buyer. "There are a couple of
organizations, such as the German HRS, that offer a GDS-like representation of
those smaller hotels on a centralized platform and an alternative for those
hotels that are not in the GDS. Agencies also are developing similar platforms
because they see a lot of business slipping through their hands as well."
Inplants
Many corporate accounts in Europe still are asking their
travel agencies for inplants or onsite agents. Germany is such a market. Some
Spanish companies, too, prefer to have them. French organizations are not as
adamant as they used to be about having inplants. The United Kingdom also has
changed quite a bit in that regard, from being inplant- to online-oriented. In
the Netherlands and Switzerland, there is less demand for them. Companies in
the Nordics are more focused on technology and also are less interested in
inplants.
"Spain is one step behind on travel management,"
said one European travel management professional. "We see more outdated
inplant structures and very strong travel managers dedicated to travel
management still in place in Spain, Portugal and Italy, whereas in other
markets it's much more often a part of the procurement department. I would
consider that very different for the Southern European markets, with the
reliance on inplants, that there is a lot less innovation going on. Online
adoption rates are below those of other Western European markets."
VAT Reclaim
Some corporate travel executives find value-added tax
reclaim to be the most cumbersome aspect of business travel in Europe. TMCs and
many internal corporate departments have dedicated resources to capturing as
much of the paper trail as possible. Some companies use specialized VAT reclaim
services, usually from their TMC. American Express Business Travel and HRG each
have a director just for taxation. The smaller TMCs that don't have such
departments can struggle. VAT challenges them because it can add up to very
significant amounts of money.
In order to get the tax back, you need the real invoice.
Before a European Commission change this year, it was necessary to have a paper
invoice. Now it is possible to use a PDF document.
Reclamation is complex because the percentage of VAT differs
by country, and some costs are VAT-deductible in some countries but not others.
In Germany and Russia, but nowhere else in Europe, VAT is applied to domestic
air travel. Russia has completely different rules from the European Union; if a
business is not registered there it cannot reclaim any VAT. Switzerland has
very similar rules to the European Union, which means that foreign businesses
can recover VAT.
In Spain, as well as Italy, the Czech Republic, Slovakia and
Poland—which do not have reciprocity arrangements with the United States—U.S.
businesses cannot recover VAT.
A U.S. business reclaiming VAT from Germany must fill out a
paper or electronic application with original hard-copy invoices and send it to
German tax authorities. In Germany, U.S. businesses cannot recover VAT on fuel
for cars.
The refund mechanism is a little bit different for companies
based in Europe. In 2010, the rules completely changed regarding the procedure
for reclaiming VAT. If a company is an EU business—say from the Czech Republic,
doing business in Germany—a new procedure would require it to fill out an
electronic form and send it to the Czech tax administration, which then would
forward the application to Germany. Previously, the business would have sent
the application directly to Germany.
In general, companies are focused on reclaiming
accommodation, meal, car rental and local transportation expenses.
Companies can reclaim in a six-month period after each
year-end. For EU businesses, that deadline has been extended to nine months.
Travel Allowances
Another area in which there are differences between
countries are tax rules regarding per diems. In one country, a per diem might
be considered as payment and in another country it might not. That leads to
differences in how per diems are taxed. Sweden is very aggressive regarding
fiscal claims on per diems and Germany is similar, to a certain extent, but not
as aggressive as Switzerland. In the Netherlands and France, the governments
are looking into the fiscal implications of per diem allowances.
Travel allowances are used in Portugal, Germany, Sweden, the
Czech Republic, Croatia and Russia. They are cumbersome because a traveler must
calculate the number of hours they travel.
The German government each year releases a table that shows
how much travelers are entitled based on the length of trip. From zero to eight
hours, the traveler gets nothing—the idea being that during the normal business
day, employees take care of their own meals anyway. Travelers receive a certain
amount for trips of eight to 14 hours, and more for trips of 14 to 24 hours.
If the hotel includes breakfast in its rate, the traveler
deducts that from the per diem. If the traveler is invited to lunch, that too
is deducted from the per diem. Another layer of complexity is variance by
country and city. Travelers to London get a bigger allowance than if they went
to Manchester. There is a table for each city and country.
"The most complex of all of the countries on the planet
is Austria," said one European travel management expert. "They follow
the same concept of a travel allowance, but they have 140 industry-specific
collective treaties, which then dictate how much you get compensated. If you
are in the mining industry you get one amount, and if you are in the IT
industry, it's another amount."
Payment And Expense
While corporate cards for business travel purchases are the
norm in the United States, they are not ubiquitous in Europe. Cash advances
there are prevalent in companies that do not issue corporate cards to all
travelling employees and do not use automated expense management. Such
companies also are more likely to use bill-backs or central billing
arrangements. Southern European countries and southern France use credit cards
for payment less often than other parts of Western Europe. Elsewhere, in the
past few years, the number of corporate cardholders has increased, particularly
those linked to private bank accounts and using individual pay.
One German travel management expert said, "Our ratio
for paying by invoice rather than credit card is very small here and in the
Nordics and Benelux countries, where card use is about 95 percent. In Spain, it's
very common that customers are paying by invoice, which creates a lot of
problems for the TMCs, because they are not banks. If you have a lot of
turnover on the invoice, it is not good for your cash flow. It's the same
situation in Eastern Europe. In addition to the mega agencies, customers often
use smaller agencies and multiple agencies and do a lot of business via bank
transfers and even cash. The United Kingdom is a very credit card-driven
market. There are also banks, like the Royal Bank of Scotland, that are issuing
cards. There are more products available in that market. Use of invoice there
is very limited."
Experts said companies usually pay for meetings and
incentive expenses in Europe by direct debit or invoice rather than cards
because of the cost of the merchant fee.
While expense systems are available in Europe today, they
aren't widely deployed. There is room for improvement in all of the European
countries. Even many of the biggest corporate buyers have no system in place
other than employees manually compiling and submitting spreadsheets.
Rail
Another characteristic of business travel in Europe is the
use of rail travel. Rail is popular in France, where there is little low-cost
air service. In the United Kingdom, home to a lot of low-cost carriers, rail is
more expensive than elsewhere. German companies extensively use rail and
low-cost carriers.
Even so, the lack of rail content in GDSs frustrates many
buyers. Said one, "It's often hard to get a connection between our online
tool and their res systems."
Despite having an advanced high-speed rail network, there
never has been a European umbrella organization that coordinates reservations,
timetables and ticketing for the various national railway companies.
Developments by GDS operators and others could start to improve that situation.
Meanwhile, EU legislation in May 2011 introduced
standardized rail passenger data for fares and timetables. Next year, EU will
put forward a legal measure requiring travel operators to bring their IT
systems and practices in line so that standardized data can be exchanged and
used effectively. This in theory will be a major move to enable a more
integrated booking solution for pan-European rail travel.
Airlines
Air travel still is competitive on most European routes,
despite the presence of national airlines in many markets.
According to one German travel buyer, "In all those
countries in Europe, you have a national carrier—Scandinavia with SAS, Finnair,
British Airways. It is completely different from the United States. It's
impossible for me to work with only two or three airlines. It doesn't help me
if I don't work with Iberia because Lufthansa planes overnight in Madrid and
don't leave until 10 a.m. You need the local player to catch the early planes
to be able to have a day trip, otherwise you add hotel cost."
Air sectors in most European countries have negotiating conditions
similar to one another's, with dominant hub airlines, the presence of one or
more alliances, low-cost competitors and emerging joint-venture deals.
When it comes to air negotiating, the only real anomaly
among the eight countries in BTN's
research is in Sweden. A law there requires SAS—because of its dominant market
position—to offer every customer the same discount or rebate for Swedish
domestic flights.
Meanwhile, a large number of European airlines now impose
surcharges for specific payment methods, especially in their home markets,
including all Lufthansa Group airlines and Air France-KLM. This adds costs that
travel managers must address. However, EU ministers are considering a new
directive that would force airlines to reconsider these surcharges.
This report
originally was published in the May 14, 2012, issue of Business Travel News.