Mark Cooke talks ERM, and its impact on travel looking into 2019, based on insights from Carlson Wagonlit Travel’s 2019 Energy, Resources & Marine Travel Forecast
We know that travel is critically important to businesses in the ERM industry, and uncovering economic trends, price projections and industry intelligence can help keep down the costs of travel, in a market on the rise.
A global overview
It’s been a challenging few years for the energy, resources and marine industries, and 2018 saw a slow but steady recovery. Companies in the ERM industry are rebounding as the price of oil and commodities rise, with global GDP growth projected to increase 3.4 per cent in 2019.
The price of oil and commodities dictates industry activity and investment, and these rising prices see the market on a steady path to modest growth in 2019. Tighter crude supplies, which are exacerbated by US sanctions against Iran – set to impact Iran’s petroleum sector when they come into effect in early November – are projected to drive prices higher. Travel activity is also on the up and up, with global air prices expected to climb 2.6 per cent in 2019.
Bracing for political uncertainty
The biggest unknown as we head into 2019 is global geopolitical uncertainty, and how these will play out and impact economies. The current political climate is marked by surprise policy decisions and swift changes – and any of these changes could throw the positive-trajectory predictions off-course. Venezuela remains unstable, the outcome of Brexit and its impacts are still unclear, and the US trade policy remains unpredictable – with further uncertainty in the US as midterm elections could shift the balance. These factors make forecasting difficult, as any change would send ripple effects throughout the economy.
ERM in 2019
We expect to see growth in the energy sector in 2019, and as oil prices rise slowly, we expect to see activity pick up. The economic downturn of 2016 saw companies investing in the optimisation of business processes so they can run more efficiently. Increased digitisation also means the workforce must diversify as new skills are required, which could further help fuel growth. Despite this positive outlook, we expect to see companies remaining cautious, focusing on cost control and driving efficiencies.
Renewables remain the fastest-growing energy market globally, however as most companies are wary of long-term investments, we don’t expect to see a big swing to renewables as of yet – and investment is currently being used to find sustainable ways to extract fossil fuels.
Prices for commodities are on the rise and are expected to continue to increase – due to an upsurge in global demand, and supply bottlenecks. Policy changes have had an impact on price as well, as prices for nickel and aluminium shot up in April after the US imposed sanctions on Rusal, one of the world’s largest aluminium producing companies. Unpredictability in policymaking is likely to continue to affect the market, but overall the sector look set for a new wave of investment.
When forecasting growth in the marine sector, we expect the outlook to be fairly flat – with one exception being service vessels used in the energy sector, as they benefit from the slow upturn in the energy industry.
Impact on travel
Following the 2016 crunch where crude oil process crashed, most companies now have clearer and more efficient policies, with a stronger focus on compliance.
While there are expectations of an uptick in travel activity overall, companies are likely to stick to their prudent ways, booking the lowest available fares, even as airlines pile on the additional fees for extra services. Revenues to airlines from these fees rose to $82.2 billion in 2017, up from $32.5 billion in 2011.
In hotels, we continue to see extensive consolidation as brands try to round out their portfolio, now able to offer a variety of choices from budget to boutique. Hotels are also increasingly introducing stricter cancellation policies, which could be problematic for the ERM industry where flexibility in travel planning is required.
Safety & security is a major concern when considering ERM travel, as numerous key markets are in volatile areas, for example, many mining destinations in Africa are located close to regions threatened by militant groups. Recent attacks in European capitals also highlight that emergencies can happen in low-risk countries as well, and reacting fast is difficult if you do not know where staff are. We recommend knowing where your staff are at all times and assessing the risks that travellers themselves carry with them.
Mark Cooke is Senior Director, Growth Initiatives and Insights for CWT Energy, Resources & Marine. He is responsible for the strategic leadership and direction of CWT ERM. CWT Energy, Resources & Marine combines innovative technology with first-class safety and security, to get travellers to their destinations efficiently and safely in specialised industries, where getting to remote parts on the work can be complex.