South African business travellers are starting to feel the pressure as rising inflation eats into corporate travel budgets and also per diems, according to FCM South Africa. These provisions are designed to cover things like meals, lodging, and getting around while the traveller is on a business trip.
The South African rand has been lagging by 6% against the US dollar over the past year. With domestic inflation clocking in at 7,8%, overseas jaunts and local travel are packing a pricier punch.
“The standard per diem, once a solid cover for meals, comfortable lodging, and transport, is finding itself at odds with escalating global prices,” says Bonnie Smith, GM of FCM South Africa.
Airfare and hotel prices soar, widening the per diem gap
The FCM Global Trend Report 2023 Q2 reveals more of the budgetary challenges South African business travellers face. Among the sore spots are surging North American airfare prices, which have been hiked by 13% for business class since 2019 and 16% for economy class. Europe’s hikes are slightly more, with business class up 15% and economy flights 17%. In the Middle East and Australia, business-class seats have rocketed by a third since 2019.
The report emphasises a notable discrepancy between the average daily rate in accommodation in key business travel destinations and the per diem rates by which many companies operate. For instance, the average daily room rate stands at R2 484 ($129) in London, R2 253 ($117) in Dubai, and R2 214 ($115) in New York. The outlook is equally glum on the continent, with Lagos hitting an average daily rate of R2 850 ($148) and Cape Town R2 330 ($121) for a hotel room.
In contrast, the current standard US General Services Administration per diem lodging rate is R1 849 per day, excluding taxes. The rates vary between R1 059 ($56) to R1 464 ($78) per day for meals and incidental expenses, depending on the destination. The standard rate for incidental expenses, covering tips and fees, is pegged at R96 per day ($5).
Some corporations are cutting down on travel expenditures to balance the books. However, this route risks dampening business traveller morale and productivity. Outdated per diem rates might usher employees towards fast-food chains rather than healthier restaurant choices and less comfortable accommodations, leading to a weary and less productive workforce.
Striking a balance between costs and comfort
“In light of the glaring discrepancies between the standard per diem rates and the actual daily rates in various cities, companies need to revisit and potentially revise their travel policies,” said Smith.
Secondly, she recommends flexible booking, such as planning ahead and choosing less busy travel days. She says this will allow companies to save on airfares and accommodation costs.
Additionally, leveraging loyalty programmes offered by airlines and hotels could lead to savings and extra perks like free WiFi and breakfast, which would otherwise dip into the per diem allowances.
FCM says that partnering with an experienced corporate TMC opens access to pre-negotiated deals and preferential rates, especially on hotels, which can make room for more generous and employee-friendly per diem allowances without overstretching budgets. A TMC will also be able to offer businesses valuable advice on how to best leverage their frequent flyer programmes.
“It’s a balancing act for South African business travel in the current economic climate. However, with prudence and a focus on staff welfare, business trips can remain productive without overstretching corporate budgets,” Smith concludes.
