Discounted hotel and conference registrations. Nonstop airline promotions. Nearly deserted TSA airport checkpoints. These are some of the obvious signs of the recession's impact on business travel. But a report released this month by Oxford Economics (and sponsored by the U.S. Travel Association and Destination & Travel Foundation, two Washington, D.C.-based organizations representing the travel industry) quantifies the fallout -- and warns that emerging conferencing technologies are viewed as insufficient substitutes for face-to-face meetings. Some of the key findings:
Companies are cutting back sharply on travel. Citing a Kellogg School of Management survey of 400 executives conducted in February, the Oxford Economics report states that about half of surveyed organizations decreased the amount of business travel in the months leading up to the survey. "Those who have made cuts have reduced their travel budgets by an average 35%. However, 34% have slashed their travel budgets by more than half," the report said.
Face-to-face meetings can make a huge difference in closing sales, and achieving other business objectives, including training and staff retention. Citing the results of its May survey of 300 high-level managers, Oxford Economics found that "both executives and business travelers estimate that 28% of current business would be lost without in-person meetings" and "Both executives and business travelers estimate that roughly 40% of their prospective customers are converted to new customers with an in-person meeting compared to 16% without such a meeting."
But we were most interested in the survey results that pertained to new conferencing technologies (emphasis is in the original report):
"Certainly, web meetings and teleconferencing offer opportunities for cost savings as technologies continue to advance. Yet 85% of corporate executives perceive web meetings and teleconferences to be less effective than in-person meetings with prospective customers while 63% believe virtual meetings to be less effective than in-person meetings with current customers."
The report also found that among prospective customers, only 12% of respondents believed virtual meetings were equally effective, while 3% said they were more effective. For current customers, about 1/3 said virtual meetings were equally effective, but just 6% said they were more effective than face-to-face meetings (the survey had a margin of error of 5%).
However, have many executives actually tried the alternatives to face-to-face meetings? While it's safe to assume that everyone surveyed has taken part in a teleconference, it's not clear how many respondents have tried Web meetings, let alone cutting-edge 3D or videoconferencing technologies. Another issue that fell outside the scope of the survey: The actual return on investment of virtual meetings vs. the ROI of face-to-face meetings. Face time is certainly important, but we think it's premature to dismiss emerging technologies that deliver savings and other benefits.
The complete report can be read at the following location:
The Return on Investment of U.S. business travel
Sources: Oxford Economics report, email from Oxford Economics USA, U.S. Travel Association websites, The Transnational.
Image: PhillipC/flickr (creative commons license)
Comment below, or email Ian at ian -at- thestandard -dot- com. Follow Ian on Twitter at http://twitter.com/ilamont. Standard updates and asides are available at twitter.com/the_standard.
Comments
Of course you can't close a lot of big deals without meeting in person. And if companies are cutting travel budgets to closing meetings, they deserve to lose the business.
The important point, rather, is whether or not conferencing technologies of various kinds can stand in for some fraction of the huge amount of business travel that's truly optional, driven by habit, salespersons' notions of appropriate perquisites, corporate and executive ego and status-seeking ("Of course I can afford to drop $1500 to fly to Seattle to take you to lunch -- what do you think I am, a piker?") and unreasonable customer demands for lovey-dovey high-touch attention from vendors they otherwise nickel and dime.
And the answer, equally clearly, is that yes, conferencing technologies can. Further, any comptroller, sales manager or CEO with three brain cells to rub together is able to draw the line and say: "Y'know - they've approved the scope in principle, their delivery deadline is 3 months away, this is a $2 million deal, it's time to send Bruce out on a closing mission with a finished scope, a stack of contracts and a fountain pen," as opposed to "Y'know ... this is a $20K deal ... they've been on the phone with us for 19 hours already ... we think they're window-shopping ... nothing's on paper ... they don't reply to email ... let's see if we can move the dial on this thing via WebEx." Why is this hard?
Thanks, John, for your input. I can't comment on the sales aspect as I have never taken part in the sales process, but one of the things that struck me about the report is it did not consider any type of hybrid approach (including the fractional situation that you suggested) in the questions posed to survey participants.
Ian Lamont
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I guess this is what happens when the Travel Lobby sponsors a survey. (grin)
Obviously, all business (including most especially the highly-technical, execution-oriented parts) runs on relationships, trust, and insightful communication -- which require both what might be called 'human bandwidth' (conceived as time/attention, rich exchange of information, context and background, business and personal detail) and what might be called 'process bandwidth': the ability to iterate, evolve and manage designs/plans/strategies/process/customer expectations in realtime, facilitating the 'doing and/or making part' (and ultimately, the 'getting paid' part).
Ironically, salespeople are (at least in my experience) very little involved in formulating the substance of deals or their representation in proposals, scopes, contracts or other project documents. By and large, they function as connectors, presenters and single points of contact during the blue-sky phase, as 'closers' during contract signing (with a great deal of backup on strategic negotiations by people who aren't in the room) and are long out of the loop by execution-and-delivery time.
Which means it may be pathological for us to have allowed the presumptions surrounding sales (rather than execution) to dominate our view of the necessity of business travel. Arguably, most of the critical 'relating' involved in work is being done by people who aren't permitted to travel on mere whim, and who (because they're actually executing) don't have time to do so, either -- but whose NEED for trust and insight is no less (arguably much greater -- a 'lost sales opportunity' is one thing; a 'blown job' with concomitant loss of capital investment, reputation, legal strife, etc., is quite another).
For this reason, I personally advocate reducing (non-essential) travel in favor of a constant process of seeking, piloting, implementing and binding (to process and best-practice) cheap, agile and powerful tools for online presence-projection and deep collaboration. These days, I keep my entire distributed workforce desktop-present on Skype, do all my ad-hoc audio and video there and an increasing amount of client presentation using slides or live software (Skype's new desktop-share is awesome, slick, fast, free). When I need deeper engagement, I pull folks (a handful or a hundred at a time) into Second Life, where I can seat them in nice virtual chairs in my glorious glass/steel/marble conference theatre, show slides and video and dynamic 3D models, and talk in Skype-like heliophonic broadband voice. Naturally, I still travel to close BIG deals and speak at industry events, but I feel strongly that if airlines (particularly those with cramped seats) and hotels (particularly those with $25 'Ozone Inhaler' bottles in the bathroom and $12 bottles of 'complimentary' mineral water on the credenza) suddenly went away, I'd manage to muddle through. If I absolutely need to get somewhere, I have a sailboat. (grin)
This is from the perspective who a person who studied computer-based communication as an alternative to FTF, beginning in the 80's. This work was at Western Behavioral Sciences Institute, and may be too academic to be of interest, here, but FWIW...
I'll cut to the chase. Some kinds of communication are highly iterative -- i.e., they require many cycles of back and forth in a short period of time. Establishing trust and negotiation are two kinds of communication that require high interativity. Establishing trust MAY require non-verbal cues, as well, depending on lots of circumstances. Telepresence of any form currently available to us is at least somewhat deficient with regard to both iterativity and non-verbal cues. (When and how one interrupts, or has the opportunity to interrupt, is an important factor to effective communication.)
Sales meetings often have the purpose of negotiation and establishing trust, so it's no wonder that it would be regarded as non-satisfactory for meetings with new customers, but less so for continuing customers (where some trust has already been established.)
All work is not a sales meeting. Where relationships are firmly established, and where cooperative work is the goal, telepresence and asynchronous communication can and will become more and more important to efficient work transactions and competitive practices.
Things can change. Don't forget that Amazon had to overcome the "see and touch" trust barrier. We can trust when we feel there are sufficient safeguards to prevent or remediate broken trust. With trust established, negotiation may actually be enhanced by asynchronicity -- e.g., by presenting the opportunity to collect a variety of trusted inputs outside the attention of those on the "other side of the table."
I suspect the travel industry is already aware of these studies and considerations, and thus the spin that emphasizes sales and meetings with customers, without indicating what portion of business travel is actually characterized by those activities.
Darrell Thanks for adding the academic perspective, particularly regarding the trust aspect. Note, however, that the Oxford Economics report also addressed other non-sales scenarios, including employee retention, training, "building relational networks," and government travel (which, interestingly, accounted for $32 billion in spending last year, which the report notes is higher than most other sectors).
Your comment "things can change" is very relevant. As I asked in the original post, how many of the people surveyed have actually tried these technologies? Applying it to the Amazon example, I recall the skepticism from book enthusiasts and merchants that it would never work. I wouldn't be surprised if many of those same people now do a large portion of their own book shopping online.
Ian Lamont
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The Industry Standard
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Already a lot of great comments. I don't think face-to-face will ever go away but I'm just surprised that there are so many of these studies being done right now that set out to establish that face-to-face meetings are better than virtual meetings. In every one of them, not surprisingly, the findings are that the overwhelming majority of the respondents prefer face-to-face meetings and events. Now some of the studies are somewhat flawed in my opinion, for example, asking members of the hotel sales and marketing association what they prefer or a study Trade Show Week did of recent trade show attendees asking them which they preferred--they are at a trade show how could they say they didn't think travel for trade shows was important.
My point is, if the vast majority of business executives that are being surveyed all agree, face-to-face is better, who is this study really for? If business leaders already think its better well the only thing I can think is that it is for the members of the travel association. When the association's members say "what are we doing about this?" they can whip out the fancy study they did. I can just imagine the auto manufacturers association doing a report showing the preference for company provided fleet vehicles back in the 80and 90's. But when it comes to changes in the business that require adjustments to be made...they will be made no matter what people prefer.
I think Ian, you are right on target when you talk about hybrid meetings. The travel-related industries would be much better served if they embraced hybrid meeting models and looked for more ways to show value while being responsive to changes in their customers businesses. In the long run, as the industry proves the value of hybrid meetings (where some people are physically present and some are attending virtually) perhaps more meetings will take place and the overall business travel sector will see stability and even growth.
In Tuesday's (9/22/2009) Wall Street Journal, there is a special advertising section (sponsored by international airline industry, judging by the ads) that includes an article mentioning the Oxford Economics study. It highlights the virtual vs. f2f data included in the report, but interestingly, the author added other perspectives suggesting that a hybrid approach using both f2f and virtual styles is acceptable.
It is authored by Joe Mullich and starts on page A17.
Ian Lamont
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At least from an environmental impact, using virtual world conferencing reduces the carbon footprint per person and overall by over 90%. With cap and trade schemes, or outright carbon taxes, coming into action in the near future, companies that travel to conference now will see real life conferencing events convert to virtual events and earning carbon credits for doing so. Even if a virtual conference is only 60-80% as effective as a real life conference, considering costs tend to parallel the carbon footprint as well, then the overall ROI is actually much higher with virtual conferences, so rather than budgeting to do 4 or 10 real life conferences, a company can budget to do 40-100 virtual conferences on the same budget and get a much higher return on investment, growing their business quite a bit more.
IntLibber: The green angle has also been played up by some of video and Web conferencing companies (such as Cisco's TelePresence line).
I think any cost/ROI calculations for virtual conferences should include training and setup costs. For TelePresence, the setup cost can actually be quite high. What's your take on Second Life setup and training costs?
Ian Lamont
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Well there are companies that offer conferencing areas on an event by event basis in SL, with full sim security, so a company that wants to test the waters doesnt need to drop much money to try it out, although I would caution that a company should try it out on a concerted basis for an agreed upon period of time so everybody gets a comprehensive exposure. This sort of service can cost less than a hundred dollars for a few hours of time renting the sim conference center.
As for training execs to be avatars, there are various means of doing so. An exec with experience using game controllers already has a leg up on movement, etc, as does anybody with experience in autocad, blender, maya, 3dmax as far as manipulating content. When I first entered SL it was like living inside autocad for me, but not being a gamer, it took me three months to learn the key combo to make my avatar run cause I had no need for it.
One service my company offers is to fly in to a corporate location (yes, ironically, but its cheaper than a bunch of them flying to my offices) to give intensive lunchtime training sessions to execs and other staff over a week, or rigorous all day classes. This is as important as learning all the tricks to Word, Excel, or a database app. and which is similarly taught in corporate environments.
On a lower budget basis we can send a registration/installation steps document to the user, and once they log in the first time, at our orientation facility, we can meet them and orient them inworld.
Once done, the individual is up to speed for the new reality and can then focus on attending dozens of virtual conferences, even multiple conferences at the same time (yes, you can run multiple SL clients and avatars at the same time, so you can maximize your multitasking).
As for a dedicated conference facility for one company, that sort of an installation we can set up for less than $8000 US and annual maintenance costs of $4500 US. Theres a lot of other things that a company can adopt for a more comprehensive virtual world presence, including custom staff avatar last name accounts, private registration api, and integration with existing company interwebs infrastructure.
We still see IBM, Sun, Cisco, and other major corporations using SL for a lot of things, so the 'backlash' was obviously not applicable to them.
For a company not needing a public presence on the SL grid, we can set up a behind the firewall solution using SL derived OS technology, for less, in which they will have more control over everything.
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