The Travel & Transportation Sectors
Modern modes of travel and transportation mean the free movement of people and goods is now truly Global. The huge growth in International trade due to imports of raw materials and products from Asia to The West, means strong demand for transportation and logistics companies' services. The market segments that make up transportation industries include road, rail, sea, air freight, express delivery, contract logistics. These transportation and logistics sectors make up about 9% of the global GDP. Their valuation is heavily dependent upon tourism demand and also demand for products and raw materials from overseas markets.
Improved accessibility and technology is changing the way people and goods move around the planet. Travelling consumers and holiday makers are more active. Companies are cutting costs by using specialist business travel firms to arrange staff itineraries and source low cost travel tickets. All travellers are exploiting relatively low-cost airlines, high speed rail networks and inter-country connections and routes across Europe and beyond. It is not uncommon to find families travelling abroad for a weekend, to spend time skiing or soaking up the sun in hot climates. This accessibility has allowed an increase in working from home as well as travelling greater distances to work. Demand for cars, rail and air journeys has increased population expands, and workers become more flexible.
One of the biggest challenges for the transportation industries is the capacity levels of existing public transport infrastructure is at maximum and the cost of replacing it is huge. In a world of economic austerity building new airports, motorways and rail extensions is becoming increasingly unaffordable. Many Western governments simply cannot afford to be seen to be investing in massively expensive transportation projects, (especially when millions of voters are seeing their net disposable income fall). Yet, demand for transport continues to rise during the economic downturn. The net effect is increasing congestion, travel delays, delayed product shipments and disrupted supply chains. Businesses that rely on international trade and international transportation can be affected by differences in national transport toll charges, fuel duty, diesel costs and capacity variances.
For businesses that produce goods, movement of those goods and services has to be as efficient and cost effective as possible. Efficiency might dictate that goods are sent by road. However, roads may not be the most cost effective method of logistics and transportation when all costs (including adhering to environmental legislation) is taken into account. Unlikely alternatives such as transport by waterways are beginning to open up. These projects may help manufacturers to keep costs down, meet environmental targets, maintain speed of delivery and keep roads clearer.
Motorists are also under pressure as the cost of owning and running a car rises. This is because of rises in fuel costs, fuel tax, insurance premiums and road fund licences. Travelling by bus is becoming an attractive travel option, (especially when the cost of parking a car is also taken into consideration). There are other pressures on motorists too. For example, new fuel tax levies that encourage to motorists to invest in cars with a smaller carbon footprint. As the cost of fuel rises, (as well as environmental taxation levies), many transportation and logistics firms have seen their margins decline. Car manufacturers have responded by designing more fuel efficient and cleaner cars, which have seen a decrease in the road fund licence for smaller engine cars. Political pressures on Governments to meet environmental targets have impact investment in carbon hungry road, rail and airport infrastructure. The decisions made at Government level will impact on businesses as to how their logistics will operate.
Transportation for commuters is also becoming increasingly expensive. Cheap bus journeys are usually restricted to shorter distances. Yet, many local authorities have cut funding for bus services while journey times have increased due to congestion. A novel solution to this problem is the recent phenomenon of car sharing. Many businesses have responded by offering company car schemes to their employees to help cover the cost of commuting to work.