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Asian Locations Overtake Sydney In Global List Of Most Expensive Cities

Australian locations have now all fallen out of the global top 30 most expensive locations in the world for expatriates.

This is among the findings of the latest Cost of Living survey by ECA International, the world's leading provider of knowledge, information and technology for the management and assignment of employees around the world. Sydney and Canberra, both in the top 20 a year ago, now rank 31st and 39th respectively. Melbourne has fallen 22 places to 45th position globally followed by Adelaide (46th), Perth (47th) and Brisbane (54th). Of the Australian locations Darwin has fallen the most places to 55th place down from last year's 26th spot.

“Despite actual prices of goods in ECA International’s shopping basket for Australia rising at a faster rate this year overall, the significant weakening of the dollar against most major currencies means that Australian locations are becoming cheaper again relative to many other locations around the world,” said Anna Michielsen, General Manager, Australia, New Zealand & Pacific for ECA International.

Asian locations including Beijing (15), Shanghai (18), Seoul (21) and Hong Kong (28) are among those that now rank higher up the list of most expensive cities for expats. To ensure that their employees' spending power is not compromised while on international assignment multinational companies will often include a cost of living allowance in their pay package. Living costs for assignees are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on assignee remuneration packages. To assist companies with their calculations ECA carries out two Cost of Living Surveys per year, comparing a basket of like-for-like consumer goods and services commonly purchased by assignees in 440 locations worldwide.

Asia Pacific – more regional highlights

Port Moresby has fallen 12 places in the ranking to 25th globally. Auckland, ranked 52nd, is the most expensive of the New Zealand cities. While Tokyo still tops the list of the most expensive locations in Asia for expatriates, globally it has fallen to 10th place on the back of a weaker Yen – a significant drop from last year, when it was the most expensive city in the world for expatriate staff.

Companies that need to locate staff into Japan can now do so for considerably less than in recent years, despite the long period of deflation in the country being reversed earlier this year. The difference in the cost of ECA's cost of living basket between Tokyo and Sydney fell from 31% to 12% over 12 months. After Japan, some of the biggest falls in living costs in Asia have been seen in Indonesia – also partly as a result of a weaker currency.

While Jakarta has only fallen 3 places in the regional ranking to 27th, globally it has dropped 45 spots to 172nd place. Beijing is now Asia’s second most expensive location after Tokyo, up from 5th position last year. Globally, the Chinese capital is the 15th most expensive location for expatriates. Shanghai previously in 25th position is now in the 18th position in the global results, and 4th in Asia.

"It's important to remember that certain living costs, such as accommodation rental, utilities, car purchases and school fees are not included in our cost of living basket," continued Michielsen. "Because these costs are usually addressed separately by an expatriate's employer, we collect this data separately. But if we were to include such costs, Hong Kong and Tokyo would be higher in the ranking, while Beijing would be lower due to lower housing costs."

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HRG Air Trends Survey Indicates Upward Trend For Business Travel Market

Despite an unprecedented number of disruptions over the last year business air travel is showing encouraging signs of recovery, with travel to emerging markets in Africa and Latin America leading the charge, according to data released today by Hogg Robinson Group (HRG), the award-winning international corporate services company.

Data based on HRG UK clients' domestic and international air transactions and fares from April 2012 to March 2013 indicates that:

Despite ongoing challenges, particularly in the Eurozone economies, there are signs that the business travel market is on the road to recovery. Global air travel booking activity in the first quarter of 2013 was up 3.2% compared to the same period in 2012. After a shaky start to 2012, the number of UK domestic transactions increased by 2.6% in the fourth quarter of 2012, and rose by 4.3% in the first quarter of 2013.

India was among the destinations where HRG saw the strongest growth in corporate air travel. Year on year transaction volumes were up by 11.1%. Corporate air travel to the Rest of the World region, encompassing the emerging markets of South East Asia, Latin America, and Africa grew by 3.3%.

Transaction volumes in Brazil and China declined by 6.1 and 2.3% respectively, as the economies in both countries began to slow after breakneck growth in previous years. Business class transactions showed an overall decrease of 14.8% with economy transactions recording an overall increase of 0.5%.

The shift from business class to economy was particularly acute in Europe suggesting changes made by business travellers on short haul routes during the peak of the downturn has extended well beyond it. Stewart Harvey, Group Commercial Director of HRG says: “The general picture is of an industry in slow but steady recovery. However, despite the improved view there is still a focus on cost by our clients and an increase in the use of economy fares, particularly on short-haul destinations. We’re also seeing rail re-emerge as a genuine alternative to air travel.

“Getting the best value for money when it comes to air fares, and aligning travel budgets to match high growth markets are the priorities for our clients as they look to make a limited pot go further. “The BRIC countries (Brazil, Russia, India and China) are now well established business travel destinations and, with the exception of India, the huge growth in air travel to these destinations is slowing. What we’re seeing now is significant growth coming from smaller, less established destinations, like Colombia in Latin America, and Ghana in Africa. These countries are poised for massive growth over the next decade as more international routes open up.”

Encouraging signs after challenging 2012

HRG figures show that corporate travel is on the rise after a challenging period in the second and third quarters of 2012. Transaction volumes recovered in the final quarter of 2012, showing 0.5% year on year growth, and this continued into the first quarter of 2013, when transaction volumes rose by 3.2%.

HRG’s findings are supported by the latest data from IATA, which reported 5.9% rise in the number of passenger kilometres travelled globally in March 2013. Despite cautious optimism however, HRG figures indicate the picture remains mixed, with a number of clients still showing significant reductions in travel.

Global picture mixed with emerging markets underpinning growth

HRG’s Air Trends data shows evidence of an upward trend in business travel transactions and spend across all regions, though the pace of recovery varies significantly.

Growth in the Rest of the World region, encompassing the dynamic economies of Latin America, South East Asia and Africa, grew by 3.3%, providing further evidence that businesses are prioritising travel to emerging economies rather than traditional economic hubs in the West.

Year on year transaction volumes for UK domestic travel dropped by 2.9% while the rest of Europe showed a similar rate of decline at -2.7% for the year. Corporate air travel to the North Atlantic region decreased by 3.9%.

UK and Europe – Mixed picture as economic conditions remains uncertain

UK domestic travel dipped sharply in the second and third quarters of 2012, but recovered in the final quarter with year on year transaction growth of 2.6%. This growth continued into the first quarter of 2013, when UK domestic air transactions rose by 4.3% compared to the same period in 2012.

While the dip in air travel to mainland Europe was not as pronounced, the recovery has been slower, with the prolonged Eurozone crisis continuing to impact growth. The fragile economic situation across Southern Europe has led to signifcant reductions in air travel to Portugal (-20.1%) Italy (-14.6%) and Greece (-15.3%).

Germany emerged the most popular international air travel destination for HRG clients due to its position as a leading commercial centre, though even here transaction volumes were down 1.5%. Strong economic growth conditions and revenue opportunites across Northern Europe and Scandinavia drove a significant rise in air travel to the region.

HRG data shows an 11.5% rise in air travel to Norway and a 16.9% rise to Denmark. Interestingly, transactions for flights to France decreased by 5.2% between April 2012 to March 2013 when compared with the previous year. HRG figures reveal an increasing trend for business travellers to travel to France using high-speed rail services including Eurostar.

Many companies have also changed their travel policy, requiring travellers to travel by rail for this particular route as it allows for work to be completed en-route.

Latin America – Dynamism beyond Brazil

Latin America continues to grow as a business travel destination, but data from HRG indicates the pace of change is slowing in more established markets like Brazil. While air travel to Brazil has grown exponentially over the past five years, HRG’s data showed a year on year decline of 6.1% in terms of transactions.

As part of the exclusive ‘BRIC club’ Brazil may grab the headlines, but the opening of new international routes across Latin America is underpinning strong growth in air travel to less established destinations across the entire region. Peru (+18.2%), Chile (+16.7%), and Colombia (+36.2%) are all emerging as business travel destinations as international companies recognise investment opportunities in these smaller countries.

Middle East and North Africa – Bouncing back

Air travel to the Middle East and North Africa is showing signs of improvement after hitting rock bottom during the social-political uprisings of the last 18 months. Travel to booming Turkey rose by 11.5% year on year. HRG’s data also showed an increase in corporate travel to Saudi Arabia (+9.1%) and UAE (+5.3%), but business travel to Bahrain remains stymied by ongoing political unrest.

Air travel transactions to the Kingdom were down 13.3% year on year. In North Africa, inbound air travel to Tunisia is down by 22.7%, while air travel to Egypt declined by 2.7%. There are however signs this may be changing as Foreign Direct Investment is beginning to have an impact on business travel to the region.

Africa – Rising fast

Boosted by a plethora of new airline routes into Africa and a successful football World Cup in June 2010, the continent is gradually emerging as a desirable destination for business travel. Compared to the sluggish pace of growth in Europe, transaction volumes in Africa are rising at often eye-watering rates, albeit these rises are often from a low starting base. Inbound travel to Ghana was up 50.4%, and 14.8% to South Africa.

Asia – China stalls as India powers back

China may be tipped to overtake the US as the world’s biggest business travel destination by 2015, but even the world’s second largest economy has not been spared some economic hardship over the past year.

A slight slowdown in growth from the blistering pace we have become accustomed to is reflected in the 2.3% decline in year on year air travel transactions reported. Conversely, India was one of the major growth regions identified by HRG’s air trends data, showing year on year growth of 11.1%

United States – Feeling the pinch in 2012

Air travel transactions to the US dropped sharply in 2012, showing a year on year decline of 4.2%. In a sign that air travel to the North Atlantic region has yet to recover, Delta Air Lines, one of the US’s two biggest airlines by revenues, warned of a fall in demand in March and expected unit revenues to fall 2 to 3 per cent in April, as it experienced the impact of a weakening US economy.

Cabin classes – Belt-tightening hits business class

Business class transactions have declined dramatically across domestic and short-haul destinations in mainland Europe with drops of 22% and 45% respectively. Economy and low-cost carrier transactions on short-haul destinations in Europe rose by 1% and 4% respectively, suggesting a widespread shift in travel policy on these routes.

In the UK, economy and low-cost fares were down 1% and 9% respectively, indicating UK domestic business travellers may be swapping air travel for rail, and holding more meetings remotely. Belt-tightening is also extending to cabin classes on some long-haul destinations. HRG reports that while transactions to the Rest of World region are up on the previous year, business class transactions remained flat with the majority of the year on year rise accounted for by economy and premium economy fares.

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Mobile Workforce As Popular As Ever

Organizations all over the world are leveraging the benefits of a globally mobile workforce. According to a KPMG International survey, 72 percent of over 600 respondents use global mobility programs to support overall business objectives. KPMG International’s 15th annual Global Assignment Policies and Practices (GAPP) survey provides a wealth of information for those responsible for or interested in global mobility. The detailed data found in these pages is an opportunity to compare or contrast one’s current practices to those of their peers or other types of organizations. Further, it allows for critical learning of best practices and new ways of thinking.

“A globally mobile workforce is as popular as ever,” says Achim Mossmann, Principal, KPMG’s International Executive Services, KPMG in the US. “Over the 15 years of this survey’s existence, in those companies where use of mobility is the norm, we have seen continued expansion and adaptation to the programs. We even see companies with headquarters in Nordic and Asia Pacific regions beginning to jump on the globalization bandwagon and needing to move their people to new strategic growth locations.”

Flexibility and adaptability of programs to address changing demands is strongly evidenced through the variety of assignment types offered:

  • 81 percent offer short term assignments;
  • 96 percent offer long term assignments;
  • 47 percent offer permanent transfer/indefinite length assignments.

Surprisingly, given the current economic environment, and the noted desire to support the business, only 12 percent of survey participants say that cost control and assurance of an acceptable return on investment (ROI) are of importance.

According to Mossmann, “Having agreed upon metrics to demonstrate ROI helps any global mobility program demonstrate objectively their value to the broader organization and secure continued program funding. However, a notable amount of survey participants struggle to track ROI information as it relates to international assignments—27 percent do not know the percentage of assignees that leave the organization within 12 months of repatriation and 31 percent do not know why they leave.”

Encouragingly, survey participants, year-on-year, continue to exhibit inclusionary mindsets as it relates to the definition of a “family” within their policies for benefit purposes. Fifty-five percent include unmarried domestic partners/companions of the opposite gender and 49 percent include unmarried domestic partners/companions of the same gender.

These broader definitions are most evident in European and Asia Pacific-headquartered organizations, and also within the financial services and high technology industries. In circumstances where organizations may offer incentives for assignees to accept international opportunities, many survey participants also take into consideration dual-career couples and their children.

For instance 21 percent provide job search support in the host country and 21 percent reimburse education expenses for the spouse/partner. Forty-one percent offer language training and 37 percent offer cross-cultural training to the assignee, spouse and their children.

Overall, the use of international assignees will remain the same amount or more for 86 percent of survey participants.

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