For businesses that require face-to-face meetings, travel has always been a considerable expense. The rise in oil prices in previous years – and airfare along with it – sent many companies looking for more cost-effective solutions. Online conferencing technologies like GoToWebinar, Skype, WebEx or On24, while not a perfect replacement for face-to-face meetings, provided at least a partial solution. But now oil prices are dropping substantially. What does this mean for face-to-face meetings, and the online conferencing that has been filling in for it? Will plummeting oil prices result in a resurgence of in-person meetings?
Oil is Cheap Right Now
Oil prices have undergone a remarkable reduction recently, enough to have serious effects on a global level. With a price reduction of 40 percent since the high in June 2014, oil producers and associated businesses are being hit hard. However, this also has resulted in savings for any consumers or companies that pay for fuel. Overall, the loss on the side of producers and the gain on the side of consumers could result in “one of the biggest transfers of wealth in history,” according to the Washington Post. In fact, the price drop is so significant that it will cause the global economy to grow by 0.5 percent to 1 percent.
No one knows how long this price reduction will last, but the effects are already being seen at the pump. Gas prices in the United States are averaging $2.77 a gallon right now. It is estimated that the price could drop by another 10 to 20 cents per gallon in coming months. This means that the companies for which fuel is a major operating cost are benefiting considerably. Airlines are a prime example of this – just a penny saved in the price of fuel means $40 million saved for Delta Airlines alone, according to a recent interview with the chief executive of the company.
So how does this translate to savings for businesses?
Rapid Reduction in Oil Prices Does Not Result in Rapid Reduction of Airfare Costs
In January 2014, Fox News published an article on the rising costs of airfare. At this time, airfares had risen by 12 percent in just the previous five years. And this was without all the extra fees that airlines tack on. In the same article, the current cost of jet fuel was set at a little over $3 a gallon. In 2009, the cost of jet fuel had been $1.89 a gallon.
Contrast this to a recent article in the Christian Science Monitor. In the Monitor article, low oil prices are reported to have very little measurable effect on current airfares. The profit margin has risen for airlines, thanks to lower fuel costs, but this is not being reflected in current airfare costs. Nor is it expected to have that much of an effect on future airfares – with only a 5.1 percent drop in 2015 airfare costs. The International Air Transport Association (IATA) explains that the profit margins are already low for airlines. What increase they do see in profitability will probably be reinvested back into the companies.
Thanks to mergers, most airlines are enjoying good business already. Flights are full, demonstrating strong demand, so there is little incentive to drop prices. Trade groups like Airlines for America argue that airfares are actually relatively inexpensive, when compared with inflation. So, while oil prices may be dropping a great deal, the prices that airlines charge for their tickets are not reflecting this. Nor are they expected to reflect cheap oil prices in the future.
Airfare Costs, Face-to-Face Meetings and Online conferencing
How have businesses that use air travel adapted to the increased costs associated with air travel? The face-to-face meeting at the client’s office or at a trade show was the only kind of meeting there was for a very long time, so constant business travel made sense until recently. Sure, one could pick up a telephone and discuss business matters or prospect for new business, but it was a poor substitute for talking in person.
Companies wanted to get the best from their employees, and they needed that real-life feedback to effectively manage. There comes a point, however, when even the most performance-obsessed operation must consider costs.
The considerable rise in travel costs from 2008 onward led many businesses to look for meeting alternatives. This is where online conferencing came in. The technology began to become viable around that time, giving businesses an option when air travel was unaffordable.
However, technologies like Skype, etc. were quickly discovered to be no replacement for in-person interaction. They were better than a phone call, but they were not better than an in-person meeting. Many companies have elected to use both as their budgets allow – online conferencing to save money and time, face-to-face for matters of true importance.
Where do Face-to-Face Meetings Stand With Falling Fuel Prices?
It should first be made clear: Falling fuel prices are not resulting in considerably lower airfares, at least thus far. This means that, at least as far as business travel by air is concerned, businesses are not likely to see much cost savings. Judging from current evidence, the in-person meeting is not going to become more appealing on a cost basis, as airfares remain high.
However, this does not mean that the face-to-face meeting is going to become a thing of the past – even with the best online conferencing technologies out there. An Oxford Economics study demonstrated that every dollar spent on business travel resulted in $12.50 in added revenue. While online conferencing is useful in a variety of ways, there are some things that – at least so far – are not replicable electronically. Relationships do not develop effectively in two-dimensional space, and it is relationships that make a business work.
It would be nice if plummeting fuel prices resulted in cheaper airfares. It would make face-to-face meetings easier to justify on a simple budget. But regardless of what they cost, their value remains consistent. Cost of airfares aside, face-to-face meetings are just good business.