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Is Relocation the Same as Moving?

“Could you help me move my furniture back to England?” I receive a request like this once every two to three weeks.
That’s great you might be thinking, you run a relocation company and you get regular enquiries. It would be great if I owned that kind of relocation company, what I actually own is known in the industry as a Destination Services Provider (DSP for short).

That’s great if you work in the field of global mobility but for the everyday person, perhaps relocating for the first time, a DSP is probably not a business type you have come across.

What is a DSP and how can it support relocating employees?

Let me clarify what my company, Inter Relocation, does: we provide independent home search services for expatriates, as well as helping them to find a school for their children, orientation support for new arrivals and additional support with anything relating to establishing a life in a new country.

In addition, we also provide in-house visa and immigration support, which is quite typical, at least within the Central and Eastern Europe region. That makes my company an ISP (Immigration Service Provider) as well as a DSP.

A short history lesson

When I started out in the industry things were a little simpler. Companies like mine were commonly referred to as relocation companies, with our cousins in the removals business calling themselves household goods movers, removals firms, or van lines. Then slowly but surely the removals companies started to call themselves relocation companies, just like we destination services providers had done so, so that things would be clear for the lay person.

The late, great Paul Evans once explained it to me in terms of his goal of ultimately selling his business for a higher price. The basic gist was that household goods moving is a blue-collar logistics business, whereas relocation (encompassing the work of a DSP, ISP, tax and legal and other support services such as language and cross-cultural training) was considered a white collar consulting business. The multiplier of historical or projected profit that you can charge when selling your business is significantly higher if you are selling a consulting business, and that is what he was building.

Let’s look at the big relocation picture

So back to that request for my company to move someone’s furniture. I take such requests with good grace and do my best to direct the customer to a company that will indeed assist them. It reminds me that relocation encompasses so many processes, of which my company delivers only a few. At this point we must mention the global players in this industry, the Relocation Management Companies (RMCs).

Many multinational companies’ global mobility management have realised that if each of their offices operates its own global mobility policy, it results in a very disjointed experience for their international workers. A typical solution has been to take a global approach and to establish a relationship with a service provider that can support that company’s expatriate employees wherever they relocate to.

This is the role taken by the Relocation Management Companies. Companies like mine partner with RMCs and act as an on-the-ground partner. There could also be immigration, household goods moving, spousal or partner support, tax equalisation and so on, all provided by a network of partner companies around the world.

Relocation is all about people

For me the beauty of our industry is that it is all about people. I do my best to occasionally work with a relocating family, just to remind myself of why we are here. To relocate from one country to another, even as a single person, can be very stressful and to know there is someone who will hold my hand (metaphorically at least) when I arrive in the new location is very reassuring.

There are efforts within the industry to use technology to streamline and simplify the process and I am all in favour of a reduction in administration and in the number of people who contact a relocating employee. For me though there is still no substitute for having an actual relocation and/or immigration consultant to look after an expatriate and make sure they find the right home at the right price, with a lease contract that protects their rights and with the legal right to live in that home and work in the country they’ve moved to.

Empathy for the expat

I’m an expat too. I relocated to Hungary in 1995 and did so without any professional support. I proudly refer to myself as an economic migrant, because I relocated with two suitcases, a small amount of money and sought a new life, a better life, in Budapest. For me relocation was the freedom to make a choice, to be able to move to another country, without having to prove my worth in advance. I moved to a country with a fresh, entrepreneurial spirit and found myself caught up in that feeling and was running my first business by 1998.

Beer was cheap, the locals were welcoming and loved that I tried to speak their language. My decision to relocate changed my life, beyond all recognition and I sometimes wonder how my life would have turned out if I’d decided not to. I don’t think about that too often though, mostly I’m focused on making sure my team has all the tools they need to relocate the next satisfied and very brave customer.

By Stuart McAlister, owner and Managing Director, Inter Relocation

Relocation Trends in the CEE region- Addressing Challenges and Changes

It’s fair to say that the relocation profession is developing at a rapid rate. The world has changed since 5-6 years ago, where most international assignments were for typically middle-aged men with a wife and two children.

Now this kind of expatriate is increasingly the exception and relocation service providers have to adapt their business models if they are to remain competitive and relevant. This is a report on the relocation trends in the Central and Eastern Europe region.

Main Challenges for the Industry in the next 3 – 5 years and How to Address them 

Challenge 1: Perception of the relocation trends

A common challenge we face in the Central and Eastern European (CEE) region is one of perception. The concept of what relocation destination services are is still not well known.

To add to this challenge, organisations close to the DSP world such as law firms, real estate agents, tour guides and household goods moving companies have started to offer services similar to destination services. These services are offered at varying levels of quality and dilute the professionalism of the industry.

We must address this with HR departments so the professionals we work with understand the value of the services we provide and why outsourcing offers real value for money. One solution is to form an association of relocation companies, similar to the Association of Belgian Relocation Agents.

This body can then work to educate the market about the benefits of our services. Another answer is to get involved with HR forums by offering free consulting support to HR departments in our countries. This would allow us to show the expertise and value we offer, both in terms of housing and local service expertise and in terms of immigration compliance knowledge.

Challenge 2: Commoditisation of our Services

We see a trend towards breaking down our services to the level of a day or even an hour of work. There is a tendency to simply view our services in terms of there being a relocation consultant with a car, with no consideration given to the cost of the office base, management, systems, insurance, compliance requirements and so on.

Similarly to the previous challenge, our services are not seen in terms of the value of our expertise. Clients are not informed about the cost savings we can generate by negotiating a lower rental price or the peace of mind we offer by making sure an assignee is legally able to work by a set deadline.

To address this, we now collect cost saving data and present it to our clients on an annual basis. We also set a limit on when immigration document processing becomes immigration compliance and we enter into a consulting role, rather than that of being expert administrators. These practices allow us to present ourselves as experts in the field, meaning that our clients will take our work seriously and pay a fee commensurate with that expertise.

Market Trends

Inbound Transferees

We see a rapid increase in inbound transferees and foreign new hires from outside the EU filling gaps in the labour market with people willing to work for less. Countries within our region are seen as sources of cheap, skilled labour but increasingly there are shortages for companies already entrenched. Their solution is to look further afield to fill those labour talent gaps.

One client in Hungary presents an excellent example: Their need for native French speaking call centre staff has exhausted local resources. To add to this, it is extremely hard to find workers from Western Europe who are willing to work for Hungarian wages. The company’s solution is to source employees from French speaking African countries.

The current migrant crisis makes certain nationalities less than popular with the immigration authorities. Thus the individuals being hired tend not to be sufficiently educated from an immigration point of view for the positions required and the salaries offered in Hungary. One of the challenges is getting the required work and residence permit when the applicants have few formal qualifications.

Another is finding landlords willing to rent their properties out to African citizens. Our solution is an unprecedented interaction between HR, the company’s recruiters, and ourselves to ensure that the employees the company chooses to hire are most likely to be able to gain the required permits and find a home in the destination city.

Housing Availability

This links into another trend that is presenting increasing challenges in cities like Budapest. We refer to this issue as Airbnb-ification. Landlords in cities in our region that are popular with tourists have realised that Airbnb and similar websites can generate far more revenue from short-term rentals than by renting out long-term to expatriate tenants.

There are tax avoidance implications as well. Landlords would much rather receive rent via PayPal to a bank account in another country and not declare the income to the local tax authority. This is easier than rent the property out locally, where tax obligations are far harder to circumvent.

This phenomenon has severely impacted the availability and the asking price of lower to mid range properties on the local housing markets over the last 12 months. The trend is developing so fast that the data corporate clients have on the housing market is often inaccurate. The data experts state about what properties should be available is no longer in line with the reality on the ground.

This leads to questions about our competence as providers of suitable housing, However, assignees who go online expecting to find cheap and plentiful accommodation are generally disappointed and turn to us for support.

Exchange Rate Fluctuation – Russia and Ukraine

The conflict in South-East Ukraine has led to a general economic decline across the whole country. The number of companies wishing to relocate assignees to Ukraine, even to Kiev, which is 700km from the Donetsk Oblast, where the conflict is focused, has significantly reduced. Business is slow to say the least.

The economic downturn has led to a weakening of the Ukrainian currency, the Hryvnia against major currencies like the Euro. This is good news for tenants with existing leases set in Euro or U.S. Dollars since when leases come up for renewal the tenant has the opportunity to significantly reduce their rent. The current solution to avoid frequent modifications to lease contracts is to set the rent in Hryvnia.

The same thing is happening in Russia, although property demand in Moscow remains high, Western economic sanctions against Russia depressed the Rouble in the period from September 2014 to February 2015. This was followed by a relatively strong recovery and then another major drop from June to August this year.

As in Ukraine, our colleagues have been working hard to re-negotiate leases where the agreed Dollar or Euro rental amounts are now far higher in local currency terms. We then work to set them in Roubles to avoid the need to modify the lease contract on a regular basis one way or the other.

How Inter Relocation is changing its business model to address the needs of the next generation of “movers and shakers”

Housing Needs

The kind of assignee we deal with is changing rapidly. The traditional expatriate, probably male, probably middle or upper management and probably married with a couple of children is an increasingly rare beast. Instead we’re seeing younger assignees, couples without children, short-term assignments, and a large number of foreign new hires.

The focus from expatriate accommodation typically being a family house near an international school or kindergarten has been replaced by the need for ready-to-occupy furnished accommodation available now. This rapid increase in demand has, as already mentioned, led to significant supply issues and demand pressure on rental levels. It also presents practical issues where a corporate lease is involved.

Not only are corporate clients setting budgets based on out of date data, they find themselves losing properties because landlords no longer see the value in the stability of a corporate tenant.

Landlords are no longer willing to wait weeks for a complex due diligence process to be completed on the lease contract. Speed can be the key to securing a property and corporate tenants can be slow and cumbersome in this modern world.

Our solution is to find landlords who see the value in a corporate lease. Or to encourage clients to allow leases to be in the individual’s name when dealing with 1-2 bedroom apartments in popular areas of capital cities.

Social Media

The rise of social media has led to so many emails, posts, blogs and newsletters clamouring for our limited attention. This means that emails with large blocks of text are likely to be ignored. We are trying to keep informational emails as short and to the point as is possible.

This is to increase the better chance of the recipient reading everything. Using bullet points, coloured and bold text to highlight what an assignee has to do grabs their attention, making them better informed.

In addition, we’re in the process of developing our social media channels and changing our website so that it meets with today’s standards in terms of brevity, focus and ease of navigation.

Expansion to Second Tier Cities

With the exception of Russia and Poland, relocation within the CEE region has until recently been almost exclusively to capital cities. However, housing in those has cities become more expensive, the labour markets more saturated, and salary expectations higher. This has led to multi-national companies finding second tier cities to locate their businesses in.

Expanding into a city that has little or no expatriate housing market, no international schooling, and more or less no local amenities available in English can be a real challenge. Corporate clients often decide on a destination based on financial and labour market motivations. They don’t always consider the practical aspects of how their assignees will live in said location.

As service providers we have had to learn how to become experts on a new city. We learn how the local housing market works and find out what local facilities there are for expatriates and in some cases. Sometimes we actually engage with the local city council to encourage certain resources to be developed. Housing can be the largest challenge and occasionally resorts to our consultants or partner real estate agents knocking on doors of suitable looking properties.

Changes we’re seeing in our clients’ policies and programs

New employees

As mentioned earlier, we are seeing a trend towards clients filling gaps in the labour market by hiring new employees from abroad. One challenge with this area is that we may be hired to complete the immigration paperwork only, with the employee finding their own accommodation.

This is a problem in countries with complex bureaucracy like Ukraine and Hungary. We have to ensure that the lease contract the employee signs is legal in the eyes of the immigration authority. We also must ensure that the landlord is willing to allow their tenant to legally register at the property.

These issues are so essential that we push hard to be allowed to negotiate the lease. Even if we are not hired to manage the home search we ensure that the employee rents a home where they can legally reside.

Less Employee Autonomy

Major changes have been made to the amount of choice an employee has when choosing a home. This includes clients either limiting the employee’s right to choose a home to half a day of accompanied search.

It can also mean limiting the number of properties they can choose between to 4-5. Or it can mean renting properties on rolling leases and then placing new employees in an available property without giving them any choice.

Both of these cases can impact the satisfaction of the assignee, especially if their role in choosing housing has not been explained to them by their own HR department or RMC before arrival. Managing expectations is a watchword in our industry already and in such cases can be quite challenging.

Relocations for personal growth and life experience

We work with an increasing number of private individuals who relocate without a job offer or who wish to work from home, typically online and who will not work for a local entity.

For relocations where there is no clear employment in the destination country, it can be a challenge to find a justifiable case to issue a residence permit. For EU-EU transfers this is not a challenge since a simple registration is all that is required. However, online work is often not compatible with local immigration requirements for cases where evidence for reason of stay must be presented.

The Impact of Online Tools

We’ve seen very little impact from online tools so far. It’s possible that those assignees who relocate themselves using online tools never even come up on our radar. However, language barriers and the complexities of local immigration processes mean that our services are necessary for immigration compliance. Even in the cases where, we lose out on the destination services work.

A secondary impact of such self help tools is a regular push to lower our fees by RMCs. When a corporate client is looking at self help options, their RMC may wish to dissuade said client from moving away from a supported model by reducing cost or streamlining the package their assignees receive.

As a result, we are expected to do less at a lower cost but client and assignee expectations for quality remain high.