Industry Research

Business Travel Curbs May Be Permanent

Posted on August 5, 2009 by LCT Staff - Also by this author - About the author

7 POINTS OF NEW REALITIES: That’s bad news for the segments of the travel industry that have thrived on the free spending ways of business travelers.

1) Reductions in both the number of business trips and the amounts spent on those trips during the recession are likely to be permanent.

No one’s talking about going back to the way things were, even after the economy recovers. For example, trips for intracompany meetings have been greatly reduced, replaced with video- and teleconferencing. This change is likely to extend beyond the current downturn. “Businesspeople will still travel, but will travel smarter,” says DeAnne Dale of Travelocity Business.

2) Traveling by air in first class will be restricted, except on flights over eight hours.

They’ll probably be limited to at least one way so employees can be fresh and relaxed when they arrive for a big meeting, with staffers forced to come home by coach. Employees will be pushed to do advance planning to get cheaper fares and to buy nonrefundable tickets. “Businesses have found that even if they have to pay a change fee, buying norefundables is worth it,” says Dale.

3) Companies are limiting allowances for dining, imposing per diem policies so workers will hold down meal expenses, the No. 3 travel expenditure.

Reimbursement for alcoholic drinks will be limited — to one drink at dinner, for example.

4) Employers are allowing workers to book their own hotel room if they can do it for less than at a preferred property.

“This is happening at more and more companies. Many employees like the idea of finding a new place to stay and saving money,” says Bjorn Hanson, at the Tisch Center for Hospitality, Tourism and Sports Management at New York University. In fact, many wage earners and customers are surprisingly agreeable to these changes in travel rules, adds Hanson. “They all seem to recognize the importance of saving on costs.”

5) These cutbacks are wreaking havoc in the travel industry.

Hotel occupancy for business travel is off 8.5% from a year ago. Spending is down a whopping 24% as road warriors trade down to cheaper properties and spend less on other services such as cocktail receptions and audiovisual equipment rentals. Hotels in cities that rely more on business travel such as New York and San Francisco have been hit particularly hard.

6) Hotels will cut costs, affecting guest services.

Some properties are eliminating free newspapers or nixing the bottles of shampoo and conditioner in rooms. Others are cutting the hours of their business centers, restaurants and fitness facilities. Some hotels are closing entire floors. Upkeep is slipping. It might not be noticeable at first because hotels did major renovations before the recession, but a year from now, chipping paint and worn carpeting will not be unusual.

7) The airline industry is in a similar bind.

Business travelers make up about 30% of airline traffic and yet still account for about 60% of revenue. If business travel falls off long term, airlines will have to reconfigure their planes to accommodate more economy seats and fewer business and first-class seats — a time-consuming and costly proposition, says Kevin Mitchell, chairman of the Business Travel Coalition, which represents mostly large companies. At the very least, look for higher ancillary fees and fewer flights as the carriers trim capacity.

Source: Kiplinger Business Resource Center

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