UP AND. . . UP OR DOWN AGAIN? As the economy sends mixed messages, a leading CEO in the chauffeured transportation and business travel sectors looks at the signals and scenarios that lie ahead.
BOSTON — The unsteady recovery has put the business travel industry into a holding pattern as corporate travel clients weigh the uncertain course of the economic recovery, Scott Solombrino, CEO of DAV EL CHAUFFEURED TRANSPORTATION NETWORK, told LCT today.
Solombrino, also the president of the Allied Leadership Council of the NATIONAL BUSINESS TRAVEL ASSOCIATION, said the year started with a small surge in business travel spending that now has leveled off as the recovery has slowed.
“All of us in business travel in the second quarter were hopeful that we were seeing the beginning of a big turn up for the positive in business,” said Solombrino, also a board members of the National Limousine Association and past multi-term NLA president. “July and August have been a stall. We’re back in same place we were in the first quarter. I’m not sure business travel has completely turned around yet.”
Solombrino spoke following a successful NBTA Convention & Expo in Houston last week where attendance and activity rebounded from a dip during the recession year of 2009.
The final determiners of a continued uptick in business travel will be the leading economic indicators for the coming months, such as GDP, housing starts, airline capacity, and average hotel room rates, Solombrino said. “If the numbers improve, then people will feel better about adding staff. We would see the beginnings of a recovery getting back to 2Q numbers again. If news headlines show those numbers starting to come in and they don’t look better, the year will end flat and we won’t get the recovery we’re hoping for.”
One crucial indicator is the unemployment rate, which, if it falls below 9% in September, will be a sign of better times to come, Solombrino said. The industry is hoping for a boost after Labor Day in global business travel, he said, after the summer vacation season ends and people get back to work and school.
“I’m not seeing the improvement yet I hope to be seeing,” Solombrino said. “Things do not look busy enough to meet the demand we’re looking to meet.”
Since the recession began in December 2007 and ended in July 2009, many companies have scaled back and streamlined their business travel spending. Likewise, chauffeured operators have had to transition to lower demand. “Everybody has cut out things they don’t need and readjusted to better efficiencies,” Solombrino said.
In assessing the business travel comeback compared to the peak year of 2007, Solombrino said there has been a double digit increase for sure, but after a decline of 30% to 40% over two years, any increase so far is “still well below where you want to be.”
Many companies still consider business travel expendable, despite its proven necessity for drumming up business, he said. Tele- and videoconferencing are available low-budget alternatives. “The easiest budget item that any CEO looks at is to cut travel. That’s what people did. We all paid a price for that.”
The subject of a double-dip recession troubles Solombrino, but with the media dangling the prospect of one based on reported economic indicators, it can’t be avoided. “A double dip would be devastating to the chauffeured car sector,” he said. “You would see widespread company failures, and no one is prepared for what that would look like if that happened.”
One possible boost to economic and business travel industry fortunes would be a sweeping Republican victory in the Nov. 2 midterm Congressional elections, which could yield a divided government in Washington, D.C., Solombrino said.
“If there is a political upset and they start talking about deficit reduction and controlling costs and spending, you would get a positive response,” he said. “If the Republicans win the Senate and the House, even if there is gridlock, I think the economy will start to respond that.”
Solombrino called the current economic strategy of the Obama administration and Congressional Democrats “unsustainable.”
“Business is very concerned going forward with them in control and what they have done. Many people believe government has contributed to the length of the recession. The policies have not been pro-business and are affecting peoples’ ability to grow the economy again.
“If the government gets spending under control, we will see things go back in the right direction,” he said. “If the Republicans don’t win, you would see a very fast double dip.”
— Martin Romjue, LCT Magazine