Industry Research

Business Travel = Hardwork + Creativity

LCT Staff
Posted on January 7, 2009

At least you can count on corporations and public/nonprofit organizations still using business travel in 2009.

But the difference between this year and last is they will book fewer trips for smaller groups as cost containment becomes the top priority.

This didn’t start with the recession. Travel managers have been changing their thought patterns on tightly managing travel programs. The recession only intensifies this trend.

“The business community has gotten smarter,” says Kevin Maguire, president and CEO of the National Business Travel Association and travel manager for the University of Texas at Austin. “There’s been a cultural shift in business travel, and the light went on because of the downturn.”

Corporate travel programs are becoming more structured, he says. Travel managers want to make sure they’re getting the best value they can from suppliers.

“Companies have put out mandates and are cutting down the cost of travel,” says Scott Solombrino, president of the NBTA Allied Leadership Council, and president/CEO of Boston-based Dav El Chauffeured Transportation Network. “Everything is being cut in all industries. High-end consulting was looking good, and it’s now starting to downturn. There’s less and less demand for what we do.”

Difficult to Forecast

WHILE THE NBTA released its 2009 business travel forecast in November with modest growth expectations for the year, things change rapidly in this economy, Maguire says. “It’s difficult to predict the forecast,” he says. “The bottom line: It’s a crapshoot.”

Despite such uncertainty, the requirements have become clearer. Travel managers are putting more guidance and structure in their corporate travel contracts. “You can call it smart corporate travel,” Maguire says. “They might send two instead of five, and they’re downsizing their hotel stays.”

Alternative to Flights

GROUND TRANSPORTATION COMPANIES can offer business travelers another benefit: a cost-effective, comfortable alternative. As airline prices increase and the airport experience becomes more stressful, business travelers may be looking more at their ground transportation options for short trips.

Bayview Limousine Service in Seattle has benefited from this trend, president Rob Hansen says. Business travelers have been able to save money getting rides to Vancouver, British Columbia, and Portland, Ore., rather than flying, he says. With airlines cutting flights and raising prices, chauffeured trips have become more worthwhile, he says.

“Seattle to Vancouver is a three hour trip,” Hansen says. “It’s quicker and costs just about the same to get a ride.”

Another growth opportunity for Bayview has been providing building-to-building transportation for corporate employees. “Their parking lots become full,” he says. “It’s cheaper to hire a transportation company to move employees on these routes.” These transportation services have been provided through 14-passenger vans, and Bayview also has been looking at buying mini-coaches to serve these clients.

Solombrino agrees that buses can provide chauffeured transportation companies with an effective marketing tool for building corporate business. “You can offer minibuses, shuttle buses, and corporate airport buses. It’s not necessarily the high end — you have to get creative and take a look at it.”

For operators tied tightly to airport runs, market conditions are difficult to forecast. There has been a downturn in airport traffic, and it’s not clear when this will let up. “It’s similar to 9/11 in percentage drops,” says Ray Mundy, executive director of the Airport Ground Transportation Association. While the 9/11 travel downturn rebounded quickly, economic conditions in this recession will last longer, he says.

Downturns at West Coast airports have been fewer than at major airports along the East Coast, he says. “New York airports have been hard hit, along with other East Coast airports,” Mundy says. “Florida airports are expecting a 15% downturn, while West Coast airports are expecting a downturn of 5% or less.”

Midsize airports are sometimes doing better in markets than major airports, he says. “They have a mix of airlines and discount flights,” he says.

As for airport regulations, AGTA is carefully tracking how airports are implementing the RIDE Act. “Airports can’t charge operators parking fees higher than normal fees,” he says. “We’re still monitoring it.”

Another airport trend for chauffeured transportation operators to follow is making wheelchair accessible vehicles available. “This has affected taxis in many airports,” he says. “It could extend to limousine services, too.”

Operators Have Their Own Cutbacks

JUST LIKE CORPORATE travel managers, chauffeured transportation operators are considering cost cuts. Nearly every operator that LCT Magazine has spoken to in recent months talks about how they are solidifying revenue and containing operating costs.

Pulling vehicles out of service and remarketing them sooner than expected is part of the game plan for many companies, along with buying fleet vehicles that have higher customer demand. Analyzing the cost of support services and looking for alternative suppliers are other necessary moves.

“Operators should look at their balance sheets,” Solombrino says. “Cut overhead costs for your fleet and office. If it goes on for a long period of time, what do you do? Realign yourself as quickly as you can. Make sure costs are in line with your revenue.”

Bayview Limousine Service has worked hard at reducing its overhead costs. Some of the management decisions that have worked well include:

  • Rearranging staff schedules to optimize their work time
  • Acquiring a waste oil burner instead of paying for this service from outside vendors
  • Buying long-burning light bulbs
  • Buying previously owned Town Cars with low mileage and good prices

To get ahead during changing times, Bayview is looking at hiring a sales manager to increase its client base. Bayview has benefited from building a strong reputation in the Seattle market, and wants to expand its marketing efforts. Like many operators nationwide, Bayview has learned the valuable lesson of building a strong brand in its market, and relationships with the right people.

While it’s important to offer great service all the time, managing operations to guarantee high-level service is more important now than ever. “To reach corporate decision makers, we’re focusing on our company reputation, convenience for corporate employees, better services, competitive prices, clean cars, and on-time, excellent chauffeurs,” Hansen says. “We can’t fall short on this. The CEO can’t be late.”

Strengthening Relationships

Kevin Maguire, CEO of the National Business Travel Association, offers guidance to chauffeured transportation companies wishing to strengthen existing client relationships and build their customer base:

Show potential clients their return on investment. Demonstrate how clients can receive the benefits of chauffeured service for better dollar value on short trips instead of other ground transportation such as taxis and rental cars. Providing detailed comparisons will help prospects see the value.

Security is a major concern. Chauffeured transportation companies can offer clients the safest experiences in ground transportation. Explain to prospects how their entire transaction will be conducted under effective security procedures. Maintain a good image. Corporate clients can benefit from the prestigious, professional travel experience operators offer.

Quantify green vehicle options. When offering hybrids and alternative-fuel vehicles, don’t get too complicated. “You may improve the client’s carbon footprint, but will this make sense?” he asks. “Everybody wants to help the environment, but common sense must go with it.”

LCT Staff LCT Staff
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