Companies Slashing Travel Budgets in Response to Economy

LCT Staff
Posted on December 20, 2007

U.S. — As economic conditions in the U.S. continue to sour, with the home mortgage crisis, volatile trading markets, and the weakening U.S. dollar, many travel buyers have revised their 2008 budget. Some buyers have adopted new measures to curtail their 2008 travel expenditures.

One CT100 company plans to reduce its total T&E costs by 15% next year, after several years of continuous growth in expenditure. Another CT100 company has accounted for inflationary increases in the budget for the first time ever.

Ricoh Americas has thrown out its previous travel budget in order to gain a more accurate spending picture, rein in over-projected costs and scuttle unnecessary travel spending, according to Maria McSorley, manager of corporate travel and special events for the West Caldwell, N.J.-based office equipment supplier.

"You start out with the assumption that you have no travel budget, so that everything that you do spend on travel has to be absolutely necessary," said McSorley, who budgets on a March to April fiscal calendar.

International forest products company Weyerhaeuser has set a 5% to 8% increase in all travel categories in expectation of rising costs next year and already has seen a reduction in trips, as management has asked employees to be more "discretionary" when booking travel, according to director of travel, meetings, food service, fleet and transportation Suzanne Fletcher.

The company has added a field to its online booking tool for employees to state the reason for traveling. "It's not just Big Brother, but it also helps understand where our travel dollars are going," Fletcher said.

Super-regional travel management company Travel and Transport's client population on average is planning for moderate increases in total travel trips. The TMC's top 15 corporate accounts plan an average increase of 5.56% in total trips next year, while its remaining accounts — roughly 500 — project a 0.33% increase, according to Travel and Transport president and CEO Bill Tech.

"They are trying to cut back where they can," Tech said. "Because of the increased ticket prices, they are traveling less frequently or they are taking less people with them. Where maybe two or three would go previously, maybe only one will go with them now."

Regional TMC Casto Travel also has heard clients' concerns about economic pressures, but president and COO Marc Casto said that buyers have increased their budgets from 5% to 15%, especially for organizations with heavy international travel.

"There is that general concern our clients are expressing, but we are not seeing that in the numbers they are reporting in their budgets," he said.

With the weakening dollar, Casto said there has been a heavier scrutiny on T&E per diems, especially by companies that send employees to Europe. "In our experience with clients in the San Francisco Bay Area market, travel policies and mandates tend to be on the loose side. We are noticing the increased management of it," Casto said.

While not all travel programs are feeling the squeeze, Priscilla Campbell, practice leader of hotel advisory services for American Express Business Travel, said buyers this year asked for budget consultation and data in late spring and early summer, which is earlier than previous years.

"Corporations are not only feeling the strain of the weakening dollar if they travel internationally, but also the rising costs in the travel industry are really putting the strain on budgets," she said. "Certainly, understanding exactly what was going to happen and what we were forecasting was of great importance at a much earlier stage this year."

BCD Travel's annual client benchmark survey, released in July, noted 11% of 219 buyer respondents called economic conditions a major factor in budgeting. More clients have taken notice of that now, said newly appointed executive vice president of global business solutions, sales and marketing Louise Miller.

"What everyone at companies that finish up budgeting for the year in the third quarter was thinking has changed," said Miller. "By the time you get to November and December, they basically have to use a forecast. They have to have a plan if the economy is commensurate with the official budget and if the economy is slightly better or slightly worse. It can't be holistic. It has to be by region, because averages are misleading."

According to Travel Solutions CEO Tammy Troilo-Krings, the retail and banking sectors, about 30% of the TMC's corporate client base, are "really tightening up the belt." Thus far, many of the Columbus, Ohio-based company's clients have reduced total trips by 10 percent and Troilo-Krings expects that number to more than double by the second quarter of 2008.

"One way they are trying to combat the increases is reducing the number of trips, because they recognize that costs are going to increase and in many cases there is very little they can do about that," Troilo-Krings said. "They are also actively trying to reduce costs by renegotiating pricing with airlines and hotel companies, but they are also looking at other suppliers that they haven't addressed in the past, such as limousine service and meeting and events."

Some companies still are experiencing growth and are projecting higher travel volumes and budgets for next year. Westinghouse Electric has set its budget for prospective business growth in the upcoming year.

"Oftentimes, it's impossible to make sweeping changes as a result of what we see out there, but the nature of the business forces us to do what we have to do," said Westinghouse supplier relations manager Dan Cooper.

Buyer Stacy Collins, travel manager of Dallas-based medical recruitment and staffing firm The Delta Cos., which spent $1.5 million in 2006 U.S. booked air volume, expects both trips and prices to rise 10%.

SOURCE: Business Travel News

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