Originally published February 26, 2008 at 12:00 AM | Page modified February 26, 2008 at 2:33 PM
Companies start to shrink their business travel
Companies and corporate travel managers shrink business travel budgets and that will hurt airlines and hotels.
Associated Press
NEW YORK — As the economy cools, companies are shrinking their travel budgets — a move likely to put further strain on struggling airlines.
Hotels, car-rental agencies and restaurants, which along with airlines employ roughly 4 percent of U.S. workers, will also feel the pinch.
So far, travel bookings are holding up. But corporate travel managers are taking a more active role in keeping on-the-road spending in check:
— Employees are increasingly being asked to provide an economic rationale for their trips.
— Rules that require employees to book the lowest fare, stay in preapproved hotels or double up in cars and rooms are being enforced more strictly.
— Executives are pushing alternatives to face-to-face meetings, including phone- and Web-conferencing.
"They expect you to be smart," said John Flynn, a sales representative for a San Diego health care software company. But while maintaining a tight budget is a priority, so is knowing when it's important to pay clients a personal visit. "There's no replacement for that," Flynn said.
Chicago-based accounting firm Grant Thornton International, for example, has spent the past two years trying to more aggressively reduce travel costs, especially on the administrative side. That has meant shunning expensive regional flights in favor of driving or taking a train, and relying more heavily on online employee-training sessions and video conferences. Still, travel costs remain Grant Thornton's third-biggest expense after personnel and facilities, said Cheryl Geib, national director of travel and meetings.
Companies are fighting an uphill battle.
Faced with rising fuel costs, airlines increased business- and first-class fares by 12.4 percent during the first half of February compared with last year, according to Sabre Travel Networks. Economy fares climbed 6.2 percent.
Airport rental-car rates have jumped at least 20 percent each week this month compared with a year ago, according to Abrams Consulting Group. And hotel room rates jumped 5.9 percent in 2007, according to Smith Travel Research.
For companies striving to tamp down their travel spending, deciding how far to go and how quickly to act is not easy.
![]()
Executives want to keep sales staffs on the road to drum up new business rather than pull back preemptively and give competitors a potential opening. That's why airline bookings don't typically fall until economic conditions have slowed noticeably.
Any reduced spending by corporate travelers — who typically pay more per ticket than leisure travelers — is bad news for airlines. Leisure travelers tend to be more sensitive to worsening economic conditions than business travelers, but leisure bookings also remain steady, industry officials said.
The last economic downturn, exacerbated by the Sept. 11 attacks, hit airlines hard.
Travel dropped off sharply, and four of the nation's six legacy carriers eventually turned to bankruptcy protection to retool their operations. The last two to emerge, Delta Air Lines Inc. and Northwest Airlines Corp., are now mulling a combination that officials hope will boost their financial health.
The hotel industry never fully recovered from that recession, said Bjorn Hanson, a hotel consultant with PriceWaterhouseCoopers LLC. In part that is because of permanent changes in the way some companies manage their travel budgets.
"In the late '90s, (you'd) stay where you want, spend as much money as you want, didn't matter," technology consultant Perry Sellers said recently while waiting for a colleague's flight to arrive at Newark International airport so they could share a rental car. "But today, uh-uh. Just be very conservative at all times."
Because corporate America has permanently done away with some of the travel excesses of the 1990s, there may be less fat to cut this time around. For instance, growth in hotel room demand this year will be weaker than the average rate of 2.1 percent but will still grow by 1.2 percent, Hanson said.
Restaurant industry profits are falling, but it's hard to determine how much of that is due to business travel versus local families cutting back, said Standard & Poor's chief economist David Wyss. Wyss said the travel and leisure sectors, which employ roughly 1 in 25 Americans, are "by no means trivial" to the broader economy.
In the airline industry, a new recession could lead to further industry restructuring, including new partnerships, consolidation or even a return to bankruptcy for the weakest carriers, said John Heimlich, chief economist for the Air Transport Association.
The trade group expects the industry will post a profit this year — its third since 2000 — in part because of aggressive capacity cuts that have slashed the supply of seats. But optimism is tempered.
"If we have a continued slowdown, combined with fuel prices staying stubbornly high, that's where we get into a problem," Heimlich said.
Copyright © 2008 The Seattle Times Company
How to save money, energy on Thanksgiving road trip
Southwest's "bags fly free" policy is landing new customers
Snow globes? TSA will likely just say 'no'
Finding youthful spirits on elder-filled cruise
Unions urge Obama to fix ailing airlines

Smash Putt! Miniature Golf
Smash Putt! Miniature Golf Apocalypse in Capitol Hill offers an industrial 9-hole course, driving range and bar.
nwjobs

Post a comment

Michelle Goodman blogs about work/life balance.
How to tell your office you're gravely ill
Post a comment
nwautos

Choosing a new sedan? Weigh the impact of your choice on your wallet and on the planet.
Post a comment
- Homeless man, 46, arrested in Greenwood arsons
- KVI talk radio host off the air as of Thursday
- Steve Kelley | ESPN's Bill Simmons gets us: He hates Clay Bennett, too
- Police investigate videotaped arrest
- Seattle U. Men's Hoops | Big recruit goes from Huskies to Redhawks
- Mariners sign Jack Wilson to 2-year contract
- Razor found in muffin an accident, 'mortified' baker says
- Suspect's family shaken by slaying of police officer
- Mountlake Terrace woman reports razor in muffin
- Man says he will protest city's gun ban by carrying gun into community center
- OSU game thread
693 - Seattle man to pack a pistol into community center to protest mayor's ban
358 - GOP clueless as families struggle with health care
198 - NYC trial for 9/11 suspects poses risks
136 - Kent man challenges Seattle Mayor Greg Nickels' gun ban
128 - Band of advocates, activists now McGinn's likely insiders
108 - Wright State game thread
97 - Licata looks at boosting traffic-ticket revenue
90 - Light rail to airport to begin Dec. 19
75 - Huskies no match for Oregon State, fall 48-21
61
- Light rail to airport to begin Dec. 19
- Homeless man, 46, arrested in Greenwood arsons
- Ivar's undersea billboards a hoax devised as marketing ploy
- Light rail to airport to begin Dec. 19
- Steve Kelley | ESPN's Bill Simmons gets us: He hates Clay Bennett, too
- An 802.11n upgrade could make a big difference
- KVI talk radio host off the air as of Thursday
- Washington in race for federal education funds
- Police investigate videotaped arrest
- Charles Krauthammer / Syndicated columnist | A politically correct — and dangerous — delicacy about the Fort Hood shooting





