Industry Market Trends

Business Travel Hits Turbulence

Feb 03, 2009

The economic climate has had a dramatic impact on work-related travel. Understanding the new environment can help you plan your next cross-country business trip.

Although travel price rates are on the decline, so are corporate travel and expense budgets. Executives and booking agents alike are feeling the recessionary pinch, and while tickets may be cheaper, overall expenses, including ancillary fees, are expected to continue rising. Business travelers are facing a new set of challenges, but certain strategies, such as taking advantage of hotel room discounts or finding inexpensive flight routes, can help alleviate a road warrior's concerns.

Flying Stays Grounded

In times of financial difficulty and departmental cutbacks, travel funding is often one of the first things cut and one of the last things restored to the budget.

According to a Morgan Stanley survey featured at The Beat travel blog, 53 percent of corporate travel managers in November already had their 2009 budgets reduced from the previous year, with 47 percent reporting a budget decline of 7 percent or more.

In a study cited by Management.travel, approximately 42¢ of every business travel dollar go toward flights, 24¢ to accommodations and 9¢ to car rentals. Of nearly 500 travel decision-makers surveyed, 64 percent were concerned with controlling rising costs, balancing travel requirements against budget restrictions or reducing travel costs across the board.

Budget declines have caused both travelers and booking agents to scale back their earlier practices, resulting in a widespread drop in demand. The International Air Transport Association (IATA) cites "the broadening impact of the economic slowdown" as a leading cause in a 4.6 percent drop in passenger traffic in November 2008, with business-class and premium seats in particular suffering an 11.5 percent decrease.

"Now that the recession is causing widespread job losses and falling consumer confidence, there has been a sharp contraction in those traveling on economy tickets as well," the IATA told the New York Times.

The Advantages of Empty Rooms

With the drop in travel demand, worldwide hotel occupancy and room rates have also fallen, and 2009 is shaping up to be the toughest year for business and leisure travel since 2002.

According to a report by STR Global, at the end of 2008, hotel occupancy rates in the U.S. decreased by 10.6 percent from the previous year. In Europe, the decline totaled 9.1 percent. Average daily rates fell by 3.3 percent, with revenue per room down by 13.3 percent.

These declines may benefit the committed business traveler, as hotels are now more likely to offer discounts and deals. "Occupancies are under pressure and prices are generally coming down," the chief executive of discount travel site Priceline.com tells the Associated Press.

A recent report in Condé Nast Portfolio predicts "[a] frenzied round of price cuts, promotions and value-added offers" from major hotel and travel accommodation companies. In addition to lowered rates, these deals can include packaged discounts and free amenities, such as complimentary WiFi, meals or local transportation.

Some corporate travel managers are taking advantage of the packaged deals by developing comprehensive purchasing strategies similar to centralized procurement. "They want to ensure that all functions of travel (i.e., air, transient hotels) and meetings are consolidated for better negotiating power with suppliers," one travel director explains at Procurement.travel.

Tips for Cheaper Traveling

Considering the growing rift between supply and demand, how can a savvy business traveler gain perks without being sidelined by a shrunken travel and expense budget? Despite its grim outlook, the current economic climate can actually allow travelers to cut down on costs while maintaining a basic level of comfort.

Some companies are having their employees double up on rooms, rely on low-priced dining options and fly economy class even on longer international flights. In fact, there are a number of strategies for stretching a slim travel budget.

Condé Nast Portfolio offers the following recommendations for trimming expenses without resorting to desperate measures:

  • Stick to the plan. Many business travelers expect flexibility in terms of refundable bookings and changeable schedules, but these may be impractical for the frugal flyer. Purchasing flights and accommodations well in advance and avoiding "change fees" can help keep costs reasonable.
  • Control the ground game. While plane tickets and hotels tend to be the most expensive parts of a trip, local transportation expenses can also add up quickly. Try renting a car instead of relying on cabs and car services.
  • Hone in on hotel costs. In many luxury hotels, amenities such as spas, room service and valets are built into the nightly rate whether you use them or not. Look into one of the less-expensive chains affiliated with a full-service hotel, especially if you're looking for comfort and utility rather than luxury.
  • Chow down. Dining and entertaining at a high-end restaurant can be disastrous for a trip's budget. A little research in local newspapers or dining guides can often yield a less glamorous but perfectly enjoyable alternative. Likewise, ordering deliveries from local restaurants can be more cost-efficient than a buying a pricier room service meal.
  • Sweat the small stuff: In general, business travel is saddled with minor fees at each stage of the trip, including baggage fees, mini-bar bills and car rental surcharges. Avoid these costs by taking small measures, such as packing only carry-on luggage, purchasing snacks from a store or refilling the gas tank before returning your car to the rental agency.

Earlier/Related: Road Warrior Friday: A Business Travel Guide

Resources

2009 Corporate Travel Budgets Versus 2008

TheBeat.travel, Jan. 9, 2009

Industry Times

International Air Transport Association, Jan. 2009

Premium Air Travel Fell Sharply in November

by Caroline Brothers

The New York Times, Jan. 19, 2009

Managing Costs Top Concern, Says "State of the Practice" Study

by Mary Ann McNulty

Management.travel, Jan. 21, 2009

STR Global, STR Release Nov. 2008 Results

HNN Newswire, Jan. 14, 2009

Meltdown 101: Travel Industry vs. the "Staycation"

by Ryan Nakashima

The Associated Press, Jan. 22, 2009

Bargain Bin

by Joe Brancatelli

Condé Nast Portfolio, Jan. 13, 2009

The Sum Could Be Less Than the Parts: Leveraging Transient Travel and Meetings Can Lower Total Costs

by David Jonas

Procurement.travel, Dec. 2008

How to Cut Travel Costs

by Joe Brancatelli

Condé Nast Portfolio, Dec. 2, 2008