As the global economy continues to slow and with the New Year right around the corner, corporate travel professionals are gearing up for an unpredictable year in business travel costs and volume. To help in the finalization of budgets and to provide an outlook for 2009, NBTA recently hosted an online seminar offering industry insights and expectations for how the economy may fare in the coming year and beyond.
While panelists admitted that times were tough and actions must be taken to weather the economic storm, all were relatively positive about the future for world economies and global business travel.
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Ken McGill |
“We are no doubt in or heading into an economic recession,” said webinar panelist Ken McGill, ECP & Executive Director of Travel and Tourism Services at Global Insight. However, McGill believes the downturn will be short-lived and economies will not suffer for long. ”Recovery is inevitable,” he said. “We can look to be strong again in 2010 and especially 2011.”
Webster O’Brien, Vice President, SH&E, was on hand to provide an overview of the current air transportation market. He said that fuel volatility, economic slowdown and the credit crises in 2008 have left carriers around the world in an extremely unhealthy environment.
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Webster O'Brien |
According to the International Air Transport Association, from June 2007 through September 2008, airline profits have reversed by $15 billion – from a $10 billion profit then to a $5 billion loss today. “A combination of fuel costs and a drop in demand has led to this much of a reversal,” said O’Brien.
An unhealthy airline industry does not only affect carrier profits and ticket costs, but also the business travel community, said O’Brien. “A healthy airline industry can give us a predictable, reliable business travel environment, reasonable grounds for negotiating group agreements, and helps us to make sure we know what we’re getting into.”
Due to receding fuel costs, O’Brien predicts that international fares and surcharges will fall in 2009. He also believes that airlines may begin to eliminate ancillary fees. “Weakening demand should make those unpopular fees difficult for airlines to hold on to.”
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Jan Freitag |
While the hotel industry has begun to feel the pinch from a slowing economy, this segment of business travel is still thriving. “Hotel is a profitable industry – it has been and probably will be,” said panelist Jan Freitag, Vice President of Global Development with Smith Travel Research. Profits will not be has high as in the past few years, but there will be profits, he said.
A clear shift from luxury hotel usage to upscale chains was recorded this year. Luxury hotel demand fell by .1 percent, while upscale hotel demand increased by 3 percent. According to Freitag, corporate travel managers have contributed to this shift, having tightened travel policies and urged travelers to stay in less expensive hotels.
Occupancy is predicted to continue going down, said Freitag. “This is good news for the travel manager, who is now in the bargaining seat,” he said. “While the last couple of years were definitely a seller’s market, now we’re back in a buyer’s market.”
Overall, NBTA sees continued growth in business travel, but at a slower rate than in recent years. “What we’ve seen and will continue to see in 2009 is the flattening of the growth curve in terms of the number of business trips,” said Caleb Tiller, NBTA Senior Director of Marketing and Communications.
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Caleb Tiller |
In response to this slowed growth, NBTA has looked at how companies are handing any financial strain in relation to their travel programs. According to Tiller, while the consumer media has reported that companies have been cutting their travel budgets and sending less people on the road, NBTA has learned that it is not the case across the board. “Some companies are retaining or even increasing budgets in 2009,” said Tiller. “They will actually be spending more on travel.”
Whether travel is being cut or not, most companies are implementing or increasing cost containment measures, said Tiller. Corporate travel managers are ramping up existing travel policies, mandating policies, and using mandates that are in place but have not been previously enforced.
“Effective travel management provides ways for companies to drive savings,” said Tiller. “Now is the time for travel managers to step forward and show their companies what they can do and really drive that value,” said Tiller.
Return to Connecting News December 2008