Business Travel to Continue Growing
By Caleb Tiller
At the NBTA Business Travel Financial Forum, held in New York City March 10-11, analysts and industry professionals predicted that the economic downturn in the United States will not last long and is not of great concern.
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Maguire |
NBTA President & CEO, Kevin Maguire, CCTE, opened the Forum by explaining his outlook on the economic future of business travel: “I see the glass as half full, not half empty.” He said that travel managers are doing their jobs by continuing to contain their companies’ travel costs, but that he “has not seen companies taking drastic measures to cut travel.” He indicated an expectation based on NBTA research that “the growth of business travel will be slower, but we’ll continue to see growth.”
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McGill |
Maguire’s comments were mirrored by Ken McGill, Executive Vice President & Managing Director, Travel & Tourism, for economic analysis firm Global Insight, who went a step further to say that while the United States is currently in a “mild” recession, growth of travel prices will continue to outpace general inflation.
McGill indicated that the globalization of business will play a significant role in keeping the recession short. He said, “The global economy is both robust and broadly distributed,” and the interplay between growing and slowing economies around the world will help the U.S. economy recover quickly. He also predicted that both increases in fuel prices and decreases in the value of the dollar would moderate in the medium term, contributing to recovery. “The global economy is a good-news story: slowing growth, then getting back on track.”
The airline industry, however, will likely face a longer down period than the broader economy, according to Randy Babbitt, Director of Oliver Wyman, a management consulting firm with aviation expertise. He said that the airline business is “hyper-cyclic” – it is the first to drop into negative growth and the last to emerge from it.
Despite significant success reducing labor costs and increasing fuel efficiencies, airlines face challenges posed by rising fuel costs and stagnant airfares. Babbit said that airline fuel spend increased from $8.8 billion in 1992 to $32 billion in 2006.
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Boroch |
Frank Boroch, Associate Director, Bear, Stearns & Co. Inc., reported that airline fuel costs represented 12 percent of airline revenues in 2000. By 2007, that fuel costs had grown to 26 percent of revenues, and this year it will be closer to 30 percent.
Boroch predicated that this year travel buyers will likely face airline mergers, capacity reductions and fare hikes. “Buckle up,” he said. “2008 is going to be an interesting year,”
Technology Futures
Panelists in a session covering travel technology innovations agreed that there is much progress to be made in automating travel-related processes, but their companies differ on what innovations will be most important for the industry.
Chris Kroeger, Senior Vice President, Sabre Travel Network, said Sabre will focus on improving the look, feel and usability of its tools, as well as blending the business and leisure travel aspects of its portfolio, looking to boost adoption rates for client companies.
Tom DePasquale, Executive Vice President of Concur, said his company will concentrate on enhancing the “depth, rather than the breadth” of its offerings. He said that each travel provider Concur works with offers unique products, and by working closely with them Concur can ensure its end users can take full advantage of those offerings. DePasquale also indicated that Concur could provide its clients more value with this model than it could by trying to provide access to all travel providers.
Patrick Grady, Founder, Chairman and CEO of Rearden Commerce, on the other hand, said he will focus on “consumerizing the process” – building one tool that provides access to every tool and service a traveler may use while on the road. By building it all into the process, said Grady, Rearden can give travel managers the ability to control spend they may not be currently addressing while helping travelers save time.
Additional Events
The day prior to the Financial Forum, NBTA held a buyers-only Travel Manager Exchange Forum (TMEF) for more than 40 travel managers to share best practices and their ideas on the latest industry developments.
According to a March 13 blog entry by NBTA Vice President Michael Lyons, much of the conversation at the TMEF circled around the state of the corporate travel management industry and its future. Lyons, who moderated the Forum, commented in the blog entry, “We did walk away with a sense that as we, as travel managers, continue to demonstrate to our corporations the value of managed travel, we will have our jobs.”
The NBTA Foundation’s annual Gala Dinner was held in conjunction with the Financial Forum, bringing together nearly 400 industry leaders to raise money for the Foundation’s unique industry education, scholarship and research initiatives. During the gala, the Foundation launched a new fundraising imitative with nearly US$2.5 million already pledged by the founding partners in the effort.
For more information on the 2008 NBTA Business Travel Financial Forum, visit www.nbta.org/financialforum.
Return to Connecting News March 2008