A recent survey found 70% of corporate travel managers expect to spend more on travel in 2011.
Mitchell Goozé usually spends much of the year traveling, giving advice to companies on how to grow. But the phone wasn’t ringing much during the depths of the recession. Now, many of his clients are feeling more confident, and Goozé is back on the road. “I went through a period where I wouldn’t travel for two or three weeks, and now, I’m starting to be gone almost every week again,” says Goozé, whose company is based in Sunnyvale, Calif. “The trend is definitely moving.”
Businesses will send more people out on the road next year, making up for lost time during the recession, when travel budgets were slashed and corporate trekkers mostly stayed put, corporate travel managers say.
But the frugality that took hold in the economic downturn will continue, they say. Companies will opt for coach over more expensive first-class airline tickets.
The tickets will more often be bought in advance rather than at the last minute, which costs more. And videoconferencing will be used if a face-to-face meeting on the road isn’t critical.
“At the end of the day, people have to go see their customers, and they have to see their suppliers, and you can’t do everything over the phone,” says Ron DiLeo, executive director of the Association of Corporate Travel Executives (ACTE), an international group of corporate travel managers and executives at the airlines, hotels and others in the industry that supply them. “They’re not going to think twice (about traveling) if they think it’ll help close the deal.”
For every dollar spent on business travel, the average business sees $15 in increased profits, according to calculations by the National Business Travel Association (NBTA), a business travel and corporate meetings association, and American Express Business Travel, which offers its clients travel management services and technology.
Seeing an upswing
A September survey of ACTE members found 70% of U.S. respondents expect to spend more on travel in 2011, while 60% anticipated their staffers would be on the road more in 2011 than either this year or last.
While travel budgets were among the first to be cut as companies tightened purse strings to ride out the recession, an NBTA Foundation survey of 170 business travel buyers in North America estimated that they spent 5.5% more on travel on average this year than last, and the amount will grow another 4.45% in 2011.
The upswing in corporate travel began in recent months, as companies began to show at least modest profits, clients began buying again, and competition for new customers started to heat up, business owners and travel watchers say.
“In recent months, soaring corporate profits and strong cash reserves have meant that companies have begun to relax their travel restrictions and allow their existing employees to get out on the road more,” says Suzanne Cook, senior adviser with the U.S. Travel Association. “It shows that companies are realizing the value of face-to-face travel to not only preserve current relationships but to build future business.”
Norm Cardinal, president of an agency of manufacturer representatives in Garden City, N.Y., says that he will travel more next year “because competition is tougher.” “(There’s) less business, therefore you have to go after it.”
But with more people hitting the road for business as well as leisure, corporate trips are also getting more expensive as airlines and hotels raise their prices. The average hotel room rate in the top 25 domestic markets rose 3.5% in August, according to Smith Travel Research, which monitors the industry.
Average corporate airfares from North American markets will be lower to some top business destinations such as Hong Kong next year, but could be as much as 6% or 7% higher to places such as Phoenix or Houston, according to an analysis by travel management company Egencia.
The economic downturn has left its mark. The ACTE survey finds that 54.1% of corporate travel executives in the U.S. are “encouraging or mandating” alternatives to travel, such as videoconferencing. And a survey by Egencia finds that 56% of North American travel managers say they increased advanced-ticket bookings in the last year to keep expenses in check.
“In general, travel managers and purchasers have decided this new frugality is working well, and it’s allowing them to do a lot with a limited travel budget, and they’re sticking with it,” says Noah Tratt, vice president, supplier relations for Egencia Americas.
That can mean squeezing two or three clients into a trip. Corporate fliers are more likely to be sitting in coach when criss-crossing the U.S., though they might be able to book business class for flights overseas. And business travelers may be asked to use the frequent-flier points they’ve accrued on business trips if they want to upgrade to a premium section.
“We’re also seeing (airlines) coming back with … a middle-of-the-road premium economy cabin that seems to be going over well,” Craig Banikowski, NBTA president and CEO, says of new sections offered on planes that provide more legroom and other perks. “It’s not totally back of the bus, but it’s not the front of the plane. And the price reflects that, as well.”
Tickets bought weeks in advance are usually cheaper than those purchased at the last minute. But they carry penalties if there’s a change to the itinerary, which makes them problematic for corporate trekkers. Still, more travel managers are looking to advance purchases to control spending. Egencia’s 2011 forecast for the first time included an advisory on the potential savings from booking business trips to certain destinations 21 to 30 days in advance.
“If you’re buying a ticket in North America and traveling to Calgary, we believe there’s a much higher savings to be realized than if you’re buying a ticket (in advance) to Boston,” Tratt says.
In any case, Goozé says clients are calling, and he’s heading out on the road to see them.
“Most companies now believe they can do something to help themselves, so they’re slowly starting to invest in activities to try and grow,” says Goozé, who in the past would travel 45 out of 52 weeks.
He’s not back to that pace yet, but getting close.
“Just this last week, (my wife) made the comment ‘I guess I’m going to have to get used to you traveling again.’ ”
Via USA Today