Grappling with the dual clouds of war and a sluggish
economy, the business travel industry is nowhere near a return
to what was once considered "normal."
And many businesses are coming to grips with the idea that
"normal," as they remember it, won't ever return.
"The profile of the business traveler has forever changed,"
said Kevin Iwamoto, president of the National Business Travel
Association. "With travel budgets slashed, companies can't
afford to pay those full-fare, fully refundable tickets. ...
They're not going to go back to buying last minute full-priced
tickets."
In the last year and a half, many companies have turned to
discounted, nonrefundable airfares. The goal is to save as
much money as possible.
"There's a lot less discretionary business travel being
done, and the business travel that is being purchased is being
done on a tight budget," said Melissa Abernathy, spokeswoman
for American Express Corporate Travel.
Many firms have opted to use low-cost carriers, and some
are using online discounters Price line.com and Hotels.com
when affordable prices can't be found using traditional
booking methods.
More than 70 percent of corporate travel managers report
their budgets this year are flat or have been reduced,
according to National Business Travel Association surveys. New
security restrictions also have changed the airport
experience, causing many travelers to reduce trips to minimize
the "hassle factor."
As a result, industry suppliers – airlines and hotels – are
trying to change their business models to fit travelers' new
needs.
The airlines, in particular, have no choice. Two of the
nation's biggest carriers – US Airways Inc. and United
Airlines Inc. – are in bankruptcy protection, and there's
growing speculation that Fort Worth-based AMR Corp., parent
company of American Airlines Inc., may join them.
All the major carriers are struggling to cut costs by
renegotiating labor deals and working with suppliers. Most
analysts don't see any revenue improvement until 2005.
Since 2001, major domestic airlines have lost a cumulative
$23 billion, more than wiping out all the profits they had
made in the previous four years.
Air travel demand remains slow, especially from business
travelers who are critical to airline profits. The lingering
threat of war has dampened international demand even further,
with carriers such as Continental Airlines expecting a 15
percentage-point drop in the number of passengers on its
trans-Atlantic flights. The uncertain economic recovery
suggests domestic ticket revenues also aren't about to rebound
anytime soon.
Bracing for decline
Hotels have shifted to making more frequent, short-term
revenue forecasts, adjusting to an increase in last-minute
meetings. Demand for bed space, which forecasters had expected
would return by now, isn't expected to recover until the end
of this year or early 2004.
Hotel operators are bracing for another decline in demand
if the United States enters a war with Iraq. During the
Persian Gulf War in 1991, business travel fell as much as 20
percent.
Hoteliers also say they're hurt every time the Department
of Homeland Security increases security alerts. On average,
U.S. hotel occupancy declines 3.5 percent the week after the
color-coded security status is raised, according to
PricewaterhouseCoopers.
The result is that the hotel industry is growing at a
slower pace than the U.S. economy as a whole.
PricewaterhouseCoopers has forecast that although the U.S.
economy is expected to grow at rates between 2.6 percent
during the first part of this year and 3.7 percent by the end
of 2003, demand for hotel rooms will grow by only 2.5 percent.
Turning to technology
The changing travel landscape is changing the ways
corporate travelers book airlines, hotels and rental cars.
More of them are now using new technologies to reduce costs
and keep better track of employees, Ms. Abernathy said.
Online booking systems have boomed. In 2001, 2 percent of
bookings were made online. By January, the number had grown to
16 percent, Ms. Abernathy said.
Online systems can save a company 15 percent to 20 percent,
on average, for plane tickets, she said. "When they can see
the difference in price in black and white, they're more apt
to go for the lower price," Ms. Abernathy said.
All the changes have forced travelers to adjust their
routines for every step of their trips, starting with the
planning.
Verizon Communications Inc. vice president Eric Bruno, for
one, said he no longer wears dress shoes when he flies on
business, opting for slip-on loafers that ease his passage
through airport security gates.
Mr. Bruno, who's based in Irving, automatically takes his
shoes off without being asked and sends them through the X-ray
machines with his coat and carry-on items. In his pockets are
only his itinerary and driver's license. His wallet is stowed
in his briefcase before he leaves home.
"It's quicker and easier that way," Mr. Bruno said.
"There's nothing more annoying that having someone in front of
you emptying all their pennies and gum wrappers into those
bins at security."
Difficult lessons
Mr. Bruno, who flew more than 100,000 miles last year,
said he's learned some lessons the hard way. One of them:
Always pack a set of casual clothes.
That lesson came right after Sept. 11, 2001, when Mr. Bruno
was forced to take a chartered bus trip back to the Dallas
area from New York after the terrorist attacks shut down air
travel.
"When you're stuck somewhere unexpectedly, you realize that
two-piece suits are no way to live," he said.
And he no longer schedules the last flight out at any of
his destinations.
"Before, there were so many flights, you didn't have to
worry about yours getting canceled," Mr. Bruno said. "Now, you
never want to be on the last flight of the day with no
alternatives."
Mr. Iwamoto of the business travel association said "the
freedom of selection has been curbed for a lot of business
travelers."
"They're telling travelers to book in advance, take
connections and fly economy now," he said.
Cynthia Driskill, owner of human resources software
consulting firm CDG in Carrollton, has
watched travel costs chip away at her profit margin.
With about 60 employees on the road every week, Ms.
Driskill holds regular strategy meetings on how to save on
travel.
Many of CDG's clients will no longer pay for consultants to
travel. As a result, Ms. Driskill now asks her employees to
take connecting flights – something she never pushed before
because her consultants already spent so much time away from
home.
CDG is also aggressively pursuing clients in local markets
where travel is at a minimum.
"I've been doing this work for 20 years, and there were
cyclical changes in airfares, but you could anticipate them,"
Ms. Driskill said. "Today, it's just all over the map."
Staff writer Eric Torbenson contributed to this
report.
E-mail smarta@dallasnews.com
