WHILE continuing economic uncertainty around the world has rattled business confidence, it has not stopped companies — from the smallest widget-maker to the largest financial institution — from sending their battle-tested travelers back on the road this year.
Still, business travelers face a changed world. Corporate travelers are locked between a vexing economic recovery and rising travel costs. They face higher fares, steeper fees and new challenges to navigate, even as their corporations insist that employees stretch travel dollars more than ever.
Air travel drops corporate travelers into a land of a thousand perils. Airline mergers in recent years have reduced competition. Many flights have been canceled, forcing more passengers to connect at big and increasingly crowded hubs. With higher demand and higher costs, airlines have increased ticket prices, both in coach and in business class.
Hotels, too, have raised rates, and are increasingly following the airline business in charging extra fees for a variety of services, including in-room Wi-Fi and access to business centers.
Business travel is still growing this year, but corporations are being more cautious with their travel spending and enforcing greater adherence to travel policies.
“More businesspeople are traveling, but companies are being tighter with their budgets,” said Henry H. Harteveldt, a travel industry analyst and a founder of the Atmosphere Research Group. “Travelers increasingly have to justify their trips, and trips have to be approved by more managers. They have to perform the equivalent of a return-on-investment analysis before they book.”
Yet frustrated as corporate travelers may be, they have never been better armed for the hazards of life on the road.
Mobile technology provides them with up-to-date information and immediate access to a broad range of resources unimaginable just a few years ago. They can make or change plane, hotel or dinner reservations on the fly and perform a thousand other tasks, from boarding check-in to room checkout, all from digital devices.
This access to mobile technology promises in coming years to further change the travel experience and how businesses manage it, corporate travel experts said.
“You can’t say enough about mobile technology and how an expanding and incredible amount of information is provided and available to travelers through their mobile devices and apps,” said Jay Campbell, the editorial director of the BTN Group, which publishes Business Travel News, Travel Procurement magazine, and The Beat, a specialized newsletter, all aimed at corporate travel managers.
The last decade has been tough for business travel. Business trips have dropped by 22 percent since 2000, according to a study by the Global Business Travel Association. Yet travel spending has increased by 3.6 percent during that period, largely because travel has gotten more expensive. The association says that business travelers are making fewer trips and opting to stay fewer nights while maximizing their time in one place.
“Travel managers have to do more with less,” the association said in its latest market survey report.
A report by American Express, released last year, found that American businesses probably cut back on corporate travel a lot more than was necessary in the downturn of 2007 through 2009. And these cutbacks, the report said, probably worsened the recession and “likely hampered business recovery in 2010 and beyond.”
Since then, the recovery has been held back by a series of factors, including the Japanese tsunami and nuclear meltdown, the European debt crisis, renewed geopolitical tensions in the Middle East and Persian Gulf and a global rise in energy prices.
IHS Global Insight, an economic consulting firm, recently revised its forecast for global economic growth, saying it now expected the world economy to expand by 2.8 percent this year, up from the 2.7 percent rate it predicted in March. Global growth is expected to strengthen to 3.6 percent next year, the firm said, and reach 4.3 percent in 2014. But the forecast optimistically assumes a rebound in China and other emerging markets, a pickup in growth in the United States and the end to the recession in the euro zone.
After a timid uptick in 2010, business travel rebounded strongly last year. Airlines welcomed the return of business passengers, who account for the bulk of their revenue and helped the industry return to profitability. And they have fought as fiercely as ever for the company traveler’s loyalty by refurbishing their planes with new seats in business class, renovated business lounges and improved service on board.
The International Air Transport Association said premium, or noncoach, travel rose by 6.3 percent in February, for instance, extending a trend that started last year.
“The performance of premium markets is once more being supported by improvements in the business environment, with both trade activity and business confidence increasing in recent months,” the association said. “Better economic results in the U.S., for example, are supporting traffic across the North Atlantic as well as having positive impacts on trade partners, with revived demand for Asian consumer exports.”
Michael W. McCormick, executive director of the Global Business Travel Association, said he expected travel spending by American businesses to grow this year to $260 billion, mostly thanks to domestic growth, while international spending remained relatively flat. That figure compares with $251 billion last year, and $234 billion in 2010. But in a reflection of the mixed outlook for business travel, corporations are expected to take fewer trips in 2012 and 2013, according to the group.
In 2010, American businesspeople took a total of 437 million trips. That figure rose to 445 million trips in 2011. But it is expected to drop to 440.4 million this year and 438.5 million next year as a result of fewer domestic trips. (International trips are still expected to grow, according to the forecast.)
“Full recovery in business travel spending will require a more sustainable economic environment, rather than the two-steps-forward-one-step-back pattern that has prevailed,” the business travel association said in a recent report released with Visa.
Mr. McCormick said growth in business travel was stable, though slow. “Last year we were in recovery mode, but everybody was looking for the next bad thing to happen,” he said. “I don’t see this kind of concern anymore. Now, it’s steady as she goes.”
Travelers are also spending more on each of their trips. The average amount spent in 2000 was $422, and it grew to $564 by 2011. Two-thirds of that increase was because of inflation, and a third was a result of real increases in expenditures. But every dollar invested in business travel has historically brought in $20 in extra profits to American businesses.
“We’re seeing road warriors taking fewer trips but making the most of them, making more stops and spending more on the road,” Mr. McCormick said. “The productivity explosion is a huge factor, and it’s being brought on by better travel management, better technology and making the most of their time on the road.”
At the same time, travelers are facing a world of rising prices. The surge in oil costs this year is once more forcing airlines to raise fares, analysts said. The industry’s recent mergers have also pared competition in some markets and allowed airlines to charge more.
The airline industry’s financial outlook remains fragile. High oil prices are the biggest threat to the sector’s profitability. They are forecast to average $115 a barrel this year, the International Air Transport Association said, and a new spike in prices could easily wipe out the industry’s tenuous gains.
With slow economic growth, and very low profit margins for the airlines, “it will not take much of a shock to push the industry into the red for 2012,” Tony Tyler, the director general and chief executive of the International Air Transport Association, said in a speech last month.
In 2011, average fares on domestic flights rose 10 percent, to $254, according to the American Express Business Travel Monitor. And prices keep on rising. Domestic fares averaged $261 in February, the latest month for which that data is available, compared with $250 in the same month last year, according to American Express. Hotel rooms are also going up: domestic nightly rates rose 3 percent on average, to $155, in February compared with last year.
International fares are soaring, too. Corporate fares for international flights from the United States averaged $2,240 in the first quarter this year, up from a recession low of $1,651 in the first quarter of 2009 and nearly double the rate of $1,190 for the same period in 2007, according to Travel G.P.A., which collects travel reservation data from 45,000 companies worldwide and produces scorecards on how well corporations maximize their travel spending.
“Travel budgets this year will be similar to last year’s as companies focus on growing their businesses and get their travelers on the road,” said Lane Dubin, a vice president and general manager for American Express Business Travel. “But prices are up. And this creates a dilemma. Companies need to be increasingly strategic about how they manage their travel.”
The Travel Price Index, which includes the key travel components of the Consumer Price Index, measures travel inflation. It had strong growth in 2011, gaining 4 percent from the previous year, reflecting the price rises seen throughout the industry last year. The trend should moderate this year, although travel prices are still expected to rise by 2.2 percent.
This price inflation is forcing companies to tighten travel policies, said Rock Blanco, the president of Travel G.P.A.
Mr. Blanco said businesses did not pay much attention to travel policy enforcement from 2008 to 2011 because business travel slowed as the economy slowed. But with the return of business travel, companies know they must loosen the purse strings again, even as they are more focused on saving.
As a result, they are making sure employees adhere to company policies in booking air travel, which can mean buying tickets at least 14 days in advance, accepting the lowest fare even if it means a longer trip or a connecting flight and booking a lower grade of hotel or car rental.
Savings can be substantial, Mr. Blanco said. For instance, travel managers are increasingly asking employees to move down one hotel category, from the so-called Upper Upscale Hotel Tier, which includes brands like DoubleTree, Embassy Suites, Hilton and Hyatt Regency, to the Upscale Hotel Tier, which includes the brands Courtyard, Homewood Suites, Radisson and Residence Inn.
A midsize company with an annual travel budget of $5 million, including $1.1 million on hotels, could save $150,000 a year if just 5 percent of its hotel bookings were downgraded by one notch, Mr. Blanco said.
“If companies can get their employees to be more compliant, they can really maximize their savings,” he said. “For a while, policy enforcement had lost its way. But it is back in vogue now.”
Hotel chains have recognized the opportunity, said Mr. Harteveldt, the travel analyst. Holiday Inn, for instance, has completed a top-to-bottom refurbishment of its properties, with business travelers in mind. Likewise, Courtyard by Marriott and Hilton Garden Inn have undertaken redesigns recently, Mr. Harteveldt said.
“All this means that travelers can pretty much get a four-star experience in a three-star hotel,” he said. “Of course it all depends on the kind of travel, and some of these hotels are probably better for a one-night stay than a three-night stay.”
A recent report by Business Travel News found that 70 percent of 168 travel buyers surveyed from December 2011 to February 2012 said they had reviewed or tightened their expense policies. Three in five of businesses surveyed said they had introduced an online expense reimbursement system, according to Business Travel News, and more than half of the respondents had increased expense report auditing.
Corporations insist that each travel dollar has to go further these days, said Ron DiLeo, the executive director of the Association of Corporate Travel Executives.
“That’s always been the biggest topic of conversation: each dollar, each euro, each yen gets scrutinized,” he said. “If you are a wasteful business traveler, you will not be working at your company for a very long time.”
But while emphasizing greater frugality, companies must adapt to new mobile technology and applications for travelers that are making their policies seem dated. New applications and Web sites like Kayak, FlightTrack, GateGuru, OpenTable and TripIt Pro help travelers manage their trips, find deals and look for the best place to dine or the cheapest fare to fly.
Corporations must learn how to embrace such innovations, not fight them, Mr. DiLeo said. Some are, notably Google, which allows employees to bank any savings they find on airfare or hotel rates and use them to upgrade a trip or spend an extra night.
Mr. Campbell, the BTN Group’s editorial director, said there was a generational divide at play.
“The baby boomers who are still managing the travel departments of many companies don’t feel they quite understand how the younger generation want or don’t want to be connected with their company programs,” he said.
Mr. DiLeo said: “You can’t stop travelers using their apps or device of choice. You have to accept they do it and help them manage it.”