BTI Cites U.K. Client Decline In Avg. Ticket, Room Prices

British companies not only are cutting back on travel, they also are paying less for air tickets and hotels on the trips they do take, according to BTI UK, the United Kingdom's largest travel management company. In a remarkably frank revelation of its numbers in a client conference last month, BTI UK said air spending by clients was down 20 percent in August, compared with the same month in 2001. This was in spite of a revival in volumes between January and May, with April actually being higher than April 2001. BTI UK clients currently are paying an average 14 percent less for a U.K. hotel room than two years ago.

BTI UK managing director Mike Platt told clients that spending recovered slightly in September, but was "not a major improvement" over August. Transatlantic travel has been afflicted most severely. It currently is down by one-third. BTI UK investigated its data for July in more detail and concluded that 37 percent of the downturn in client expenditure could be accounted for by not traveling, 17 percent by downgrading class of travel and 46 percent to lower average fares. Platt said all these trends broadly were being repeated in other northern European markets, such as Germany and the Netherlands.

There are three reasons for the decline in average ticket prices: British Airways and other European carriers ending Saturday night stay restrictions on short-haul fares, increased usage of low-cost airlines and increasing uptake of net fares. "More than 30 percent of BA's business now comes from net fares," Platt said. "Twelve months earlier, it was 10 percent." BTI UK clients currently pay an average $2,655 to fly from the United Kingdom to North America, down from $2,975, a fall Platt mainly attributed to the increasing uptake of net deals.

These figures are distorted by not taking into account the rebate received by companies on traditional back-end deals. Nevertheless, they are impressive in the face of continuing hikes in published fares, the most recent being a 3 percent increase from BA in August. In consequence, Platt warned: "Always make sure corporate deals are not related to the published fare, because they will go up." BTI UK accordingly is encouraging clients to move from percentage discounts to fixed fares.

BTI clients at the conference confirmed that their average fares are falling. One travel manager said his trip volumes had risen but spending volume had fallen 40 percent. This extraordinary figure partly may reflect a shift from long-haul to short-haul travel. However, Ian Nurdin, business travel coordinator for Nestlé UK and director of the Institute of Travel Management, has experienced a similar trend for his travelers, who always have flown mainly within Europe. "Our transactions have gone up, but air spend is down through a combination of the new traditional carrier fares and using low-cost airlines," he said. "Conservatively, it has fallen more than 10 percent." BTI UK's average European fare has fallen 6 percent.

An increasing willingness among travelers to seek low-fare options means they are adapting more readily than anticipated to the new mainstream carrier fares. Although the Saturday night rule has gone, the best prices tend to be for off-peak departures booked more than one week in advance. For those who can travel off-peak on one leg of their journey but not the other, such airlines as BA are allowing travelers to use a negotiated corporate fare in one direction and a spot price published fare in the other. "This has been one of the biggest trends in the past six months," said BTI UK director of consulting Spencer Smith.

The popularity of BA's new fares, which have boosted load factors by 15 percent on some flights, inadvertently has caused problems for business travelers at regional airports, who are finding flights to London Heathrow full. "Some Scottish travelers want to fly with BA from London to Tokyo but they cannot get a connection from Glasgow," Platt said. "They can't get onboard at any price." He expects travel levels to fall further if there is military conflict in Iraq, and merely to stabilize if a peaceful solution is found. He also expects there to be major airline mergers in the next 12 months.

On the accommodation side, BTI UK clients also are enjoying lower rates through a combination of hoteliers dropping prices and travelers trading down to lower-grade properties. However, although a snapshot of six major business cities showed that all but Hong Kong are cheaper now than one year ago, all with the exception of the U.S. cities have seen prices start to recover.