All signs are pointing to a corporate travel budget hangover that will last well into 2009. Unlike in previous years, many companies won't reverse year-end cutbacks and recharge travel budgets, because they don't expect business to pick up in the first quarter.
The measures companies have taken in recent months to cut travel transactions, including aggressive pushes toward remote conferencing and meetings and travel reductions and freezes, are expected to continue.
"In the United States, there is no question it's going to take a little while. People aren't resetting their budgets in the first quarter to normal levels," said BCD Travel executive vice president of global business solutions, sales and marketing Louise Miller. "The days of having an annual budget and quarterly forecasts were pretty important, but I think we're down to monthly forecasts."
HRG CEO David Radcliffe following the company's half-year results for the period ending Sept. 30 said, "None of us have seen anything like this before. For the first time in 38 years, I am being cautious in how I am reading the following quarter." After a 10.8 percent revenue growth for the period, HRG's October and November client revenues are down 3 percent.
Meanwhile, the Travel Industry Association projects a 2.7 percent business travel demand decline next year following this year's estimated 4 percent decline
(BTNonline, Oct.30)In an Egencia survey of 500 business travelers fielded in October and released last month, 46 percent expect to travel less next year, and 49 percent of 230 business travel buyer respondents in a National Business Travel Association survey published in October said they expect business travel to decrease for the rest of 2008 and into 2009.
FCm Travel Solutions in a 2009 outlook statement released this month said, "Demand for corporate travel in the short term is likely to experience further reductions, particularly in softening markets, such as the United States and United Kingdom. However, as more companies improve their policies, travel activity could stabilize later in 2009."
International transactions in October dropped 13 percent year over year, according to ARC's travel agency sales summary, and domestic transactions decreased 7.9 percent. October was the first month in which international transactions fell by a larger percentage than domestic transactions since both segments began dropping earlier this year.
Travelport CEO Jeff Clarke said year-to-date overall segments are down 16 percent through Nov. 11 from 2007 levels, and Americas segments are down 15 percent. "We're seeing an increasing slowdown. The recent decreases in fuel prices and some of the recent price actions you're seeing by some of the airlines have yet to show a differential in the trends here," he said. "These numbers are as much of a decline as we've measured in many periods, and they're quite serious."
Another global distribution system provider is forecasting a 10 percent year-over-year decrease in transactions in early 2009.
"The first half of the year is going to be challenging," said HRG North America president Tom Gleason. "All companies are being prudent on their budgets."
BCD's Miller said a significant part of travel transaction reductions are coming from replacing internal travel and meetings with videoconferencing, which yields on average a 10 percent to 20 percent trip reduction.
Enterprise management software provider Deltek is implementing such technology in some of its locations, which travel manager Karoline Mayr estimates will reduce non-billable travel expenditure by 20 percent next year.
The company has set a flat travel budget for next year. In November, non-billable travel has undergone a significant drop from a combination of travel freezes and videoconferencing efforts. In addition, Mayr said there is increased compliance as more employees become more conscious of their spending. "At this time, people don't want to land on a compliance report, which helps travel buyers save money and show more compliance," she said.
Dublin, Calif.-based Sybase plans to reduce travel spending by 10 percent to 15 percent in 2009, according to purchasing manager for global card and travel Patricia Carlin. The company, which so far has added videoconferencing facilities in several locations, now requires a trip purpose and pre-trip approval with each booking. While Carlin said some of the savings would come from negotiations, the company plans to add more videoconferencing facilities to cut its transactions to meet the savings goal.
These cutback efforts are coming from a company whose revenues increased by double-digit percentage points over the past several quarters. "It doesn't mean we are not being affected by the economy," Carlin said. "We are making sure we are running as smart as possible in everything that we do, and certainly travel has a lot more visibility than it ever has. This year is when we really started the serious push on that a little earlier in the year, and as the year has gone along it's gotten stronger and stronger. As we've come through the budget cycle, we are absolutely putting a big eye on travel for next year.
"Internal trips are being scrutinized, managed and reduced pretty carefully. As a company, we are on such a great path that we don't want to interfere with our ability to do business, but where we can we'll use videoconferencing to keep people off of airplanes."
While Philips Electronics' sales and profits remain relatively strong, it is undergoing its own travel savings push, which will accelerate next year. Philips director of strategic sourcing for airlines and corporate card Peter Sijbers said the company will have videoconferencing in its top 20 locations by year-end and plans to expand the project in 2009.
Meanwhile, the downward business travel trend may turn before the economy does, said American Express Business Travel global advisory service vice president of North America Frank Schnur.
"Looking at past downturns, travel ramps up in advance of the economy ramping up," he said. "As people see the beginnings of it hitting the bottom and things are starting to come back, they travel in advance of that to take advantage of the recovery and start bringing in new business."