2009: Effects of Global Economic Downturn Settle In

The global economic downturn precipitated by the banking and subprime mortgage fiascos in 2008 hit business travel very hard in 2009. Not only economically, but also from a regulatory standpoint with the Troubled Asset Relief Program bailouts and that program’s requirements for financial disclosure for companies that touched business travel—in particular, meetings and incentives—thanks in large part to the media frenzy around an expensive AIG program at the St. Regis Monarch in California that took place after the insurance company took bailout money from the government. The backlash became widely known inside and outside the industry as the “AIG Effect.” It pushed the Obama administration to task the Treasury with defining what should be “luxury expenditures” for TARP companies, and such moves combined with the flailing economy developed into a low point for meetings hotels and resorts.

Meetings Miasma

Companies—TARP recipients or not—downsized or scrapped meetings, events and incentives to avoid public scrutiny. Often, they were willing to endure massive cancellation penalties rather than suffer public ire.

High-profile cancellations have included Primerica Financial Services' 55,000 delegate event in Atlanta in June, a State Farm Insurance agent convention set to bring 17,000 people to Las Vegas in October and more than 160 AIG conferences and events that reportedly were to cost $8 million, but were axed as part of AIG's agreement with New York's attorney general. Wells Fargo CEO John Stumpf took out full-page ads in major newspapers to report that he reluctantly canceled employee recognition events for the rest of the year. "Who loses beside our team members? The workers who depend on our business," the ad stated. One of its canceled meetings was in Las Vegas, where more than 30,000 hotel room nights booked for meetings and conventions have been canceled at a loss of more than $20 million to its economy this year, according to city officials.

The damage sustained by the meetings and incentives industry drove associations and new coalition Meetings Mean Business to defend the value of their existence by defining the benefits of meetings and incentives not only to the businesses to host them but to the local and overall U.S. economy.  

Scrutiny on meetings expenditures was just one element of the economic downturn and scrutiny on corporate travel activities, but it was high profile. One positive for corporate folks was the emphasis it put on strategic meetings management to track meetings spend integrate meetings management tools back into finance. You’ll see Siemens getting on top of that in 2009. NBTA rolled out an SMM certification program and the drive to manage meetings accelerated tremendously in 2009 into 2010.

Corporate Travel Craters

In survey after industry survey, buyers said their companies were cutting back on travel because revenues were down, full stop. Trip pre-approval was huge, and easy to pass muster with executives.

Cisco System’s Telepresence had a big moment, with Marriott and Starwood installing the platforms in special Telepresence rooms in hotels in gateway cities around the globe. Forty-five percent of travel managers surveyed by Business Travel News said their companies were requiring remote conferencing strategies in lieu of some portion of travel.

The result of the cratering corporate travel on airlines was stark. Of course, the drop in leisure travel also contributed, but U.S. airlines had their worst performance to-date across several metrics (remember, we haven’t met Covid-19 yet). Total passenger revenue fell 18 percent in 2009 versus 2008. That exceeded the 14 percent decline in 2001 after the 9/11 terror attacks iced aviation.

But airlines had a new revenue strategy. Remember a couple of blogs back, the word “unbundled” was first uttered by Spirit Airlines. Well, all the airlines were on board with this idea by 2009—with American Airlines perhaps the most bullish about it and few airlines ever looked back after tasting the approximately $13.5 billion in ancillary revenue they gained (collectively) in 2009. In 2023, that number sat somewhere around $54 billion. These numbers come from different sources and include different U.S. airlines so look at them as estimates… but still. We all know ancillary revenue changed the industry for good, and in 2009 that trend was just getting started.

What also started in 2009 as a result of ancillary revenue streams and the resulting merchandizing strategies were new battlegrounds for distribution contracts. Here’s an excerpt from a Travel Procurement article from 2009, penned by executive editor David Jonas (note: BTN wouldn’t acquire Travel Procurement and The Beat for two more years, so this article is a bit of a cheat to include in BTN’s history if you want to be technical, but we’re not going to get so technical today that we overlook a great explainer opportunity):

Though most current distribution agreements between airlines and global distribution systems won't expire for at least two years, recent developments and industry commentary point to how the next set of deals may be negotiated and structured. American Airlines, for example, expects that the technological capabilities of GDSs—and their willingness to collaborate with third-party technology providers—on optional services, ancillary revenues and other airline merchandizing strategies will play a central role.

Increasingly popular among airlines, those strategies include a la carte pricing, branded "fare families;" unbundling of such services as baggage handling, seat selection, inflight meals and priority check-in; and add-ons from hotels and others.

"The past couple rounds of GDS negotiations have really been around economics," said AA managing director of distribution and merchandizing Suzanne Rubin in an interview last week with The Beat. "This time, it will be much more about the ability to deliver products and services in a way that generates the kind of customer interaction and revenue streams that we are able to get through our other channels. The rules of engagement are changing."

By the end of 2009, payment companies were working on ways to parse out ancillary airline spend on corporate cards and provide detailed reporting. Whether corporate travel buyers would ever be able to negotiate those ancillaries was emerging as a big question—and one that we are still working on today even with New Distribution Capabilities.

ACTE-NBTA Merger Drama

With so many travel suppliers and travel agencies hemorrhaging revenues, the pressure to support two industry associations became a hardship. To ensure the existence of a strong association, the supplier community made it know that it was looking to support a single entity and the two associations—one solidly configured for the U.S. (NBTA) and the other with a more international structure and member base (ACTE)—should talk about a merger before it became untenable for one or the other to survive.

Discussions began in earnest in April, led by president Doug Weeks and treasury secretary Mary Ellen George at ACTE and Kevin Maguire and Scott Solombrino on the NBTA side. A handful of board members contributed to a preliminary integration plan that would retain the ACTE name in some way for two years, establish an International Leadership Council via ACTE’s network and structure and replace the executive director position with a new leader.

The plan did not pass the two-thirds required votes from the ACTE board of directors, scuttling the tie up in June. However, after the resignation of both Weeks and George, ACTE reactivated AirPlus’s Richard Crum as president. Crum re-grouped the merger concept and by early August had presented a new plan to NBTA for consideration. The fact that ACTE presented the proposal to NBTA along with a press release announcing it didn’t sit well with the NBTA team. The latter organization iced any prospect of a deal, claiming ACTE refused to participate in a due diligence process. But even as late as December 2010, when BCD Travel exec Chris Crowley was identified as the incoming ACTE president, talk of a merger was still at hand.

The two organizations never merged. ACTE ceased operations in 2020, at the height of the Covid-19 epidemic. GBTA (the current iteration of NBTA) bought the ACTE brand and some assets in a $35,000 transaction.

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JANUARY

U.S. Department of Treasury infuses American Express with $3.39 billion of new capital as part of the $700 billion financial bailout program. The government on Dec. 23 approved American Express' participation in the Troubled Asset Relief Program Capital Purchase Program.

Without a successful round of fare increases since July 2008, U.S. airlines kept the most deeply discounted leisure tickets out of business travelers’ hands through Saturday-night stay and other restrictions. The average one-way leisure fare the week of Jan. 12, 2009 was $99; the average business fare the same week was $531.

MasterCard acquires Orbiscom for “one-time-use” card capabilties. Today, we would call them virtual cards. Royal Bank of Scottland was the first user of the platform in 2008.

Buyers and consultants report success in staving off increases in domestic hotel rates, as hoteliers faced a “bleak demand outlook of indeterminate length.”

Trend toward heavier TMC data and reporting comes with rising costs; with travel transaction volume down, TMCs look to ancillary revenue stream to stanch losses. TMC execs said there was no “across the board” effort to raise data costs.

U.S. Transportation Security Administration preps passenger pre-screening Secure Flight program for takeoff—eight years after the 9/11 terror attacks, which initiated the study to implement stronger protections. 

February 

The U.S.-EU Open Skies agreement's capacity gains are being undone by a slow demand environment. Transatlantic airlines lower capacity, especially in premium class travel, which suggests weakening pricing power and gives buyers more negotiating leverage. 

Due to economic pressures and shifting buyer goals, many TMCs are revising their technology product development plans, reallocating resources, and some are even holding R&D budgets flat. 

For the first time in the company’s history, Southwest Airlines seeks to cut its annual capacity. The carrier is looking at a full-year reduction of 4 percent in available seat miles for 2009. 

The U.S. hotel industry is reducing capital expenditures to their lowest levels in years, but analysts believe travelers will not experience severe amenity cuts. 

The extended-stay hotel segment, previously dominated by smaller brands, faces new competition. In December 2008, Holiday Inn set up its first Staybridge Suites property, while Hilton announced its plans for Hilton Residential Suites a few weeks later. 

March 

Industry analysts think that the gap between transient and group hotel rates is narrowing, or in select markets fully disappearing. This could lead to significant drops in group rates but could also create issues for buyers trying to fill room blocks for upcoming events. 

Amid economic struggles, travel buyers enforce stricter policies to curb air expenses. Their solutions include moving travelers to coach, increasingly purchasing tickets in advance, applying promotional fares, and getting rid of nonessential travel. 

Next month, global distribution providers aim to replace their legacy hosted traveler profile systems with GDS-independent platforms. This will create singular profiles, massively expand on data elements, and offer more personalized traveler services. 

Marriott International promotes its CFO Arne Sorenson to president and COO. 

April 

Travel buyers are having a tough time assuaging the cost of checked-baggage fees in negotiations with their preferred carriers. More of them want to include that in their 2009 corporate contract discussions. 

Some hotels have adjusted their corporate rates according to the shrinking market. Analysts continue to predict a buyer’s market, with hotels expected to see their biggest price drops in decades. 

Huge travel volume declines have affected travel program back-end revenue streams like corporate card rebates, hotel commissions, and VAT reclaim.  

Interest in sustainable travel management allegedly didn't falter despite economic lows and rising focus on budgeting.  

The International Air Transport Association changes its projected 2009 global airline losses from $2.5 billion to an almost doubled $4.7 billion. 

Concur introduces a mobile version of its travel and expense management tools, enabling travelers to manage itineraries and expense reports with a BlackBerry or Windows Mobile phone. 

May 

Global distribution systems and travel agencies rush to comply with new U.S. TSA requirements under the Secure Flight program. Through which, airlines would request passenger data like their full name, date of birth, and gender. 

There are growing industry concerns that antitrust-immune alliances will impact buyer leverage for negotiating transatlantic deals and force companies into alliance agreements. 

Airlines and technology providers plan to soon test new technology that would let airlines generate expenditure reports and settlements for ancillary and unbundled purchases. 

GetThere's recent move to bundle its demand management application suite and assess a per-user profile fee on top of transaction fees has been criticized by some buyers, as OBTs move further away from the direct transaction model, creating opportunity for higher online booking service costs. Other OBTs have established pricing structures that may protect them from depending on the travel transaction. 

British Airways has gone back to offering incentives to British TMCs on transatlantic routes. The carrier paused incentives in 1999 after being fined €6.8 million by the European Commission for what it ruled as abuse of a dominant position in its home market. 

The National Business Travel Association’s lobbying efforts focus on industry issues like travel guidelines for companies getting funds under the Troubled Asset Relief Program and travel in the time of swine flu. 

Recent airline traffic reports displayed signs of improvement. Executives noted stabilization in revenue and demand declines, but the corporate travel segment remained weak. Buyers do not express much willingness to modify their budgets or policies. 

Chinese tourism and travel terms soften, allowing foreign TMCs to own more than 51% of a Chinese agency and open local branches. Reduced entry capital requirements make it easier for foreigners to get international ticketing licenses, though they remain mostly restricted from owning domestic ticketing licenses. 

BCD Travel gets a $50 million cash infusion from its parent BCD Holdings. Principal owner John Fentener van Vlissingen said a small portion of it went to a major stake in the third-largest Singaporean TMC and more Asia/Pacific investment is expected. Most of the funds went to the business’ debt relief. Despite the harsh economy, BCD remains steadfast in its acquisitions and long-term growth. 

JUNE

The NBTA board of directors on June 18 voted unanimously to continue to pursue the merger discussions with ACTE after an initial effort failed to pass the OK of the associations’ respective boards. After the merger rejection, however, president Doug Weeks and treasurer-elect Mary Ellen George resigned.

American Express Business Travel and Maritz Travel announced plans to pool people, customers, technology and resources for a strategic alliance MaXvantage to provide end-to-end strategic meetings management services to support meeting, event and incentive travel portfolio.

U.S. Department of Transportation sends a troubling signal to the airline industry by delaying final approval of antitrust immunity for Star Alliance members United Airlines, Lufthansa, Air Canada and incoming member Continental Airlines. Additional concern is fueled by a House approval of a bill that would allow the Transportation Secretary to sunset ATI for partnering carriers.

JULY

Special 25^th Anniversary Issue

AUGUST

Siemens deployed in the United States an end-to-end meetings management platform to integrate meetings payment with automated planning and booking processes to consolidate meetings spending data and gain visibility into actual meeting costs.

The Department of Transportation approval of Star Alliance carriers—fortified by a joint venture with United, Air Canada and Lufthansa—finally came on July 10, more than a month past deadline, and with some caveats stemming from Justice Department opposition, signaling a new temperament in Washington toward such deals.

A BTN survey of 196 corporate travel buyers found that six in 10 respondents had cut travel costs through boosting remote conferencing use in the past 12 months. Forty-five percent were requiring use of remote conferencing in lieu of travel in some cases. Starwood and Marriott each launch Cisco Telepresence.

Hilton Hotels director of global travel management Craig Banikowski succeeds University of Texas Athletics travel buyer Kevin Maguire as NBTA president and CEO.

ACTE reverses its stance on a merger with NBTA and re-opens a shaky negotiations led by ACTE president Richard Crum. The new proposal crafted by ACTE was communicated to NBTA along with a press release. GBTA ultimately rejects the proposal and the merger wholesale, reversing its own initiative to continue to pursue the merger. NBTA claimed that ACTE refused a due diligence process.

Buyers approach the negotiation table for 2010 largely amenable to dynamic pricing deals given the economic conditions and rock-bottom hotel rates that have driven multiple rate-renegotiations in 2009 to keep corporate rates in line with the market.  

Expense management technology supplier Concur announced it acquired European competitor Paris-based Etap-On-Line, provider of the Ulysse Travel & Expense Tool, doubling its European operations.

SEPTEMBER

NBTA names Mike McCormick executive director; Craig Banikowski was elected president and CEO. Outgoing president Kevin Maguire iced ACTE’s revitalized merger proposal, suggesting the smaller firm refused a due diligence process.

Global distribution system providers “finally deploying new desktops;” Amadeus Americas and Travelport begin testing new agent point-of-sale desktop tools that feature graphical interfaces instead of green screen. Meanwhile Farelogix was poised to release its first multi-source agent desktop.

After four years without a specialized meetings fare discount, Delta Air Lines launched a renewed Delta Meeting Network based on the (acquired) Northwest Airlines’ meetings product.

NBTA announces it will launch a Strategic Meetings Management certification developed by SAIC’s Lee Ann Adams Mikeman, Xerox’s Tracey Wilt, KK Strategic Solutions’ Kari Knoll Kessler (Wendell) and PWC’s Debi Scholar. 

OCTOBER

Business travel industry tries to define business trip ROI. The National Business Travel Association and the U.S. Travel Association recently released studies that measure the return on investment of business travel and indicate how business travel spending can impact revenue generation.

With hoteliers more flexible in negotiations during a buyer's market, travel buyers find success with alternatives to the standard negotiation strategy, including reverse auctions, block space programs, capped dynamic pricing and consortia negotiations.

Travel management companies HRG and BCD Travel find success with advanced hotel rate auditing tools; at the same time, the audits are turning up savings with consumer rates in a depressed economic climate, complicating automated audits.

Sen. Barbara Boxer (D-Calif) and Sen. Olympia Snow (R. Maine) inch an airline passenger bill of rights closer to reality, with several once-opposed travel industry groups now in favor of the bill. Even airlines appear to be softening stances on tarmac time limits.

Percentage of companies with pretrip approval requirements passed thoroughly into the majority by the end of 2009, underscoring the level of scrutiny corporates continued to place on business trips in this challenging year.

NOVEMBER

BCD Travel executive Chris Crowley takes accepts role as president-elect at ACTE, succeeding the interim president Richard Crum who stepped in after Doug Weeks departed role in June in wake of failed merger talks with NBTA. ACTE executive director Susan Gurley resigned.

Google’s Michael Tangney outlined at the Europe ACTE conference the company’s policy-light travel program. It became a beacon for companies to “trust their employees” in stark contrast to the current cost restriction and approval-heavy travel environment. The program would be referenced for years in companies looking to reduce policing of travelers.

DOT, as it did with Star Alliance members, misses its statutory deadline to approve antitrust immunity status for Oneworld members American Airlines, British Airways and Iberia. Airlines, however, remained confident they would gain the same rights as Star and Skyteam.

DECEMBER

Payment systems AirPlus International and MasterCard Worldwide develop a solution that would enable travel buyers to report ancillary airline charges, but it won’t debut for nearly a year.
Meanwhile, American Express said it is pursuing an ancillary fee-reporting solution with a large U.S. carrier.

DOT issued "precedent-setting" fines against Continental Airlines, Mesaba Airlines and ExpressJet totaling $175,000 for their involvement in an August delay that left 47 passengers stranded in an aircraft overnight on a runway in Rochester, Minn. The fines represent the first time DOT has penalized a carrier for its role in subjecting passengers to extended tarmac delays.

Expense managers tighten policies in response to the economy, including more thorough audits and stricter requirements for receipt submission, according to Business Travel News' 2009 Expense Manager Survey.

Timeline produced this week by AI and BTN editorial content and engagement manager Gianna Song

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Elizabeth West is the editorial director of the BTN Group. She has reported on the business travel and meetings industries for 24 years. Beth was editor-in-chief of Meeting News from 2006 to 2008 and director of content solutions for ProMedia Travel from 2008 to 2011, when ProMedia was acquired by Northstar Travel Media and merged with BTN. She became editor-in-chief of BTN in 2015 and editorial director of the BTN Group in 2019. 

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