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Given all the questions related to the national and global economies, the stresses pressuring airlines and other travel suppliers and the increasingly likely rise in prices for travel services, many in the business travel industry are not exactly sure what 2009 will bring. For now, add American Express and the Association of Corporate Travel Executives to that list.
A recent ACTE poll found no clear overall expectation for business travel spending next year. Among 131 respondents, slightly more than one-third said their organizations would spend more in 2009 than in 2008, while one-third indicated they'd be spending less. The roughly one-third remainder said they expect no change in their organizations' annual business travel expenses.
Meanwhile, American Express Business Travel this week delayed the release of its 2009 forecast as it continued to assess the impact of recent Wall Street shockwaves. Like BCD Travel (which previously circulated preliminary projections), Amex now expects to issue 2009 business travel predictions in a few weeks. Carlson Wagonlit Travel already weighed in, forecasting for next year much higher airfares, reduced air travel demand and marginally higher hotel costs than 2008.
Discussing with reporters Amex's decision to delay its 2009 preview, vice president and general manager of Global Advisory Services and Meetings Solutions Hervé Sedky said, "We had to do it due to the unprecedented activity in the financial markets. We felt it was our responsibility to take a step back and wait and see how and when the market will settle, and see if there is any additional impact that will influence the predictions we made."
More specifically, Sedky said Amex is waiting to see if recent events would compound the pressures already applied to corporate travel budgets. "We want to understand if recent economic activity and changes in the economy will have a greater impact on demand than we have forecast," he explained. "That is the piece, from an American Express Business Travel standpoint, that is an unknown." Sedky also said the travel management company would watch to see if heightened economic uncertainty would "have an even greater impact on supply than we have put in our predictions." As it was, Amex already had expected the effects of diminishing airline capacity to have "a greater impact for 2009 than in 2008."
Though Amex did not specifically touch on the consequences for airlines of the collapse in the financial sector, some expect them to be significant.
For example, "British Airways and American Airlines carried a lot of banker business on transatlantic routes," according to PlaneBusiness Banter founder and editor Holly Hegeman, speaking this week in Cleveland at The Beat Live. "That high-yield, nice, cushy money [is severely slashed]. BA's stock already has taken a tumble. In fact, there is more chatter [in the United Kingdom] than there is on this side. AA has been silent. Lehman [Brothers] was AA, AIG is AA ... you can just go down the list." [Hegeman suggested that as a result of the "rough time" those two airlines will face during the next 12 months, their request for antitrust immunity "may get approved."]
In all sectors, as many organizations reduce their level of business travel, they risk underperforming on their preferred supplier contracts. That prompts carriers to end some of those contracts or tighten up during contract renewal negotiations, which translates to lower discounts and higher corporate airfares. Amex, for one, expects that trend "will continue into 2009," according to Frank Schnur, vice president in North America for Amex Business Travel's Global Advisory Services.
Schnur said Amex also expects further airline consolidation, diminished competition and capacity cuts "to drive fares upward, especially on underperforming and low-profit routes." In the lodging sector, he said "a slight decline in occupancy will keep the rate increases below what we saw in 2008." Regarding car rental, Schnur noted that "taxes and airport fees are primary areas to watch for corporations."
In general, "senior leaders have spent more time thinking about travel," according to Sedky. "Travel has become a boardroom issue." He suggested that top executives now are trying to balance the need for cost cutting with the need to maintain travel as an "essential, revenue-generating business function," and "increasingly view travel as an investment" rather than a cost. That "shift in philosophy," he said, is "evidenced" by fewer corporate executives seeing travel as "a commodity."
Meanwhile, given expected increases in business travel rates and services, ACTE concluded that organizations expecting overall business travel expenditures to remain flat next year would embark on fewer trips. "Even those who stated they are spending more may find they are barely keeping up with cost increases," according to a statement by ACTE executive director Susan Gurley.
For those respondents expecting lower travel spending in 2009 than in 2008, the most cited reason was a combination of economic concerns and high fuel costs. The most cited means of cutting back was fewer internal meetings (39 percent), followed by across-the-board travel reductions (31 percent), less international travel (16 percent) and eliminated training trips (9 percent).
ACTE plans to re-survey the same 131 corporations represented in the poll "to create a 'control' group for more precise measurement."
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