2009 has seen nothing but declines in business travel transaction and dollar volumes, but none steeper than among the largest travel management companies and biggest corporations that tend to put the most work into managing travel. Vendors may be anxious to find out whether--and when--big business will loosen the reins, but observers are not banking on a full return.
The 37 percent drop in global corporate travel sales at American Express Business Travel in the March quarter was astonishing, as was the 23 percent fall in commercial card billings. Amex may have been especially hard-hit by cutbacks and disappearances in the financial services industry. Spokespeople for BCD Travel and Carlson Wagonlit Travel declined to provide first-quarter numbers--as did an HRG executive--but the overall mega agency category clearly is suffering as demonstrated by agency transactions in the United States. ARC vice president of marketing, sales and customer relations Mike Premo this week said transaction counts fell more for the megas in March than for online or other agencies, continuing a trend seen in January and February. ARC's overall April figures showed a 12 percent drop in transactions and a 26 percent decline in total sales, both worse than March. Breakouts by agency type for April were not available at press time.
Another indicator of mainly air transactions, global distribution system segments in the March quarter also showed a continuation of the severe late 2008 declines. Travelport GDS segments fell 16 percent year over year, with Americas segments and Asia-Pacific segments both down 16 percent, and Europe, Middle East and Africa segments down 17 percent. Noting the recent impact of swine flu fears on travel bookings, Travelport CEO Jeff Clarke said, "April deteriorated a little bit, down 17.5 percent, and May is down 21 percent in the first week. But we'll get back to this 16-ish, 17-ish [percentage] decline. It seems to have stabilized."
But even as volume reductions apparently are no longer getting worse, it's unclear how quickly and whether corporations would resume their travel--particularly international and premium-class travel. A survey last fall by UBS found that half of corporate buyers claimed their firms within three months could adjust travel budgets in response to a rebound. Despite possible signs of an economic bottom and potential indicators of a coming upside, some research and commentary suggests that the value of travel to big businesses may have permanently changed.
According to Siemens Shared Services mobility services director Steven Schoen, "Many vendors [are] speaking about 'doing what we need to do until the volume returns, etc.' My view is that I don't want it to return to what it was. Business people should travel when they need to; when there is a defined business objective that can be best accomplished with a face-to-face meeting."
"It seems to me as though some portion of these cuts are here to stay," said TRX Travel Analytics vice president and general manager Dan Pirnat. "There's a lot more discretionary T&E spending among large buyers and they have been able to cut back in a more significant manner. Small and midsize firms always were more judicious in their travel spending. Among the larger corporations, we have witnessed travel as more of an entitlement ... but that mindset is quickly ending due to the economic cycle. If you're faced with layoffs for yourself or the guy in the cube next to you, you don't want to spend those discretionary dollars quite as readily."
An American Express/CFO Research study based on a February survey of 285 companies spread across global regions and executive interviews in April found that travel reductions "are very specific: spending for meetings with clients or for new business will be sustained--if not actually increased--while travel for reasons such as internal meetings, professional development, and conferences will be greatly reduced."
Most of the Amex/CFO study's respondents expected the overall downturn to continue into next year. Global Insight analyst Ken McGill in a forecast delivered in March at the National Business Travel Association Financial Forum noted the correlation between corporate profits and travel spending. Standard & Poor's is calling for a return to growth of S&P 500 profits in the March quarter of 2009, with steady expansion thereafter, following a year-over-year reduction in the December 2008 period.
Meanwhile, there's a mix of expectations on negotiating and pricing opportunities that companies may find in the coming months, at least for air travel.
"On the airline side, the M&A activity is causing the carriers to regain some leverage and as a result fares are not as attractive as they once were," said Pirnat. "There's no question buyers will see higher ticket prices over the coming year. A number of airlines are taking this opportunity to try and tighten their belts in terms of discounts to buyers. I'm generalizing, but for the most part, carriers are being more judicious in discounts they're rolling out."
According to a May newsletter by the CWT Solutions Group, "airlines have been aggressive in offering a myriad of deals to help stimulate demand. More aggressive competition has created an urgent need to fill seats, specifically in high-yield international markets, and increase commitments from the corporate sector. A company that can articulate a compelling response to the airlines' challenges can expect to improve their agreements in this environment."
Egencia today announced its expectation for a decrease in average corporate travel ticket prices in the September quarter.