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With the business world trying to get a handle on how deep the U.S. economy's slowdown--or possibly recession--may be, many eyes have turned to the travel industry for clues. But short of a consistently dismal view of travel demand among financial firms, figures shared thus far are decidedly mixed.
Certainly the fact that there is any negativity at all in industry metrics suggests that a slowing has occurred, but how deep, or long-lasting it may be for corporate travel is difficult to decipher. Some sources of such information, particularly airline, hotel and intermediary companies, have said that leisure travel is feeling a bigger impact than corporate. But neither is corporate travel data immune to negative analysis.
One of the better supplier indicators would be global distribution system providers, which more directly represent corporate travel trends than some other players. The latest report, coming this week from Travelport, was not encouraging. Travel segments booked by Galileo in the Americas fell by nearly 7 percent year-over-year during the March quarter, while "international" segments fell 1 percent. Parent Travelport's revenues were flat year-over-year, excluding the impact of its Worldspan acquisition.
According to Travelport president and CEO Jeff Clarke, "The weakness versus our plans has been in the online travel agency space. We have Orbitz and CheapTickets exclusivity, and their year-over-year performance is down, in part, because they had a hit-it-out-of-the-park performance in the first quarter of last year. In terms of the corporate business, it's also a little slower than we had expected.
"We get daily reports and [in April and May] they are swinging around a little bit," Clarke continued. "It was a little stronger in April, and slowed down a bit in early May. We're not seeing a marked difference in consumer versus corporate. We're seeing weakness in the Americas in both."
Despite these trends, Clarke suggested that the 7 percent figure could easily have been worse. "When I look at the U.S., I think a lot has been thrown at the market," he noted. "Bankruptcies, unusual groundings, consumer confidence at record lows ... businesses pulling back and tightening their belts, particularly in the financial sector. When I see that segments are down 7 percent, I kind of smile and say that's a lot to throw at you and have segments be down 7 percent."
Orbitz Worldwide had a rough March quarter, posting a larger-than-expected loss of $15 million on lower domestic booking volumes. But CEO and president Steven Barnhart last week said "current trends do not indicate any major pullback in leisure or corporate travel to date. We do see softening in some markets, primarily leisure."
Expedia Inc. president and CEO Dara Khosrowshahi on May 1 said Expedia had "as yet" seen "no signs of broad-based softness from corporate travelers."
According to TRX president and CEO Trip Davis, the March quarter offered "quite resilient" and "stable" transaction volumes, "despite headlines." Although "leisure travel bookings in the United States and Europe showed signs of softening toward the end of the quarter ... corporate travel continued to grow modestly in the U.S., Europe and Asia."
Asked about the mixed picture, Davis said, "There has been a bit of a wait-and-see mode in corporate travel, where things have been okay for most sectors in most companies--resulting in solid spending and modest growth--but the real impact is in financial services."
There are flaws in making assumptions based on a single vendor's experience, so such figures need to be taken as merely indicators. But broader-based surveys and polls can also lack consistent conclusions.
A UBS Investment Research survey in late March and April of 80 corporate travel buyers found that 42 percent expected their companies to spend less on air travel this year, up from 26 percent in a UBS poll six months earlier. Among sectors with substantial representation in the poll, financial services firms indicated the largest cuts.
"Corporate travel managers have been increasingly bearish on their firms' air travel spend," UBS analyst Kevin Crissey wrote in a May 1 research note. "Overall, 65 percent of travel managers forecast their firm's air spend to be flat or down year-over-year. About 37 percent expect air spend to be down more than 5 percent."
Asked whether air travel cuts are fully reflected yet in airline financial results, 49 percent of the buyers polled by UBS said they "have not and are not cutting back" and another 18 percent said, "Yes, our cuts were made a while ago and the airlines should already have seen our volume changes."
Perhaps the broadest new data came from the International Air Transport Association, which this month said March global airline passenger traffic grew more slowly than it did a year earlier. "The slowdown in the demand growth continues the sharp downward trend which began in December 2007 as the impact of the U.S. credit crunch began to be felt in the airline industry," according to IATA. Also citing fuel costs, IATA director general Giovanni Bisignani said, "The fortunes of the industry have taken a major turn for the worse."
The "credit crunch" impacted American Express' first-quarter earnings, but the company also said global commercial travel sales rose 13 percent to $5.4 billion and spending billed to global commercial cards increased 13 percent to $32.8 billion. Amex said that in the United States, travel and entertainment spending across all customer segments rose 8 percent.
For Marriott International, "Business and leisure travel demand remains robust in most markets around the world," said CEO J.W. Marriott Jr. "While performance at our U.S. hotels reflected slowing economic growth, few markets have witnessed discounting and full-service room rates rose 4 percent during the quarter. Attendance at group meetings was on track during the quarter and group cancellations remained lower than 2007 levels. Group meeting bookings for the remainder of 2008 are strong. Given these trends, we remain cautiously optimistic about 2008 demand trends."
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