No Growth For US Biz Travel?

<FONT SIZE="+3"><B>No Growth For US Biz Travel? </B>

By Barbara Cook

<I>Alexandria, Va. </I>- Domestic business travel will experience flat line growth for 1996-97, according to predictions made at the Travel Industry Association's National Outlook Forum in mid-October.

Corporate travel in the United States is expected to drop by 1 to 2 percent, and will then increase by 2 to 3 percent in 1997.

Suzanne Cook, TIA's senior vice president of research, described business travel as "somewhat soft" for the first six months of this year, explaining that the industry has experienced a decrease in the average number of trips taken.

Cook cautioned that the figures are still preliminary and said researchers will have to wait until April of 1997 until the final business travel outlook is completed.

<B>Fewer Conventions</B>

A TIA survey revealed that the likelihood of people planning to travel for business and conventions this fall has weakened and is at its lowest level since 1992, although the association could not find any reason for the drop.

For U.S. travel overall, Cook said surveys of consumer confidence show improvement, with healthy labor markets leading to a 3.5 percent increase in personal spending.

Air Transport Association chief economist David Swierenga outlined carrier expectations for air travel next year, predicting that this year's expected record profit of $3.7 billion for the industry will taper off to between $3 billion and $3.5 billion for 1997.

Determining the right balance between discount fares and higher ticket prices will be a problem for next year, Swierenga said. "We will have to do something aggressive with prices to keep the traffic growing." Swierenga predicted that it could be until April of 1997 before Congress acts to reimpose the airline ticket taxes or propose a substitute tax on passengers, which will keep ticket prices down and demand healthy during the first quarter.

Like the hotel industry, growth in airline seat capacity this year has trailed demand, Swierenga said, and load factors may reach an unprecedented high level of 70 percent this year. Another plus for the industry is that carriers are not buying airplanes; the aircraft on order are replacement equipment and not for expansion. Passenger traffic growth in 1997 is expected to reach 3.5 percent, Swierenga said.

<B>Fuel Costs To Rise</B>

The upshot for the airlines, however, is higher labor costs and rising jet fuel prices, which Swierenga termed the "most troubling item of expense." Jet fuel will average 65 cents per gallon this year, a 10 cents-per-gallon gain over last year. At the same time, he said the 4.3 cents-per-gallon tax still in effect on jet fuel adds $550 million to carriers' expenses annually.

On the hotel side, Randall Smith, CEO of Smith Travel Research, predicted that the average room rate should hit $74.81 in 1997, up from $71.25 this year as the industry continues a strong trend toward revenue improvement.

While this year will see record profits, Smith forecasted a "very modest downturn" in occupancy levels. But he added that the next 18 months will be "very good" for the hotel business overall.