OP ED: Travel Prices To Exceed Forecast

This is going to be an expensive year for T&E expenditures. The current 1997 T&E expenditure projections-generally between 6 and 7 percent-are too low, and are misleading to corporations.

I am concerned that the same people who are making these projections are the same persons that significantly missed the target last year too. Some of them missed the target by more than 100 percent.

We foresee a 1997 cost increase for T&E expenditures of 10 to 12 percent, with a possible additional increase of 2 to 3 percent (for a total of about 14 percent) if several adverse events occur. Our projections are based on several factors.

First, airfare already has increased by 10 percent because airlines have increased their fares to offset the elimination of the 10 percent airfare tax. Instead of passing the savings along to the customer as they did last year, they are keeping it themselves. We anticipate that possible additional price increases will occur during the rest of 1997, creating a significant cost impact upon the corporate traveler.

No matter what the argument is about the increases being only on 14- and 21-day fares, I haven't seen the "corporate fares" decreasing. The airlines also are experiencing increases in the cost of fuel, which will fuel the cost increases passed onto buyers.

The final significant impact on the airlines is the withdrawal of services or possible demise of Kiwi, ValuJet, Western Pacific, and Air21, which have in the past created a cost-competitive impact for lower fares.

Second, the lodging industry has had better occupancies in 1996, and the high occupancies will continue into 1997. Therefore, rooms will cost more, corporate rates will continue to rise and there will be less room availability. This formula spells higher lodging costs, which certainly will exceed 6 percent, and could, because of the various factors affecting total lodging costs, reach 10 percent. Additionally, the lodging industry is in the midst of major construction of new properties, and those costs will be passed to the consumer through higher room rates.

Finally, the auto rental companies continue to be able to pass higher rates onto consumers, and this trend should continue. Also, the recent acquisitions of auto rental companies (HFS buying Avis, Republic buying Alamo and National, and the probable sale of Budget by Ford) will create an environment for higher rates to be passed on to travelers.

Knowing that airfare represents almost half of the total T&E expenditure, and that lodging represents another 22 to 25 percent of the expenditures, it is easy to see a major impact on travel expenditures. The travel manager has a corporate responsibility to inform management that a budget planning amount of 6 percent is very risky, and that a more realistic estimate of 10 percent is a better planning tool. Remember that when management looks at its actual financial performance (versus budget amounts), and sees a negative performance, it will be looking to see why the company's travel professional did not plan better. It is your responsibility, and it is within your control to help management plan correctly.

<I>Robert Langsfeld is a principal in Langsfeld Fazio & Associates, a travel management consultancy in Incline Village, Nev.