Reporter's Notebook: Masters Plumb Depth Of Demand, Petruccelli Predicts 2010 Plateau

After recounting the grim state of the industry in the past year, American Express Global Travel Services president Charles Petruccelli during the Masters Program in Washington, D.C., last month said travel volumes would grow—then plateau.

"One could say that the recession may be behind us," Petruccelli told the roughly 175 senior-level buyers and suppliers in attendance. "The question: Is this the beginning of a recovery, with either a U-shape or V-shape, as some are predicting, or is it a square-root shape, where the volume rebound that we're experiencing is being provoked by pent-up demand that is finally being released by companies that believe the worst is behind them? In that second hypothesis, which is the one I favor, one should expect a flattening of the demand at some point in 2010."

Petruccelli cited high unemployment, negative consumer confidence, lack of "investment capacity" and lightly available capital, which will yield "a prolonged period of flatness with yield not improving."

As potential areas of growth, Petruccelli pointed to meetings spending and the small and midmarket segments, which typically bounce back more quickly.

"The predictions are that we will not reach 2008 levels again until 2012, and maybe 2013," he said, suggesting one possible result of that general sluggishness: consolidation.

"It sounds obvious to me, if you look from the outside, that this industry will see more consolidation happening in distribution, the airline industry, in the tech players—in everyone who provides services, because this is a truly global industry," Petruccelli said.

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Though overall travel demand this year is not expected to rival the pre-recession era, meetings spending is likely to grow from last year's dismal volumes, as 35 percent of 26 buyer attendees said such expenditures at their companies would be higher than 2009 levels, while 50 percent said such spending would remain flat. Some attendees cautioned, however, that improvement does not mean recovery, considering the deep decline of meetings activity and spending in 2009.

ExxonMobil global travel manager Vivian Wu attributed some increases to "pent-up demand," claiming, "If you're down 20 or 30 or 40 percent in meetings, then guess what: You've only got up to go."

Maria Chevalier, manager of travel services for Johnson & Johnson, said her company like many others drastically cut meetings expenditures in 2009, but customer-facing travel is going back up this year.

"Last year, we did a mandate of a reduction of 30 percent of meetings, but this year we're flat," Chevalier said. "You can only go so long without some of these meetings. It's short-term. We're not going to go back to normal levels, to where we were the year before, because it will be flat this year, but what we're seeing is where we cut back on internal meetings, we're going back up on external meetings."

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Though buyers in attendance forecast more meetings spending, many admit they don't fully know how much they actually spend on that category. About one-third of the 26 buyer respondents said they do not "have clear insights" on corporate meeting spending, while an additional 40 percent said they "have clear insights on large meeting spend but less visibility on small meetings." The 27 percent minority claimed to have full visibility into all meetings.

It's no surprise "gaining clear insights on spend for all meetings" was a high priority for more than half of the buyers respondents.

"Strategic meetings management will move from cutting-edge to mainstream. For many years now, we've been talking about SMM as the next frontier," said National Business Travel Association president and CEO Craig Banikowski. "We're approaching the tipping point."

Citing NBTA research, Banikowski said the number of companies embarking on strategic meetings management programs more than doubled in 2009, and have become a small majority.

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Asked by Monument Policy Group partner Stewart Verdery what impact the growing use of new imaging machines will have on airport security wait times, Stephen Heifetz, deputy assistant secretary for policy development at the U.S. Department of Homeland Security, said, "It's true that the machines take a little bit longer, though not that much longer."

Heifetz noted passengers can request alternative screening. "The wait times will depend on where it's configured and whether people request secondary screening or screening through a pat-down and metal detection, since those take significantly longer than the walk-through or advanced imaging technology," he said.

Invoking an adage, "If you build a 10-foot wall, someone will get a 12-foot ladder," IJet president Bruce McIndoe said, "The drug smuggling industry has used body cavity to move drugs for decades if not hundreds of years, so as soon as we put this technology out there for body contour, counter to that is to just put explosives inside the body." McIndoe questioned why the United States would spend millions on what he called an "ineffective barrier."

Heifetz responded that DHS relies on multiple layers of security, not only scanners and metal detectors at the security checkpoint, but also behavior detection personnel programs not visible to the public.

"It's impossible to eliminate all risk—that's always been the case and will always been the case," Heifetz said, later adding, "While it's always possible that an individual can circumvent one layer, the likelihood of circumventing all layers is very low."