Rebound in business travel slow
By Barbara De Lollis
Travel is slowly recovering six months after the Sept. 11 attacks, but it remains far from the robust levels of 2000.
There is no consensus on when air travel will fully recover forecasts range from fall to next spring and depend largely on the nation's economic recovery. There is, however, no doubt what's needed: Business travelers must start spending like they used to.
"The benchmark is 2000. Will we get back to that level?" asks Marianne McInerney, executive director of the National Business Travel Association. "If the economy continues to keep pace, we can be optimistic, but again we're looking at multiple industries that lost multiple billions of dollars."
It took six months to recover from the Gulf War, the last steep travel downturn. Recovering from Sept.11 will take at least twice as long, industry experts say, because of what Federal Aviation Administration chief Jane Garvey calls the "one-two punch" of the recession followed by the terror attacks.
"Business travel will come back. It always has," says Tom LaTour, chief executive officer of the Kimpton Hotel & Restaurant Group, which has 40 percent of its rooms in hard-hit San Francisco.
This month, the boutique hotel chain's occupancy rate is in the 60 percent range compared with the 80 percent range before the recession. Still, LaTour and others point to subtle, encouraging signs:
Airlines are ramping up their schedules for spring and recalling workers.
Next month, Reagan Washington National Airport will become fully operational again.
The declines in hotel occupancy rates are starting to improve, particularly in central U.S. cities such as Houston and Oklahoma City.
"Most of the impact from Sept. 11, we think, is now behind us," says hotel analyst Randy Smith.
Room demand is inching up this month in markets outside of the worst-hurt cities, such as New York and San Francisco, he says.
"Some of the increases are less than 1 percent, but at this point, we're thrilled we're reporting any increases at all," says Smith, chief executive officer of Smith Travel Research.
Passenger boardings on U.S. airlines in January were down 14 percent compared with a year ago, versus down 30 percent in September, according to the Air Transport Association.
John Heimlich, an economist with the association, says that the airlines essentially bought those gains, because the average fare was down 16 percent in January from last year.
"The fear of flying has largely abated," says Kevin Healy, AirTran Airways' vice president of planning. "The cure is lower fares."
Corporate travel managers also are optimistic. About 75 percent of those surveyed recently by the business travel association said demand for travel has increased as much as 10 percent in the past three months.
Allstate Insurance is already booking trips at January 2001 levels, says spokeswoman Emily Daly, but total spending is down because fares cost less.
The average one-way business fare paid by American Express clients on top domestic routes was $251 last year versus $268 in 2000, indicating that travelers are shopping around for better fares and taking advantage of advertised deals usually geared to leisure fliers.
"Business travelers are not immune to that," says Pam Arway, who heads U.S. corporate travel for American Express.
"They say, 'If I have a limited budget, I can send one person at a full fare or three people at a cheap fare,'" Arway says.
It's clear that companies and business travelers are still clinging to their travel dollars.
Marriott CEO Bill Marriott says the corporate and group meeting business is coming back, but individual business trips are barely improving. Some of the business travelers who have returned are flying Southwest, AirTran and other low-cost carriers.
Companies are trying a variety of tactics to help keep budgets down, including encouraging teleconferencing. And despite its members' optimism, the business travel association posted a cautionary tip sheet on its Web site two weeks ago titled "What business travelers can do to fit a tighter corporate travel budget."
Corporations still cautious
An Equation Research survey last week of corporate travel managers for USA Today found that 65 percent of the corporate travel managers who responded said their companies will do better this year than last. Yet nearly half said they cut travel spending last year and plan to spend the same or less this year.
Of the companies that adopted strict travel policies last year, 52 percent said they are keeping those policies in place, according to the survey. Only 28 percent of those surveyed said they did not adopt stricter policies last year.
"We're now having the best months that we've had since September, but (travel) is still down year over year," says PricewaterhouseCoopers travel manager Mark Williams. "It's coming back very slowly."
PricewaterhouseCoopers expects to spend $250 million to $260 million on airline tickets this year versus $238 million last year, he says.
Some contend that the industry cannot take business travelers for granted anymore.
While personal security may have been a concern immediately after Sept. 11, other issues appear to be deterring travel now.
Among them: long waits at some airports for security screening since the government took over airport security last month, the possibility of terminal evacuations because of security scares, the widening gap between business and leisure fares, and the acceptance of alternatives to meeting in person, such as web casting.
The new world of business travel is taking shape at Merck, one of the world's largest drug makers, where budget restraints combined with the terror attacks have made employees more likely to use technology to conduct business.
"There's been a behavior shift," says Merck spokeswoman Gwen Fisher. "People are now looking at other ways to also do business."