TSA to impede travel market recovery? Not buyin’ it

by Tom Johansmeyer on

When I finally crawled out of bed and caffeinated Saturday morning, I made the rounds on Twitter and found a bold statement by travel journalist Christopher Elliott: “Thanks to TSA, 2011 could be a flat year for travel”. Despite the digging he did, I’m just not buying it. Passenger inconvenience, especially when it comes to leisure trips, isn’t likely to have a major effect on the travel industry in 2011.

You’ve read it from me on Gadling before: it isn’t the leisure traveler that defines the travel market; it’s the business traveler. These are people who have no choice but to hit the road, whether because they are instructed by their bosses or because they recognize business opportunities that they need for growth or simply to keep their companies alive. As business conditions continue to improve in the broader economy, demand for flights is likely to increase, and those buying tickets will have relatively little choice in the matter.

We’re looking back on what’s shaping up to be a positive year for the travel industry, particularly the airlines. And, according to Elliott, on his blog, “2011 was shaping up to be the best year for travel since the recession began.” He cites expectations of higher prices, even if only slightly, but pent up demand by travelers for “long-postponed vacation[s].”

Thanks to TSA, 2011 could be a flat year for travel http://bit.ly/gsbOfTless than a minute ago via webChristopher Elliott
elliottdotorg

The next year of the recovery could be imperiled, however, by new measures implemented by the Transportation Security Administration, specifically body scanners. In fact, Elliott writes:

But now that the Transportation Security Administration has introduced full-body scanners at many American airports, and subjected those who opt out of the machines to an “enhanced” pat-down, the 2011 outlook has changed, say travelers.

To support this claim, he talks to Jeff Cohen, an Austin, Texas-based securities trader, who claims to be “torn about whether I’ll travel more next year or not.” Cohen tells Elliott he goes on “a couple of large trips a year” and had a big one in mind for the first half of next year, “to somewhere exotic.” Now, Cohen tells Elliott, “[T] he recent TSA crackdown has me rethinking that.”

Further, the Consumer Travel Alliance sees the traveling public as generally unlikely to increase its travel activity. Elliott continues:

A majority (46 percent) say they will travel “about the same” as they did this year. Slightly less than a third (30 percent) will travel more, while just less than a quarter (23 percent) will travel less. This contradicts several earlier surveys, which had predicted a significant upswing in travel next year.

The key word here is consumer. The focus, here, is on leisure travel. The needs of business travelers are again overlooked.

Let’s consider Cohen’s case for example. So, he’s rethinking his leisure travel plans for next year. If he has to hop on a plane to close a deal or bring in a new client, is he going to do that? Would he sacrifice a two-hour flight for a 10-hour drive do so? I don’t know the guy, but drawing on my white-collar experiences, I think I know how he’d react to a major business opportunity a few states away … and it wouldn’t involve turning the key to the ignition.

The business traveler really has little choice in whether to hit the road. Could he skip a business opportunity or pass on a project in favor of something local – or to wait for a gig nearby to arise? Of course. But, that would mean turning down the very fees that put food on the table. Sales professionals need to travel to bring in business, fulfillment teams (e.g., the folks who provide the good or service sold) may have to take to the friendly skies and support sometimes needs to be provided on site. This is just how the nature of commerce has evolved. If conditions continue to improve, more of these people will be buying plane tickets.

And, they’ll pay more for them.

The nature of business travel, given that it occurs in order to support subsistence or the accumulation of wealth (both important), is that it is inelastic, at least relative to leisure travel. There is effectively no choice but to get on a plane, unless extreme measures are brought into the equation. Since business travel relatively inelastic, these travelers will pay more, which supports a continued travel industry recovery.

The fact that business travelers tend to be willing to pay more for their tickets also means that they have less choice in whether to fly. Sure, there are tools out there such as videoconferencing and online collaboration software that can provide a substitute, but a recovering market means that there’s more capital available, which facilitates investment in face-to-face meetings. When your boss tells you to travel, you travel.

As a result, the decision to travel is itself relatively inelastic for the business traveler.

So, if the business traveler is the backbone of the travel industry recovery, the TSA is unlikely to get in the way in 2011, even if every passenger listens to the snap of a rubber glove before an invasive pat-down begins.

Now, let’s take a closer look at the leisure traveler. The impact of the TSA security measures may involve a bit of hype there, too.

Even before Thanksgiving, the close to two thirds of consumers thought the body scans weren’t a big deal, with 70 percent stating they didn’t expect the enhanced security measures to slow travel down during the busiest travel season of the year.

Further, economic growth, if it occurs, will provide consumers with more disposable income. Those who have an interest in travel are likely to become more ambitious, taking the trips they’ve always wanted to. Elliott finds many who disagree with this assessment, but there’s nothing like having a freshly filled checking account to alter your perspective.

We all love to hate the TSA, and I’ll admit that I’m among the many in that camp. There’s nothing worse than waiting in a long security line at a crowded airport. The notion of having to devise and carry out strategies for getting through the checkpoints faster indicates the absurdity of what goes on in airports today. Efficiency is as low as customer service, and there’s little we can do about it.

That said, will body scans and pat-downs impede a travel market recovery next year? It doesn’t seem likely. General global economic trends will determine how many people get on planes next year, not the policies crafted and implemented by government employees.

[photo by oddharmonic via Flickr]

Gulfstream’s $500 million expansion of Savannah, GA headquarters to create 1,000 jobs

by Darren Murph on

According to many pundits, the so-called recession that gripped the world in 2009 is far from “over,” but we’ve been noticing steady signs of recovery in the travel industry over the course of 2010. While consumers and businesspeople alike are still pinching pennies and thinking twice as hard about where their funds are going, more and more bodies are moving about, particularly by plane. Gulfstream, which maintains a headquarters in Savannah, Georgia, seems more convinced than ever that we’re on the rebound, and it’s announcing today a huge investment that’ll better position it “to meet future demand for business-jet aircraft and support services.”

The spend? $500 million over the next seven years, and that’ll buy significant expansion of its Savannah plant as well as around 1,000 full-time Gulfstream Aerospace jobs (a hike of about 15 percent from its current level of 5,500 employees). According to Savannah Now, those positions will include production specialists, engineers, and support technicians. Needless to say, quite a few folks in the Peach State are celebrating the news, with Gov. Sonny Perdue being one of many on hand today for the announcement. Moreover, the expansion will result in new facilities at the northwest quadrant of the Savannah / Hilton Head International Airport.

Gulfstream suggests that the investment will also help it meet a growing demand for large-cabin aircraft, with large chunks of the cash used to build production plants for G650 (“Like a G6!”) and G250 jets, as well as maintenance capacity for all of the models that the company manufactures. Unsurprisingly, we’re hearing that the bulk of that demand is coming from international clients (Asia Pacific, specifically), but the company seems bound and determined to keep its roots in the south.

We know Gulfstream doesn’t speak for the entire aviation industry, but it’s definitely good to see a major player like this making such a tremendous investment in the future of air travel. Here’s hoping it’s just the beginning of a beautiful turnaround.

[Via Twitter (@mksteele)]

Four signs that people are traveling again, starting with the road warriors

by Tom Johansmeyer on

Business travelers are voicing their demands, and why should the airlines and hotels care? Well, this group of travelers is going back on the road, buoyed by all that corporate cash. According to travel industry research firm PhoCusWright, the U.S. travel agency/travel management company sector is set to surge 15 percent by the end of the year, compared to only 8 percent growth for the leisure/unmanaged business travel market. The business traveler is largely responsible for this rate of growth.

While the U.S. travel market as a whole is recovering, it’s the corporate travel folks who are leading the charge. “Corporate travel’s wild ride over the past two years has caused an unusual shift in trend, with online channels growing more slowly than the total U.S. travel market for the first time,” says Douglas Quinby, PhoCusWright senior director, research. The phenomenon reflects the peculiar dynamics of this recession, but the reversal will be short lived. “In 2011, the long-term arc of continued shift from offline to online channels will resume,” Quinby adds.

So, what can the travel business expect in 2011 and beyond? Take a look below to see four signs that the travel market is on the mend.
1. A big swing: in 2009, the U.S. travel market fell 15 percent, due largely to the effects of the financial crisis in 2008 and subsequent global recession. No business wants to spend money in those conditions. The economy may still be unpleasant, but companies are starting to put their capital to work again, and that includes investing in business travel to generate some revenue.

2. Half of the loss regained: the projected 2010 business travel market recovery means that half the spending lost from 2008 to 2009 is coming back. PhoCusWright forecasts a total U.S. travel market size of above $255 billion.

3. Growth trajectory: this year’s 10 percent overall growth rate isn’t going to get us back to 2006 levels this year, but the next two years will be positive. PhoCusWright says to look for record levels in 2012.

4. Online future: that sounds a bit obvious, right? Well, the numbers tell the whole story. Online travel agencies will beat the record levels they hit in 2008. The online leisure and unmanaged business travel sector fell only 5 percent last year, thanks to bargain-hunting. This year, the sector will remain stagnant, according to PhoCusWright, at 38 percent of the total U.S. travel market – I suspect this is because the small decline in 2009 sets a higher bar for recovery in 2010.

[photo by laverrue via Flickr]

What do business travelers want? Not just clean rooms!

by Tom Johansmeyer on

With business travel on the rise, hotels are probably thinking about how to make these lucrative customers as happy as possible. After all, a frequent business traveler can be on the road 40 weeks a year or more (been there, I assure you), and they don’t always have the same flexibility as leisure travelers. There’s a big opportunity here, especially with business travel set to increase next year.

“Consumers are more value-conscious than ever and have been conditioned to expect more for their money after a steady diet of recession-era deals. The tipping point for hotels to differentiate their brand offering and strengthen loyalty among the post-recessionary business traveler will be providing additional complementary services and amenities tailored to their guests’ specific needs,” said Adam Weissenberg, vice chairman and tourism, hospitality and leisure sector leader, Deloitte LLP. “Beyond traditional incentives, hotels are realizing the importance of developing their online presence, particularly with mobile platforms, to capitalize on a crucial touch point for brand communication.”

For both sectors, however, now would be a pretty smart time to listen to a group of customers that is about to start spending more money. Global professional services firm Deloitte recently surveyed 1,001 business travelers and has revealed the information that the travel industry can use to connect with its best target market more effectively.

Here’s what business travelers want:1. Work-friendly room: 68 percent of business travelers often work in their rooms, Deloitte said in a statement following the survey. And for a long time, I was one of them. If a room is not designed for me to get stuff done – from a desk to wifi access – the room doesn’t work. The amenities, artwork and staff responsiveness don’t matter if a business traveler can’t work comfortably.

2. Better than clean and comfy: are you satisfied with a clean room and a comfortable bed? Well, you’re probably alone. Deloitte found that 65 percent of business travelers “expect a lot more from a hotel” than that.

3. Business on internet time: it’s hardly responding that 79 percent of the respondents felt that high-speed web access was an important amenity. Seventy-seven percent cited free parking, as well.

4. Rewards for loyalty: 30 percent of business travelers, according to the Deloitte survey, “felt their favorite hotel brand was so important to them that they would stay at that hotel brand even if it were not in the most convenient location.” Interestingly, this level of loyalty was highest among respondents earning at least $150,000 a year.

There’s more than brand familiarity going on here, I suspect (again, my suspicion, not Deloitte’s). Rewards for loyalty sure help, and I remember it influencing a lot of business travel behavior when I was living the road warrior life.

5. Device love: almost half of survey respondents said they have a web-enabled smartphone. Meanwhile, this is true of 84 percent of the 18-to-29 business traveler crowd and 63 percent of business travelers earning more than $150,000 a year. Twenty-six percent of respondents have downloaded a hotel app to a device, with 54 percent of them using it “primarily to book a room.”

Deloitte says business travel up for 2011, 80% to hit the road more

by Tom Johansmeyer on

Business travelers are back in 2011. At least, that’s what global professional services firm Deloitte is saying. After two years of corporate austerity, the business traveler is taking to the skies and road again, and this has to be great news for airlines and hotels, as it’s the corporate set that really brings in the cash they count on. The numbers look good for next year, according to this survey, which means a little more elbow room for the beleaguered tourism and travel industry.

The company surveyed 1,001 business travelers and found that 80 percent are expecting to take more trips than they did in 2010, with 79 percent forecasting that spending will be the same or higher. This follows gains in 2010, in which only 29 percent said they expected the full year to net out to a decline relative to 2009.

According to Adam Weissenberg, vice chairman and tourism, hospitality and leisure sector leader, Deloitte LLP, “The travel industry was not immune to the economic slowdown, but the confidence demonstrated by business travelers who responded to our survey suggests a brighter outlook for the industry as a whole.”
This follows a tough period for business travel. Deloitte noted in a statement:

Due to the recession, 72 percent of survey respondents had monitored their business travel expenses in various ways this past year. In particular, business travelers said they had cut back on overall travel costs (37 percent), reduced the duration of their trips (33 percent), or spent less on food/restaurants (32 percent). More than one in five (21 percent) booked less expensive hotel rooms.

Not only were belts tightening, but people were watching. Deloitte found that 59 percent of respondents indicated their companies were enforcing corporate travel policies more strictly. Fifty percent revealed that they have to get pre-trip approval for business travel, with 42 percent saying that “their company guidelines currently covered booking accommodations in advance.” Close to a third reported dollar limits on accommodations.