Business travel is back and growing fast

Business travel

Business travelers shelled out more cash in the fourth quarter of 2010 than they did in any other since the recession kicked in. The latest report from the Global Business Travel Association shows an increased spend of $4.2 billion over the previous quarter. For all of 2010, business travel spending ticked up 3.2 percent – far ahead of the 2.3 percent originally predicted.

Now, hopes for 2011 are even higher. Business travel spending is expected to grow 6.9 percent this year, relative to an original forecast of 5 percent.

According to Michael W. McCormick, GBTA Executive Director and COO, “These are very heartening signs. Business travel spending is coming back at robust levels, indicating the shape of things to come – namely more travelers on the road, an improving economy, and a positive environment for continued job growth.” He added, “Thanks to increasing corporate confidence, companies are investing more in business travel which will further stimulate business activity and economic growth.”Increased travel prices are part of the reason for this, the GBTA explained. The association noted that “[r]ate analysis based on an aggregate of airfare, lodging, meals, ground transportation and car rentals shows travel prices in 2010 increased by 2.5 percent and are projected to increase between 2 percent to 4 percent for 2011.”

Some of the gains are also coming from business travelers crossing borders. Lat year, international travel spending climbed 17.3 percent year over year, with another 7.9 percent expected this year. International travel growth is expected to outpace the overall trend.

Finally, good vibes are contributing to the increased flow of cash. McCormick said, “Group travel, events and conferences are large expenses with long lead times. Companies lacked the confidence and clarity to make these longer-term investments when the economy was struggling, but these increases are further evidence that companies are feeling much better about investing in business travel and face-to-face meetings once again.”

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

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]

Hotels and spas use corporate retreats for sweet financial revenge

It’s hard to tell who wants a business travel rebound: business travelers or the hospitality companies that cater to them. Routine road warrior jaunts suck, but there are executive retreats, training programs and other opportunities that do appeal even to the most jaded of the white collar folks.

So, the hotels are fighting to get business travelers back, according to Business Insider, and they’re getting creative. Luxury properties, including spas, were nailed by the financial crisis and ensuing recession. They have a lot of ground to make up. To do this, they’re coming up with new programs to get the corporate folks to open their wallets. Some of them are pretty bizarre, even retaliatory. Business Insider reports:

Their new approach is luring clients back to their bedrooms for “must-have” bonding and training sessions that put execs in compromising positions.

Retreats that specialize in corporate getaways have been cooking up programs that encourage extremely awkward and potentially dangerous bonding activities, like fake-trying to kill each other.

Call it the, “You’re putting us out of business? We’re going to push you off tall objects, hike mountains naked with 50 pounds on your back, try to kill each other and make you beg for more” – strategy.

Even with these implications, the response from the business world still seems to be a resounding, “Thank you, sir! May I have another!”

Bank of America, Google and Toyota are among the companies that have gotten on board with these programs. Some of them do get pretty weird, such as:

The icing on the cake is The Death Race, where co-workers sit for 45 minutes in an ice-broken pond, gulp a gallon of milk (even if you’re lactose intolerant), crawl under barbed wire and sprint up a greased-up ramp.

Don’t you remember when the corporate people were just interested in making money? It was all so much easier back then …

[photo by Boss Tweed via Flickr]

Business travel picks up again – but not for the reasons you think

Did you see more suits at the gate this year? You probably didn’t, but that doesn’t mean businesses aren’t spending more on travel.

The latest data from the National Business Travel Association, in a survey of 170 corporate travel managers in North America, indicates that corporate travel budgets climbed 5.5 percent in 2010, and they’re set to gain another 4.5 percent next year.

But, it’s not for the reasons you think.

Sure, there are a few more people in seats, according to Craig Banikowski, the NBTA’s chief executive. He says that “companies are already getting their teams back on the road to help build business.” But, the underlying driver of the increase in business travel spending is that airlines and hotels are discounting less and kicking their prices higher.

Nonetheless, the NBTA report is optimistic. It finds that 72 percent of corporate travel managers believe that the business travel industry has improved over the past year. And, 63 percent believe it will continue to do so over the coming year.

Notes Banikowski, “As the economy continues to improve and both domestic and international costs rise, we will see airlines and hotels wield more negotiation power.” He adds, “Many travel buyers are already experiencing more strict market thresholds and expect this to result in smaller corporate discounts going forward.”

[photo by Mobile Edge Laptop Cases via Flickr]

White Collar Travel Extra: Abercrombie CEO grounded!

When you think about it, $71.8 million in total compensation just isn’t what it used to be. That’s what Abercrombie & Fitch Chairman and CEO Mike Jeffries raked in for 2008. Meanwhile, the company he was skippering showed a profit of $254,000. Basically, A&F as a company – with all the resources available to it – earned the decent salary of a lower-level executive. So, it’s no surprise that Jeffries had his wings clipped.

According to the Corporate Library, a watchdog group, Jeffries was one of the top five Highest Paid Worst Performers of 2008. Translation: never has one received so much for accomplishing so little. I don’t know if you can call it punishment – hell, it doesn’t even feel like a reality check- but A&F is putting the brakes on its contributions to the CEO’s personal travel cost. After $200,000, he has to pick up his own tab. Compare that to the 2008 personal travel bill he turned over to shareholders: $1.3 million.

Yeah, times have changed.

Now, I’m sure someone, somewhere, is about to shed a tear for Jeffries. After all, he’s losing a nice perk. Fortunately, he has found a way to compensate (well, be compensated) for the change in travel policy: A&F is kicking in a $4 million lump-sum payment.

I know it’s fashionable to hate greedy CEOs. Frankly, I’m fine with their making obscene amounts of money, as long as they’re creating kick-ass amounts of shareholder value – that’s really all that matters. Well, Jeffries hasn’t been delivering the goods, which means just about anything is “generous” at this point.

If it had to happen, at least, the cap on personal travel expenses came at the right time. Flights are still pretty cheap, and hotel rates aren’t likely to start recovering until next year.