Washington, D.C. – Even with Association of Corporate Travel Executives president and Booz & Co. director of global sourcing and travel Doug Weeks’ talk of focusing on economic recovery rather than downturn during the opening general session, the recession weighed heavily on buyers and suppliers throughout this month’s ACTE Global Education Conference, presented in partnership with Business Travel News.
A preponderance of travel buyers reported their companies’ year-over-year travel volumes were down significantly—some by as much as 50 percent. A straw poll conducted by BTN editors during a Corporate Travel 100 benchmarking session found that 17 out of the 18 participating companies had lower volumes this year, with the majority at least 20 percent lower.
JPMorgan Chase’s travel would drop about 40 percent this year, said vice president of global travel Erin Barth during a conference educational session. Bruce Finch, director of global travel and workplace sustainability programs for Autodesk, said in the same session that his company expects to keep travel down even when the economy rebounds for environmental reasons, as his CEO set a target of a 20 percent carbon emissions footprint reduction (see story, page 6).
Among the recession’s effects on corporate travel management are much more restrictive travel policies, accelerating growth of remote conferencing technology and heightening senior management’s awareness of travel dollars.
“As you look at what has occurred over the last eight to 10 months, we saw capacity reductions occur in September, and then we saw demand come down even further than anybody expected over the course of the ensuing three to five months,” said Sabre Holdings chairman and CEO Sam Gilliland during a BTN-hosted town hall general session with Cisco Systems director of global travel, meetings and events Susan Lichtenstein, Moog manager of travel services Kathy Hall-Zientek and BCD Travel president of the Americas Danny Hood.
“Business travel is down in the range of 20 to 25 percent on a global basis,” Gilliland said. “Even with large corporations, and in particular financial services, you see travel down in the 30 percent range.”
Gilliland said Sabre would adapt to the current situation rather than wait for the recovery. “We don’t have an expectation that when we get into 2010 we are going to see some bounce back,” he said. “Certainly, we are not planning for it. I just don’t expect it, particularly as you think about what we talked a lot about around airline capacity. I don’t think it will come back. They will grow over a period of years slowly and we will see some capacity come back into the system, but I think we are looking at two, three, four years from now until we get back to or approach levels of capacity that we saw in the first half of last year.”
After seeing transactions decrease 13 percent in 2008 compared with the prior year, BCD Travel has seen the demand drop taper off last month. “We didn’t get hit as hard last year as we did the first quarter of this year,” said Hood. “We’re hanging on. The good news is that in March, we’ve pretty much seen a flat line. When you really look at it, transactions have gone down as far as they’re going to go, and we’ve had a little uptick over the past month.”
Although demand is down overall and suppliers are suffering, Lichtenstein and Hall-Zientek noted some positives for their travel programs wrought from the down economy.
Cisco’s traveler compliance has gone from 80 percent to 93 percent. Preferred supplier marketshare also has risen to more than 90 percent. “When the world stopped for a few minutes,” said Lichtenstein, “our executives, our CEO, came down to us and said, ‘We need to change this and drink our own Kool-Aid at Cisco.’ Immediately, we went to no internal travel. All of our training came online, which ended up being a good thing for us because all of our people around the world are now doing the same training.”
Hall-Zientek said, “We had to be very creative with a team of people working together. One change was going through travel services is mandatory rather than optional. We saw quite an increase in the number of travelers going through the travel services group and our marketshare went up to where it should be.”
More than one-third of large-market companies are making their business class policies more restrictive, according to preliminary figures from BTN’s large-market report based on responses from 30 companies that spent between $10 million and $40 million annually in U.S.-booked air in 2008.
Such actions, discussed during a buyers-only session, for limiting business class included lengthening the amount of time required before companies allow business class, restricting access to premium cabins to only certain levels of executives or dropping it completely from domestic programs.
Still, according to these preliminary results of the large-market survey, not a single company has completely barred business class usage.
During another educational session, Carlson Wagonlit Travel executive vice president of global supplier management Mike Koetting noted that while many companies have taken the “meat-cleaver approach” to reducing travel, many also are trying to stretch their travel dollars through business class policy adjustments, in many cases “reducing business class from a trip that used to be six hours in duration to eight hours in duration or 10 hours in duration. Those are pretty simple things to implement and communicate.”
Shifting business class policy has become one of many levers buyers can pull to drive more savings through policy, as opposed to at the negotiating table with airlines.
During the same session, buyers noted various other policy drivers, including advance fare purchases, spot buying opportunities and lowest logical airfare policies.
Ingersoll Rand has “looked a little more on the inside, within the company, to drive savings, as opposed to negotiating harder,” said enterprise services global travel, fleet & meeting services director Pascal Struyve.
Dan Pirnat, TRX Travel Analytics vice president and general manager, noted that many buyers are adjusting policy to trim travel dollars. “Quite frankly, I fully expect that buyers are going to see decreasing opportunities to generating savings by focusing outward through negotiations and far more opportunity focusing inward. The days of set-it-and-forget-it airline negotiations are over. Signing a two-year deal and just revisiting it every two years—those days are over. Airlines have become much more savvy and so you have to take those commitments seriously and focus on actively managing the program as opposed to passively managing the program.”
Carlson Wagonlit’s Koetting noted that while many clients have continued to support preferred carriers, they also have implemented lowest-logical-fare parameters. Other buyers have implemented a “lowest fare all the time approach,” regardless of carrier, which panelists said could cause leakage, lessen leverage with carriers and ultimately detriment the program.
Companies also increasingly have been taking advantage of advance purchase fares, though Koetting said the benefit of such buys appears to be lessening. “As demand has been falling and carriers have been creative in trying to maintain demand, we’ve seen the discount you get for booking seven or 14 days out is declining a bit,” he said. “It’s not at the point where you would tell your travelers to wait until the last minute, but we’ve just seen the financial advantage of booking in advance decline.”
When asked by a supplier during a session on procurement practices if corporate travel buyers are consolidating travel vendors “to balance out the volume” that has accompanied budget cuts, American Express Business Travel vice president of global advisory services Frank Schnur said, “If I look across our large client base, I would say that close to 50 percent are consolidating.”
Senior manager of corporate travel and meetings Ann Hannon said Raymond James Financial is “reevaluating our contracts at this time,” as the company’s “travel is down about 11 percent.”
Air Transport Association CEO James May during a keynote address sent a unified message from airlines to the U.S. government: “Do no harm.” May applied those three words to a number of initiatives evolving in Washington, including various proposals to raise taxes and fees on airline tickets and another that would alter rules governing airline alliance cooperation.
May asked corporate travel professionals to join ATA in outright opposition to new taxes and security fees that could work their way down to carriers, and ultimately to passengers. May said the government “sees the airline industry too often as a cash cow” and already taxes their services at a greater rate than tobacco and alcohol.
May said taxes on U.S. airlines and the tickets they sell already contribute $18 billion annually to government coffers, and various proposals could add as much as $8 billion per year in new taxes and fees. Proposals include additional security screening fees and an increase to the passenger facility charge, which funds airports. May derided a proposal in the latest Federal Aviation Administration funding bill that could raise the passenger facility charge to $7 per segment from the current $4.50.
ATA also opposes an Obama administration proposal to increase in 2012 the $2.50 per-segment Aviation Passenger Security Fee to offset Transportation Security Administration costs.
May strongly urged the administration to deny H.R. 831, introduced by Rep. James Oberstar (D-Minn.). To May, the bill represents “silly changes,” including a provision that could allow the Secretary of Transportation to sunset antitrust immunity granted for U.S. and international carriers.
Meanwhile, May continued ATA’s call for advancing the next-generation air traffic control system, which in part “replaces a 50-year-old radar based system” with satellite technology. May implored the government to “make next-gen a now-gen kind of reality.”
Marriott International chairman and CEO J.W. Marriott Jr., who received ACTE’s corporate social responsibility award this year, also reported on his recent efforts to talk with Congress and President Obama to ease some of the rhetoric surrounding business travel and meetings that have surfaced, particularly after insurance giant AIG’s well-publicized resort meeting conducted shortly after the firm accepted billions in bailout dollars. Marriott said he has had success in communicating with lawmakers not only the necessity of business travel as a function of performance and growth but also the place the travel industry has in the overall economy.
“Business travel creates 2.5 million jobs, and meetings and conventions alone create a million jobs. Some of our legislators are beginning to understand,” Marriott said, “to get out of this economic slump, we need to get out of the bunker.”
With his and other efforts from travel industry leaders underway, Marriott said he expected to see the waning of the “AIG effect,” in which business are reticent to schedule travel or meetings in the face of public scrutiny. He mentioned a phone call he received from an executive at a bank that had received funds from the Troubled Assets Relief Program, asking if it was prudent to conduct a scheduled meeting.
“I said as long as it’s a meeting with a business purpose and held in the right place, you’ll be fine,” Marriott said. “I think the crisis is past, and a lot of that is behind us.”