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The Road Less Taken
Travel industry seeks creative detours around post-9/11 slump
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Business New Haven
2/18/2002
By:
Nancy Barnes
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Some days travel executive David Smith wishes he had a crystal ball. As director of operations for New Haven-based WorldTek Travel, which has 60 offices nationwide, he oversees the travel agency's corporate business. He saw that business drop dramatically - more than 50 percent - following the events of September 11.
“Even prior to September 11, based on the economy, corporate travel was down, and obviously it continues to be down,” says Smith. “Our business is still down about 35 percent from one year ago; it may end up leveling off at 20 percent [down] this year; or - who knows? There's no telling when it'll get better.”
Even after the precipitous decline in travel that immediately followed the events of September 11, corporations predicted a recovery in business travel by this spring. Because of the weak economy and long airport delays for security checks, however, the scenario is no longer as rosy. Now, some in the travel arena raise questions as to whether all segments of the corporate-travel market will ever recover.
“It's not as smooth as they claim it is; it's not hassle-free,” WorldTek's Smith says, describing the security checks that tie travelers up in knots at airports. He says companies have begun to avoid airline travel when it concerns a single business meeting that is reasonably close to the office. “Jumping on a plane doesn't save as much time as it used to,” he observes.
“There may never be a complete recovery on that,” adds Paul Lang, referring to the same short trips that business people once routinely took by plane. Lang, who directs corporate travel for the Bayer Corp. from its Pittsburgh office, says that the overall purchase of net airline tickets by the chemical giant, whose North American pharmaceutical operations are headquartered in West Haven, declined some 30 percent between September 11 and December 31.
Lang says that his company had seen some decline in its corporate travel even prior to September 11 due to the sluggish economy, and he says that the weak economy continues to affect Bayer's travel plans now.
It's the brief, 45- to 60-minute flight that today seems especially unproductive. “People may choose to drive if it [the short flight] takes three or four hours,” says Lang, factoring in the wait at the airports and “all the delays. More people are willing to accept the alternative,” he explains.
For some, one alternative to commercial travel has become videoconferencing. Immediately after September 11, communications companies reported a sharp surge in corporate requests for videoconferencing.
One company that has used the new technology to productive effect is Cytec Industries Inc., the global specialty chemicals manufacturer with a plant in Wallingford. At Cytec, air travel dropped by 50 percent immediately after September 11.
“We are doing some videoconferencing,” says Cytec's senior marketing executive, George Yuro, speaking from the company's West Paterson, N. J. headquarters. “We looked at and evaluated all our sites. Quite a few of them already had videoconferencing in place. We're certainly encouraging people to use videoconferencing whenever and wherever it's practical.”
And videoconferencing, which provides a technological equivalent to meeting face-to-face, may not be a corporate flash-in-the-pan. “Once you say, 'Hey - videoconferencing worked and it looks good,' you find that the necessity for travel is not that great,” Cytec's Yuro says.
Videoconferencing is one of the cost-cutting measures that showed up in a survey released last month by the National Business Travel Association (NBTA). In the survey, some of the 220 companies responding cited the technology as one of the means they are employing to pare travel costs.
Overall, three-quarters of respondents reported trimming their travel costs. More than half are reducing the number of business meetings, with some firms saying they have dramatically reduced attendance at meetings as well. More than one-quarter are reducing business travel that is conducted by a group of employees.
Nearly half are using alternate airports - for example, Baltimore-Washington instead of Reagan National or Dulles, or T.F. Green in Providence, R.I. instead of Logan - if they can take advantage of discounted flights. Sixty percent say they have begun to book flights more than one week ahead. As a result, they are not paying the full fares that airlines rely on to become profitable.
Until the economy strengthens, corporate travel managers surveyed expect these strategies to continue. Their travel budgets run the industry gamut, with the majority spending between $10 million and $30 million annually.
The lodgings industry, whose profits peaked at $23 billion in 2000 before plummeting 27 percent last year, has also become enmeshed in cost-cutting strategies. Many travel managers who responded to the NBTA survey say they are requiring that their employees stay at discount hotels as opposed to full-service facilities such as a Marriott or Hilton.
Some in the lodgings industry appear to have benefited from that decision. For instance, the number of business travelers who are staying at Choice Hotels International Inc.'s budget Econolodge and Rodeway Inns rose eight percent last year over year 2000, and the company is moving to see that the number of its corporate travelers continues to increase.
Among its efforts introduced last year was a frequency program called “Easy Choice.” Launched in early September at Econolodge and Rodeway Inn franchises, the program rewards customers with credit toward future motel stays as well as airline miles.
According to Tim Shuy, Choice Hotels' vice president in charge of economy brands, the program is the first of its kind launched within the budget segment on a national basis
Also instituted at the two chains - whose facilities, Shuy points out, are mainly sited on roadways, and so are particularly convenient to business people who travel by auto - are strict quality controls. Much like the frequency programs, Shuy says, the controls appeal to the corporate traveler.
On February 1 the chain, which includes the more upscale Clarion as well as the Quality and Comfort Inn brands, launched a promotional campaign that awards airline miles to business travelers.
Another facility that seems well-positioned in today's vexing travel climate is Windsor Locks' Bradley International Airport.
Bradley posted a record year in 2000, attracting 7.3 million passengers. Based on numbers of passengers, Bradley grew between ten and 15 percent in 1999 and 2000. Last year, its growth dropped to six percent over 2000. Still, this number is still less than the double-digit drop that some other airports experienced, according to industry reports.
“We're not back to our former level of year 2000 numbers,” acknowledges Andre Libert, the airport's marketing director. “We do see more traffic. We do see airlines returning flights. As we see new service return to Bradley, we'll be back this year to the 2000 levels.”
Libert bases his estimate in part on the types of service that he expects will originate from the airport, including more domestic nonstop flights as well as projected nonstop service to London by a start-up carrier, Atlantic Jet.
“Once we have the new [international] terminal on board in 2003, we anticipate even more carriers coming in,” Libert says. “By 2003, we hope to be in a growth mode.”
But he emphasizes that full airport recovery will require a mix of events.
“It's going to take a little of each - the return of the economy, return of service to the airport, and confidence in security measures at the airport.”
What he does concede is that it is difficult for him to track how many of the airport's current travelers are business people. “That's very difficult to quantify,” he says, adding that the airport plans to conduct a survey this month.
Even the beleaguered commercial airline industry is developing strategies of its own to ease travel for business people. The industry, still reeling from the worst quarter in its history, has begun touting the value of a “trusted traveler card” through its Washington-based trade organization, the Air Transport Association.
The card, which would be designated only for people cleared by intelligence and security agencies, such as the Federal Bureau of Investigation and the Immigration & Naturalization Service, is designed to get the business traveler through airport gates quickly.
Earlier this month the economy, which officially slid into recession in March 2001, began to show some signs of revival. Reports of a slight rise in the Gross Domestic Product in the last quarter of 2001, a small drop in unemployment claims and even a rise in the length of the manufacturing sector's work week are all indications that the economy is slowly regaining strength.
Yet few within the travel market are offering a guess as to when corporate travel will find itself on a sturdier footing. Although Bradley's Libert says he expects growth in enplanements to return to normal this year, the corporate community is more cautious about its travel spend.
“I couldn't venture to guess when we'll be back to normal,” says Bayer Corp.'s Lang.
Tangled Web Travel
More changes may be brewing within the corporate travel world. In this case, alternatives to travel-as-usual are being driven by the online travel sector. In recent months, some of the travel sites have seen their traffic increase.
Orbitz.com, an online travel site whose creation last June was backed by American, Continental, Delta, Northwest and United airlines, saw its traffic surpass pre-September 11 levels in October. Orbitz spokesperson Lana Krstich says that although the site “is mainly used by leisure travelers, we have been able to see that some corporations are checking our fares” as well.
The online travel sites have generated consternation within the corporate travel industry, according to NBTA spokesperson Allison Marble, because the sites display discounted Web fares not available to corporations that use the corporate travel industry's computer reservation systems (CRS).
“Corporations,” Marble explains, “negotiate annually with airlines to have special rates for travelers, and they'll agree to fly a certain number with that airline. The airlines provide their fares to the CRS, and corporations book through them.”
“We are pushing to have Web fare fees listed in the CRS services,” she says. “Corporations are pushing a lot, too. It's a topic that has not been addressed to its fullest.”
The federal Department of Transportation, which regulates CRS service, is scheduled to review the CRS rules beginning next month, Marble says.
In the past year, the online travel industry has experienced some turbulence of its own. Rival online travel sites, including Travelocity.com and Expedia.com alleged last year that Orbitz had unfair access to discounted tickets. The government was reviewing Orbitz' business practices to determine whether it was in violation of antitrust laws. BizTravel.com, which served only corporate travel, closed late last September.
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