Rising Costs of Business Travel Start to Put the Squeeze on Corporate America

Sometime last year, somewhere in the United States, a business traveler approached an airline ticket counter and for the first time encountered a new benchmark: the $2,000 domestic fare.

That, according to the National Business Travel Assn., was the warning bell.

It’s still ringing.

At every turn, the buzz seems bleak for the business traveler.

The news is brimming with proposed airline consolidations, increasing airport-hub concentration and stratospheric jet fuel prices. Rental car companies are charging more.

Marianne McInerney, executive director of the National Business Travel Assn., told Congress last year that 61% of the nation’s corporate travel managers were seeing increases of 6% to 9% in business travel fares, with companies reporting average fares of $1,691 for domestic business trips and $3,542 for international.

So-called walk-up fares, last-minute ones used most often by business travelers, shot past the $2,000 mark. Since 1986, business fares have increased 36%.

And, according to the NBTA’s 2001 Business Travel Forecast published in October, fares paid by business travelers will increase an additional 8% this year.

There is a temptation to blame all of the increase in travel expenses on the airlines; they’ve made themselves easy targets.

But while the airlines were drawing a firestorm of controversy with record flight delays, labor problems, customer service issues and merger negotiations, the auto rental industry was undergoing changes that went largely unheralded, yet yielded price increases only slightly less dramatic than those of air fares.

The average daily corporate rental car rate that was $48 in 1996 rose by $12, or 25%, to $60 in 2000.

NBTA analysts attribute the lion’s share of the hike to the high volume of corporate contract renewals that were renegotiated at the beginning of 1998, when 1997’s $50 average leaped 12% in a single bound to $56.

Neil Abrams, an auto-rental industry analyst quoted in the NBTA report, pointed to another reason for more recent rate increases: “Most of the major car rental companies are now publicly owned. Managers of the companies must be able to turn a profit every quarter, and they have to be able to make money off a corporate client.”

The upshot: Business travelers can expect corporate rental car rates to increase 5% this year to an average $63 a day, according to the NBTA’s Business Travel Forecast.

The group’s prognostication for 2001 hotel prices is no better: Corporate room rates also will climb 5%, to $192 a night, on average.

Many corporate travel budgets aren’t keeping pace.

When the NBTA surveyed its members in January--travel managers who negotiate and purchase business travel for Fortune 1,000 companies--more than 50% said their travel budgets were lower than or about the same as they were in January 2000.

Here’s what those corporate travel managers said their companies are doing:

* 61% are eliminating all but essential travel.

* 57% are reducing the number of employees on a trip.

* 46% are reducing the number of meetings.

* 43% are reducing the number of domestic trips.

* 77% are booking advance-purchase fares.

* 71% are booking flights on discount airlines.

* 55% are using “alternative” airports.

* 40% are requiring senior executives to fly coach.

And they’re not alone.

The challenge for America’s business travelers, then, short of staying home, is to spend smarter.

What companies need to do with their travel programs is implement “good, common-sense business practices,” said Harold Seligman, founder, chairman and chief executive of Management Alternatives Inc., based in Norwalk, Conn.

Companies can, Seligman said, “tighten the pre-approval process for business trips--usually a practice that gets lax in good times.”

Businesses that allow employees to book their own travel can install certain software systems customized to display just the carriers with which the company has negotiated discounted rates, he said.

And some software programs, Seligman said, can even track and report travel expenses from start to finish.

“The individual traveler,” he said, ‘then has only to track out-of-pocket cash expenses like cab fare.”

Another strategy companies can use in tight economic times, Seligman said, is to make multiple use of a single traveler.

“Instead of sending three employees on three trips to the same general area, you’d send one employee to make all three calls,” he said.

Another consideration is for business travelers to start thinking like leisure travelers.

In the past, business travelers “haven’t been as price-savvy as leisure travelers because they haven’t had to be,” said Mantill Williams, director of public affairs for the American Automobile Assn.’s national office in Washington.

He said business travelers should start planning their trips more like vacationers do, by using a travel agent, shopping for prices and booking as early as possible.

‘A lot of the time, business travelers know enough ahead when they are going to have a meeting,” Williams said. “They could take advantage of advance pricing.”

But many business travelers are in the habit of waiting until the last minute to book, he said, because trip planning isn’t on their day-to-day agenda.

It should be.

The Internet is an increasingly important means to comparison-shop and purchase reservations, particularly for independent business travelers and small-to-medium-sized companies.

Expedia.com, for instance, on which users can research and book air travel, hotels and rental cars, attributes about 30% of its customer base to business travelers. In November, Expedia.com added features to its “Business Tools” that allow business travelers to create an itinerary template--same flight, same hotel, same rental car--when work regularly takes them to the same city.

The site also offers a printable receipt for electronic tickets. And when one person is assigned the job of planning and booking travel for an entire group, Expedia.com’s “Travel Arranger” feature has a way for that person to purchase travel on behalf of each of the others in the group, without the entire bill being charged to that individual’s credit card and without having to use the other travelers’ passwords.

But Internet trip planning isn’t perfect. Expedia.com and Travelocity, the two biggest one-stop-shopping travel sites, don’t necessarily find the lowest air fares in every case because flights on no-frills airlines such as Southwest, Jet Blue, Spirit and Sun Country aren’t listed in a central reservation system.

To research those fares, you must either access their individual Web sites or log on to a site such as SideStep.com, which does research and posts fares on those and other airlines

Companies that can plan more than a week ahead and see their way to covering an extra couple of hotel nights will save more than enough money on air fare to justify the longer hotel stay.

According to the NBTA, fewer new rooms are coming on the market in resort and convention hotels, so prices at resort and convention hotels generally are staying high and rising.

The opposite is taking place at all-suite and limited-service hotels, where a glut of rooms may keep prices stable.

If rising travel costs bring any good news in their wake, it is this: Though items such as fuel and food may be subject to immediate price fluctuations in the market, travel prices historically take their time in responding, according to the NBTA.

In the meantime, one thing is certain. Companies are thinking twice about how much they really need the travel industry to help them conduct business.