Dollar, Traveler Take a Beating
JUST when it seemed safe to go on the road again, business travelers have been dealt another budget-busting blow: devaluation of the dollar.
Mark Stultz, who recently returned from a 5 1/2-week business trip to Europe, is still reeling from sticker shock. “It’s just so stinking expensive over there,” said Stultz, the director of global facilities planning for El Segundo-based Computer Sciences Corp. “Especially in the U.K., where everything’s two [dollars] for one [pound].”
To comply with company expense guidelines, the 120,000-mile-a-year flier now stays in cheaper hotels, takes trains instead of taxis and eats fast food instead of fancy hotel meals. And he’s spending more money for less luxury. “I paid 159 [pounds, about $288] at a Hilton in London, and it was a dump,” he said. “The paint was peeling and the elevator didn’t work.”
As the dollar gets hammered on the Continent and in Britain, once-privileged road warriors like Stultz are being forced to travel like penny-pinching vacationers. No longer are they holding court in fancy hotels and restaurants.
The name of the game is trading down.
Companies began stripping fliers of entitlements after Sept. 11, when travel budgets were cut to the bone. A weak economy keeps many of those measures in place today, according to a survey of 19 Southland companies by the Los Angeles Business Travel Assn., which counts the region’s largest companies as members. Dismal exchange rates are compounding the problem.
“Companies and their travelers have made all the cuts they can; now they’re just feeling the pain,” said Katharine Samuels, president of LABTA.
The pain is even greater for independent or small-company business travelers, who lack negotiating power. “When I worked for a large company, I’d make plans at the last minute,” said Earl Foster, a Hawley, Pa.-based travel management consultant. “Now I’m forced to think about an international trip six months out and do my own Internet searches for the best deals.”
Despite companies’ best efforts to keep costs in check through aggressive negotiations, the greenback’s losing battle against the euro (the trading currency of a dozen European nations) and British pound has been a major setback. The dollar is now worth 20% to 30% less than it was two years ago; on March 18, the euro was worth $1.22 and the pound $1.81.
Financial experts say there’s no end in sight to the slide. “The traders we talk to have a grim outlook on the U.S. dollar’s future overseas,” said Steven Dengler, chief executive of XE.com Inc., a Toronto-based currency tracking company.
That’s discouraging news for corporate travelers to Europe’s major business centers. The biggest “ouch” for U.S. execs is London, which has become one of the most popular -- and priciest -- cities in the world.
A taxi from the airport to downtown now costs about $75, a first-class hotel goes for $365 per night (deluxe is $619) and a compact car rents for $165 a day, according to daily travel costs tracked by Runzheimer International. Companies with preferred agreements have been able to shave hotel costs by as much as 60%.
Even at the negotiated rates, some travelers are barely scraping by. The U.S. State Department has been forced to continually adjust upward its international per diems, the maximum allowable limits on daily lodging, meals and incidentals for government travelers going to foreign cities. Private-sector companies and government contractors often use these per diems as benchmarks for their own travel expense guidelines.
In February, the per diem for Paris, for example, increased to $408 per day for lodging, food and incidentals, a 45% increase from the previous year. “When there’s a change of 3% or more in the exchange rate, it triggers a change in the per diem,” said Juanita Stokes, deputy director of the State Department’s Office of Allowances. “We’ve seen rates in most European cities increase significantly, due to devaluation of the dollar.”
As a result, more travelers have been forced down the travel food chain. Now, even elite travelers are squirming like sardines in the back of the plane.
“There’s very little ‘paid for’ first-class travel across the ocean these days,” said Carol Salcito, a Norwalk, Conn.-based travel management consultant.
Low-cost airlines, nonrefundable fares and inexpensive intra-Europe carriers such as Ryanair and EasyJet have become the air-travel method of choice. What’s more, companies are buying tickets in Europe to take advantage of stronger currencies, despite the airlines’ attempts to crack down on these strategies.
Travelers such as Bob Ayers are taking matters into their own hands by doubling up on trips. “Instead of going for seven days, it’s now 10 to 12 days,” said Ayers, the western area sales manager for Schaumberg, Ill.-based DMG America, a metal-cutting manufacturer. “And by making my plans way in advance, I can save up to 30% on fares.”
Because of reduced demand and weaker economic conditions, hotel rates across Europe and Britain are down about 3.5%. But in U.S. dollars, the prices are 15.3% higher, said Julia Felton, executive director of Hotel Benchmark, a service of business consulting firm Deloitte UK.
To combat these inflated costs, some companies are pulling travelers off concierge floors and booking them into lower-rent digs, while other companies are instituting leaner per diems.
Computer Sciences Corp. of El Segundo recently issued a new policy capping the hotel rate on stays of three days or fewer at 99 pounds (about $200) a night. For London-bound travelers, that means stays at more mid-level chains such as Thistles and Ramadas. Holiday Inn has become the hotel of choice for U.S. travelers of Britain-based Pilkington PLC, who once were accustomed to Hiltons and Marriotts in Europe.
“Travel was once the sacred cow, but now there are no more sacred cows,” E.J. Hewitt, U.S. global supply manager, said of a 2-month-old, company-wide mandate requiring employees to cut their costs by 20%. The huge industrial-glass-manufacturing company is in talks with another large European company to pool volume for deeper discounts from hotels and car companies.
Still, some companies may be taking the downscale concept too far, as Salcito recently discovered on a trip to Europe. “A client put me in a hotel that was the equivalent of ‘Rent-a-Wreck,’ ” she said.
The good news: Many travelers no longer have to expense high-speed Internet, parking, local phone calls, 800-number access and other pricey perks because big companies are negotiating these services into their room rates, said Joanne Baynes, president of Reston, Va.-based Uversa International, which assists corporations with hotel negotiations.
In cities where competition is high, travelers such as Steve Goldmeyer are snagging amenities and more on their own. “At check-in, I always ask for a better rate -- and usually get it,” said Goldmeyer, the principal of Rand International, a Farmingdale, N.Y., sporting goods importer. “In this day and age, you have to be vocal.”
Business travelers have given up another entitlement: taxis and car rentals. Now they’re riding the rails with students, vacationers and other tightwad business travelers.
CSC’s Stultz takes trains all over Europe. “It’s the cheapest way to go,” he said. “The train from my hotel to Waterloo station in London cost almost $4, versus nearly $26 for a taxi.” DMG America’s Bob Ayers stays at suburban guesthouses on train routes, saving more than half the cost of a central-city hotel, not to mention the price of a compact rental (about $1,000 for the week) and gas (which can run as much as $5 a gallon).
And Pilkington has mandated rail travel whenever possible and instituted an online tool to make it easier for travelers to book.
Gone too are the days of three-martini lunches and dinners. The cost of three meals per day in London can now run more than $100 a day with almost $40 of that going to breakfast.
U.S. companies are now negotiating breakfast into their hotel room rates, a practice already common among European companies. “We almost always ask for this because, thanks to the exchange rate, breakfast in Europe now costs as much as dinner in the U.S.,” said Pilkington’s Hewitt.
Travelers are getting more creative too, choosing burgers and fries over pricey room service meals. “Fast food’s even cheaper in Europe than in the States,” said CSC’s Stultz, who alternately fills up on pasta to save money. “Italian’s the most economical meal around.”
But business travelers seem to be paying more attention to air, hotel and car prices than to the cost of exchanging money, which can add 12% to the bottom line.
Savvy road warriors know to avoid high-priced airport exchange kiosks and to use charge or debit cards and ATMs instead. But few realize they’re often getting hit with surcharges that offset those savings.
MasterCard and Visa generally take a 1% to 3% commission on credit card conversions. Issuing banks often slap 1% to 2% on top of that, and cash advances can run even higher.
Another downside: Travelers may be getting shortchanged on their expenses because they do not know to account for hidden charges levied by foreign exchange providers. XE.com and its competitor Oanda.com offer business travelers free foreign exchange charge calculators on their websites, which spit out an estimate of the “hidden fees” for converting and processing the transaction.
The bottom line: The weak dollar along with corporate cuts have created a class of downwardly mobile travelers. And the dramatic change in on-the-road behavior has not gone unnoticed by industry observers. Travelers “do not [and cannot] spend as they did in the ‘90s,” Runzheimer analysts noted.
For 2-million-mile fliers like Rand’s Goldmeyer, survival is replacing snobbery. “I always make friends with the gate agent before boarding an international flight,” he said. “If there are more empty seats in coach, I’d rather stretch out there than get squeezed into business class.”