Warning: new travel “normal†on its way
A weak travel recovery is causing travel experts to warn that a new “normal” is on its way as future expectations may have to be dramatically lowered.
“The greatest concern for hotels, airlines, travel agencies and entertainment companies is that the financial crisis has led to a permanent reduction in spending on business travel,” says Reuters.
Another fear is that corporations will tell business travelers they always have to fly coach and shop online for cheaper hotel rates.
"Companies are realizing that travel has always been a big component of their budgets, but it’s a component you can control," said Deutsche Bank analyst Chris Woronka.
"You travel differently now. Maybe you fly coach instead of business class, maybe you stay in a four-star hotel, not a five-star one," Woronka said.
Travel management agencies and consultants said companies are likely to institute permanent changes in the way employees travel, effectively creating a "new normal" for business travel.
Some companies may prohibit premium-class travel altogether or use video conferencing to replace some trips, according to a business travel outlook provided by Carlson Wagonlit Travel.
What might this mean?
—For hotels, that could mean they will not be able to command the rates they have had in the past. "That’s the $1 million question," said Choice Hotels International Chief Financial Officer David White.
—For the airline industry, there are signs of recovery but carriers have had little luck in raising air fares. "It’s a continuing marginal overcapacity situation, which is an acute overcapacity situation in certain periods and markets," said airline consultant Robert Mann at RW Mann and Co.
And meanwhile, online travel agencies are working hard to bolster bookings using promotions and fee cuts.
Priceline.com said that the value of its bookings increased by 52.9 percent in the fourth quarter. Priceline’s chief rival, Expedia Inc. said the values of its bookings jumped 26 percent in the quarter.
"The travel economy has recovered a little bit here in the second half of 2009," Priceline Chief Executive Jeffery Boyd told Reuters.
The company predicted continued bookings growth in the first quarter of 2010.
By David Wilkening
David
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