Business - Business Travelers & Economic Crisis

Joe Brancatelli

I don't want to go all Chicken Little on you, but the sky is falling on the business-travel world.

"Our traffic has cratered," a 30-year airline veteran told me late last week. "I've never seen anything like it before. It's brutal."

"Travel has tanked since Labor Day," added the general manager of a luxury hotel in Chicago. "Last year at this time, I was booked fairly solid right up to Christmas. This year, I'm empty. I've got days when I'm at 25 percent [occupancy]."

It's a matter of financial doctrine that travel and entertainment spending is the first to fall when the economy weakens. And T&E has been slumping all year, as corporations reacted to oil prices, low sales, falling profits, and other factors. But the collapse of travel since the markets shuddered in mid-September is unprecedented. With the obvious exception of the months immediately after the 9/11 terrorist attack, travel has never fallen this far or this fast.

Consider this: Since Labor Day, the nation's six network airlines and their commuter affiliates have grounded about 500 aircraft. That means a carrier the size of Northwest Airlines, the nation's fifth largest, has essentially disappeared from the skies. Yet even with that estimated 10 percent cut in nationwide seat capacity, airlines haven't been able to register increases in "load factors," the percentage of available seats sold. In fact, passenger demand has fallen so precipitously that some carriers reported their load factors dropped in September or October.

It's no better for hotels. A respected lodging consulting firm says nationwide hotel occupancy has declined steadily this fall. By the end of October, the number of rooms filled dropped 6.6 percent to 63.1 percent. Revenue per available room, a key gauge of hotel performance, fell 7 percent.

Want some anecdotal evidence to dress up the dreary statistics? A pair of travel magazines folded last month. A major resort in Hawaii served just one breakfast in its dining room on a recent morning. A gate agent at San Francisco International Airport called me last week to report she had just processed a flight to Europe with only two paying business-class passengers. And oh, yeah, the 124-room Goodwin Hotel, a terra cotta icon in downtown Hartford, Connecticut, will close its doors at the end of the year. The owner has offered to lease the property for $1 a year to the union representing the hotel's employees.

The sharp downward turn of travel would be worrisome enough if it were just a matter of quantity. But it's a matter of quality too. The most profitable travelers—us business types—are staying home.

As I explained in a recent column, business travelers who take high-priced, premium-class flights and book expensive hotel rooms are the financial glue that holds the system together. As business has spiraled downward in subsequent weeks, more and more companies have put the brakes on their T&E spending. And many of us who are still on the road have been asked to fly less frequently, travel less elegantly, and pinch every available penny. The new frugality has even spawned its own thread at the FlyerTalk.com discussion boards.

"Business travelers are not fools," the corporate travel manager of a major computer firm told me by email last week. "They know that their bonuses, maybe even their jobs, depend on us cutting costs and riding out this bad patch. Some of them have even come to me with ideas for getting T&E costs down. They know this is no joke."

Of course, even such a dark cloud has a proverbial silver lining.

Travel will be easier for those of us who'll still be on the road in the coming months. Airports will be less crowded, security checkpoints will be less frenetic and, miracle of miracles, more and more flights are running on time. Last year I was writing that nationwide on-time performance had slid to schedule-destroying levels. But last month 84 percent of the nation's flights arrived on time, according to FlightStats.com. It's the fifth consecutive month airlines have improved on-time performance.

And if you need a silver lining that actually involves silver (or at least negotiable financial instruments), airfares and hotel rates are beginning to decline noticeably.

"We've been told to start thinking out of the box, come up with promotions to get people on planes, especially up front," one airline executive told me last week. "We're going to see a lot of creative discounts in the next few months."

In fact, the discounting has already started. OpenSkies, the British Airways boutique carrier I raved about three weeks ago, has slashed its prices. If you purchase tickets by November 21 and travel before the end of March, flights from New York to Amsterdam are just $550 one-way in the prem+ cabin and $1,050 in business class. Flights to Paris are just $50 more each way, making a business-class roundtrip to Paris just $2,200, about 75 percent off standard walk-up rate.

At those prices, I can afford to go all Humphrey Bogart on you. You know: "We'll always have Paris…"


The Fine Print…
The market has decided that fees for checked bags are okay. As I explained back in September, four airlines (American, United, Northwest, and US Airways) were charging luggage fees on domestic flights. Continental Airlines fell into line last month and Delta Air Lines, which completed its merger with Northwest Airlines late last month, said it adopted Northwest's policy of charging most non-elite fliers $15 to check a bag. The only wrinkle: Continental doesn't charge the first-bag fee to travelers who carry Chase credit or debit cards tied to the Continental OnePass frequent-flier program.