A quarter of businesses are implementing emergency travel restrictions resulting from the months-long financial crisis, according to the Business Travel Coalition which released its worldwide survey last week. BTC also noted that many corporations have yet to take action and thus cutbacks could be more severe. However, airlines reporting their third quarter results indicated that forward bookings indicate that capacity cuts are keeping pace with the drop in demand.
The coalition surveyed 196 corporate travel managers (CTMs) from 14 countries. The increased travel restrictions are in addition to previous travel cutbacks made earlier this year, said BTC. Forty five percent reported mandated travel reductions between 10 and 20 percent. Thirty four percent have imposed a travel freeze and another 18.8 percent mandated percentage reductions in the cost of travel. Some 68 percent of respondents in 2008 indicated that their corporations would keep emergency travel cutbacks in place until further notice. BTC found that 34.4 percent indicated that, during 2008, their corporation cut back on the use of major airlines in favor of low-cost airlines.
Among corporations that have not implemented emergency travel cutbacks, 46 percent have put additional travel controls in place, such as lower class of air travel and lower star rating at hotels. Some are looking at train travel as a substitute while others are restricting trips to out-and-back-in-one-day schedules to save ground costs or combining trips to save air fare. Corporations are also sending fewer people on trips and cancelling trips where a web conference will do. They are also mandating seven-day advance purchase, employing travel policy enforcement tools and expanding travel approval beyond a single manager. BTC found that long-haul travel at some corporations had to be approved at the director level.
BTC likened the impact of the financial crisis to the previous business downturn in the fall of 2000. “However,” it said, “there is an order-of-magnitude increase in the seriousness of the current situation and in corporate responses vis-à-vis travel policy changes this time around. In the 2000 downturn, strategic changes to corporate travel programs, including travel reductions and greater use of low-cost airlines and technological substitutes to air travel, did not start showing up in U.S. and global airlines’ results until the end of Q1 2001. A BTC survey published in June 2001, showed a travel pullback among U.S. corporations that averaged 26 percent. However, in June, the U.S. industry was still projecting a $1.6B profit for the year. By Labor Day, Wall Street was projecting a $3.4B loss, one of the worst in history, and before the events of Sept. 11.
In addition, it noted that the number of corporations requiring travel managers to offer technological substitutes to travel doubled since 2001. For instance, 11.6 percent indicated they are instructing their travel management companies to offer technological substitutes to air travel at the point-of-sale, i.e. before travel products are purchased. Another 8.8 percent are considering doing so.
Fifty percent of survey participants said their corporations were planning additional strategic investments for 2009 in substitute technologies to air travel such as video conferencing. In addition, 33.9 percent indicated that the investment in technological substitutes to air travel will be at above normal or greatly accelerated capital expenditure levels compared with prior years. Fifty four percent of survey participants said they will be required by senior management to track cost-avoidance savings used to justify the investment in technological substitutes to air travel.