NEW YORK (AP) — Airfare wars and room-rate promotions are usually aimed at vacationers, but airlines and hotels are resorting to similar tactics to regain their traditional cash cow — the business traveler.
Corporate travelers, who pay higher airfares when they sit in the front cabins of planes or book close to the date of travel, are flying coach more often — or not traveling at all during the recession. And their employers are booking fewer banquet halls and blocks of rooms, leaving many hotels pining for the sizable and reliable revenue that business meetings used to generate.
Partly as a result, several major airlines are expected to post losses for the April-June quarter when they report their earnings starting this week. And hotel revenue — which fell sharply in the first quarter from a year earlier — is not expected to show much improvement in the second quarter, either. Marriott International Inc.'s results are due Thursday.
Business travelers tend to generate a higher percentage of overall industry revenue than the percentage of total travelers they represent. Of the $641 billion spent by U.S residents in 2007 on domestic travel and tourism, roughly 33 percent came from business travelers, according to the U.S. Travel Association. But the number of domestic business trips accounted for less than 25 percent of that year's 2 billion total domestic trips.
Boston-based aviation consultant Mark Kiefer of CRA International said the economy is keeping a lid on business travel this year.
"We have a case of certain sectors that were consumers of a lot of business travel, like banking and so forth," Kiefer said. "The other issue we are grappling with are expectations. There is a lot of uncertainty about when the economy will turn around and by how much."
Travel companies are using a range of strategies to lure business travelers. Hotels are offering bonus room nights, free snacks and drinks, and more flexibility on booking and cancellation policies. Airlines have been offering heavily discounted upgrades and business-oriented fare sales.
Discounts have helped lure some vacationers back onto the road. Deutsche Bank analyst Chris Woronka noted that, while U.S. revenue per available room, a key gauge of the hotel industry's performance, was still down by a double-digit percentage since late June, it has shown a marked improvement because summer leisure demand has picked up.
But in a recent survey of 285 senior finance executives around the world, 87 percent said their companies plan to spend less on business travel this year. The American Express/CFO Research Global Business & Spending Monitor found 44 percent of the executives expect their companies' travel to decline more than 10 percent.
The survey did find that most companies will continue to spend on travel that could generate revenue. Frank Schnur, of American Express' business travel group, predicts that clients will continue to expect a financial return on their investments in travel, even after the economic recovery.