Business travel is making a frugal comeback, with room for a few luxuries along the way.
U.S. companies are forecast to spend 5 percent more on travel in 2011 than last year — a sign of confidence in the economy that is giving a boost to airlines, hotels and rental-car companies. That’s double the growth rate from 2010, after two years of decline.
“A lot were people who hadn’t come to OR the last two years, but they came back this year,” he said.
Executives sending workers back on the road say travel is critical to success.
“You need to have face time,” said Robert Genco,vice president of operations for Synopsis, a Silicon Valley company that makes software for microchip manufacturers. Synopsis cut its travel budget by 60 percent during the recession. Now it’s nearly back to a pre-recession level, with salesmen and top executives visiting old and new clients in China, India and Japan.
Although U.S. economic output returned to pre-recession levels in 2010’s fourth quarter — and faster growth in 2011 — spending on business travel isn’t expected to return to its pre-recession level until the middle of 2013, said Michael McCormick, executive director of the Global Business Travel Association.
That’s partly because companies require employees to travel frugally — spending fewer nights on the road, staying at less expensive hotels, renting smaller cars and, booking cheaper flights that aren’t nonstop. The average cost per trip in the first quarter is forecast to be $538, 6 percent below the same period in 2008, McCormick said.
In 2009, business travelers spent $222.7 billion, the lowest since 2003, he added. That year, the largest U.S. airlines lost a combined$3.4 billion.
The recovery already has benefited Utah’s hospitality industry, which could prosper even more as economic conditions continue to improve, said Michael Johnson, executive director of the Utah Hotel & Lodging Association.
“As you see travel come back, especially incentive travel, that travel goes to the hottest new destinations,” he said. “The properties that have come into Park City — the St. Regis, Montage and Waldorf-Astoria — along with Stein Eriksen’s are some of the hottest travel destinations.”
Last year’s bump in business travel — companies spent an estimated $228 billion — helped U.S. airlines post their first collective profit in three years. And profits are rising at hotel chains such as Marriott and Hyatt and rental-car companies such as Avis and Hertz.
Perhaps the most telling sign of a rebound, industry officials say, is the return of corporate retreats. They had all but vanished during the recession, part of an effort by businesses to avoid the appearance of extravagance at a time of government bailouts and rising unemployment.
But companies now are returning to “incentive travel,” which rewards employees or customers for jobs well done. While UHLA’s Johnson said he did not have numbers documenting the resurgence, “our properties say they’re seeing more of [these people] in their restaurants and walking through the hallways.”
As further evidence that companies and associations are putting money back into their budgets for travel, Johnson noted that attendance at last month’s Outdoor Retailer Winter Market trade show was the second largest ever.
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