2010 Business Travel
Forecast: Up in the Air

“Up in the Air” may be a hit as a movie, but business travelers spent less time in the air last year and indications are 2010 may only be slightly better.

Though talk of a recovery is everywhere, companies are taking a cautious approach to putting road warriors back into circulation. Some are holding budgets to last year’s depressed levels. Others are loosening the purse strings ever so slightly while continuing to use strict travel policies and expense-management applications to rein in spending and virtual-meeting technology to pick up the slack.

The news isn’t all bad, according to the National Business Travel Association, publisher of a closely watched U.S. business travel forecast. Airlines, hotels and other business travel vendors are making deals and focusing marketing efforts on midsized businesses, which remain a relatively untapped market compared with Fortune 1000 companies. “There are only 1,000 of them and a heck of a lot more that are less than Fortune-1000 size,” says Craig Banikowski, president of the NBTA, which represents 4,000 U.S. business travel managers and thousands more around the world.

Banikowski, Hilton Hotels Corp.’s global travel management director and a business travel industry veteran, started a two-year stint as NBTA’s chief prognosticator last August, around the time economists began seeing signs of a recovery. He talked to Inside Edge Editor Michelle V. Rafter recently from his office in Beverly Hills, California, about the business travel outlook for 2010, why the recession may have a silver lining for midmarket companies, and new challenges for travel managers. His comments were edited for length and clarity.

Inside Edge: According to NBTA’s 2010 business travel forecast, a majority of companies believe business travel spending won’t change much from last year. Why is that?

Banikowski: It’s all over the board. Certain sectors are going to remain flat. Some, like universities and certain businesses that were impacted greatly by the economy, will decrease. Like the state of California – we’re broke. I was talking to the travel director at UCLA recently, and she said things are getting cut left and right, so they expect to remain flat or go down from 2009, which is frightening. But other sectors are doing well. Pharmaceuticals have stayed a little more active. You have to look at vertical industries to understand what their customer relationship is and how important business travel is to their bottom line.

Inside Edge: Besides pharmaceuticals, what other industries will spend more on travel in 2010?

Banikowski: Manufacturing is coming back, and business services and consulting. As companies look for better ways to do things, such as outsourcing, those businesses will increase their business travel. Banking and financial services is another vertical that will come back. As banks repay TARP money, that will free them up a bit. Education and training is another. As the workforce evolves, the demographics of the workforce change and technology changes, education and training will still be requirements, so those companies will be traveling.

Inside Edge: Companies expect rates for air travel, hotels and rental cars to drop again this year. What effect will that have?

Banikowski: Travel managers will be able to negotiate more effectively with domestic air carriers for volume, and with international carriers for better deals on the front of the bus, first class and business. The recession has been hard on a lot of hotels, for both transient travel and meetings. Many buyers are looking to negotiate better discounts in 2010 than they had in 2009. Similarly, car-rental companies had a difficult time. They’re looking at how they can keep volume commitments with their buyers. Also, travel managers are being more aggressive about policies and making sure travelers are using approved contracts and suppliers.

Inside Edge: How much better off is international travel? Will it lag or lead domestic travel this year?

Banikowski: All the indicators show international travel’s starting to pick up. Travel originating from China is moving up quickly. We’ve seen a bump in travel from India. The European markets got hit, and I don’t think you’ll see a lot of growth there. The growth will be in Asia-Pacific through 2010, 2011 and 2012, as well as U.S. to overseas. For hotel chains, Asia-Pacific is where the growth markets are.

Inside Edge: Almost a quarter of companies responding to your survey replaced trips with some kind of virtual-meeting technology last year, and expensive telepresence systems saw a huge increase. Will that continue?

Banikowski: The technology is here to stay. We’ve seen everything from simple WebEx webinars all the way to very expensive HP Halo and Cisco TelePresence rooms. As technology improves and bandwidth becomes less expensive, those solutions will become more palatable. At the same time, for 20 to 30 year olds, their business travel style and needs are different from more mature workers. They don’t want to travel as much, and teleconferencing and telepresence are tools they’re comfortable with. They’ve grown up with it, whereas someone like me came to it in midlife. But there’s still a learning curve. It’ll be a few years, but it’ll enable greater relationship building, leading to greater volumes of business travel.

Inside Edge: So you’re saying virtual-meeting technology helps companies get customers, and once they get them they’ll go out and visit?

Banikowski: Yes, the new technology allows you to develop a greater customer base than before.

Inside Edge: Cost containment was big in 2009 and will remain big this year, with companies saying they’ll continue to audit expenses and create or enforce travel policies. What role does technology play in this?

Banikowski: We’re seeing an increase in, or initial deployments of, things like pre-trip approvals. An easy way to quickly reduce travel spend is to not have a meeting. That was companies’ initial reaction. Now they’re getting more sophisticated. They’re managing how many people can go on the road, and if they really need to take the trip, and if so, how many need to go. Travel managers are also deploying online expense-reporting tools. At Hilton, I’m helping deploy an online expense-reporting tool in 2010. The recession and CFOs are the drivers: they’re looking for ways to contain costs and where technology can help. Then, the travel policy becomes the backbone for the whole program, where you spell out things like under what conditions you can use approved suppliers versus going for the deal of the day, or whether you can deliver on your contract commitments.

Inside Edge: How big are mobile travel-management applications?

Banikowski: We’re seeing things like policy compliance and pre-trip approval now done on a Blackberry or iPhone. We’re seeing many companies rolling out systems where they can book travel on a handheld, or approve expense reports using a Blackberry, or scan and attach expense receipts to an email instead of handing in physical receipts. Technology is absolutely critical to the evolution of managed travel in the 21st century.

Inside Edge: How are these trends playing out in the midmarket?

Banikowski: Midmarket companies are not lagging, but they’re also not leading. Their forte is maneuvering quickly and quickly recognizing trends, such as adopting low-cost carriers and using new technology like online booking and expense reporting. You’re also seeing suppliers realizing that Fortune 1000 companies may have had online booking solutions and expense reporting automation for years, but the midmarket is a prime area for helping manage their travel spend. For midmarket companies, the recession has demonstrated they can benefit and realize cost savings in their business travel, that even though it’s a smaller dollar amount there are savings to be realized through good procurement practices.

Inside Edge: So are vendors targeting midmarket companies?

Banikowski: Any forward thinking vendor – whether it’s Concur or IBM – anybody with systems they’ve already sold to the big guys, they’re looking at the midmarket. Some suppliers might not be ready to go international, but they have good tools, so they’re offering them to the midmarket. These midsize companies, they might not have a travel director, but they may have a procurement director who’s sourcing travel. As a result of the recession, those people might be saying, “Where is the low-hanging fruit in terms of costs I can cut?” CFOs are pushing that agenda, and so are the consultants they work with and the NBTA as well. At the NBTA, we have to help not only the Fortune 1000s but also procurement people in smaller organizations where you might have an executive admin as the owner of travel.

Inside Edge: Last year, close to one in five of the companies responding to your survey downsized travel departments. What does 2010 hold for travel management personnel?

Banikowski: We’re seeing travel managers taking on different roles that can give them increased credibility throughout the organization. They’re taking on fleet, corporate-card management and looking at the whole lifecycle of T&E through expense-reporting automation. They’re doing business analytics, so they’re not just providing data but analytics as to why costs are increasing or decreasing and how to manage them. Sustainability is becoming a big area as organizations start using carbon offsets and cap and trade. Travel managers need to make sure they’re educated about those issues relative to the bottom line and branding.