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Full recovery in corporate travel not expected before 2004

NBTA predicts corporate travel expenditures will remain flat in 2003

Corporate travel expenditures dipped in 2002 and will most likely remain flat in 2003, according to a recent survey conducted by…

Corporate travel expenditures dipped in 2002 and will most likely remain flat in 2003, according to a recent survey conducted by the National Business Travel Association(NBTA) and underwritten by Merrill Lynch. Travel managers do not anticipate full recovery of business travel before 2004, saying their companies’ travel will remain down as long as the economy remains unstable.

In a survey of 200 corporate travel managers conducted November 20 – November 26, over one-third (34.4%) of all participants reported flat 2003 budgets with no changes over 2002, while almost 11% predict a decrease of 2 – 4%. Overall, 37.9% of all responding companies will be decreasing their T&E budget for 2003 up to approximately 8%. Travel managers have become less optimistic about full recovery of corporate travel.

A mere 3.8% anticipates recovery within the first quarter of 2003, while almost one-third (27.5%) of all respondents do not foresee recovery in business travel until the latter half of 2004 or beyond. For comparison, a survey in March 2002 showed travel managers expected a recovery within 6 to 12 months.

Corporations will remain prudent in 2003 regarding their travel budgets, said NBTA President Kevin Iwamoto. While travel is still an essential part of doing business, economic conditions must improve before corporations are willing to return to previous spending levels.

One-third (33.8%) of those surveyed stated that air travel expenditures in 2002 fell by 10% or more. Also, approximately one third (31.4%) point to flat air expenditures for 2003. Survey respondents indicated that business airfares may be on the rise, as 57% of travel managers expect 2003 rates to increase between of 1% and 10% based on proposals received from airlines.

To offset expected increase in rates travel managers plan to use more low fare carriers: 66% of respondents indicated they would use discount airlines more frequently in 2003 compared to 2002. Interest in low cost carriers is growing, as a September 2002 survey showed only 22% of travel managers having increased negotiations with low-cost carriers.

On the hotel market, the picture looks similar. Almost one-third (29.3%) of all participants agreed that expenditures in 2002 fell by 5% or more. For 2003, 31.4% point to flat hotel expenditures in comparison with 2002. In evaluating the proposals from hotel vendors, 32.4% of travel managers foresee largely flat prices.

A slight majority (50.7%) notes an increase in utilization of lower-end hotels in 2003 in comparison to 2002. Again, the number reveals an increasing importance of alternative suppliers. In September 2002, only about one third of survey respondents reported they had negotiated with lower-end hotel properties or fewer luxury properties.

Overall travel spending will remain flat in the coming year as corporations continue to focus on the bottom line, said NBTA President Kevin Iwamoto. Some corporations are rethinking buyer-supplier relationships and are using alternative suppliers that can help them meet their travel needs while recognizing cost-saving objectives.

The National Business Travel Association, established in 1968, represents over 2,400 corporate travel managers and travel service providers. NBTA members manage and direct more than 70% of expenditures within the business travel industry.

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