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Business travel on the rise

Dennis Blank

NATIONAL REPORT--New reports of accelerated business travel this year are putting smiles on the faces of hoteliers, who are raising rates and doing more to accommodate the needs of this group of customers with high-tech amenities and more meeting space.

"There is no question our business is getting better because we are seeing an upturn in business travelers," said Fred Shea, v.p. of sales for Hyatt Hotels Corp. He echoed the sentiments of several hotel operators and brands.

"We are seeing double-digit growth over last year based on January's numbers," said Bob Dirks, v.p. of sales strategy and development for Hilton Hotels Corp. "We are certainly headed in the right direction. Will it be as good as 2000? It is too early to tell."

"After three years of unprecedented challenges, the travel industry is booming, especially in the United States and Asia as people travel again for business and pleasure," J.W. Marriott Jr., chairman and c.e.o. of Marriott International, said in a press release. "Although 2004 was a spectacular year for the company, we are even more optimistic and enthusiastic about the future."

A new report from the National Business Travel Assn. confirms the surge in business travel.

The survey shows a 3.8-percent increase in the number of business trips in the first six months of 2004, compared with the same period in 2003. A majority of the 2,043 business travelers surveyed said they believe corporate travel will recover to levels seen in 2000. The latest figures show that in 2003, 38.3 million Americans spent more than $153.2 billion on 210.5 million domestic business trips.

"We believe that U.S. business travel is finally in recovery and expect reasonably healthy growth over the next several years," said Suzanne Cooke, senior v.p. of research for the Travel Industry Association of America, which participated in the survey. "During this time, U.S. companies will look for ways to maximize their effectiveness and minimize costs and will increasingly look to things like new technologies and smart travel management to do so."

Another trend is the increase in business meetings, where companies believe there is more and better interaction than video conferencing, according to Shea.

"Companies want to 'wow' their people, and they are moving back to more food and beverage and more interaction in the meetings and even out in the corridors," Shea said. "They don't want just bare bones meetings."

Dirks said airport one-day fly-in meetings and video conferencing also are increasing. "Business travelers are booking further out than they used to, and space is tightening up because there is not a lot of new building right now and that bodes well for supply," he said.

Rates are increasing and there are mixed reactions from business travelers. "There is always resistance to increased pricing," Dirks said. "We do not want to be in the position of gouging customers, but at the same time, rates can't remain flat. They have to be adjusted accordingly."

Denver-based hospitality consultant John Montgomery is telling his clients that it is not necessary to discount to get business travelers to come back.

"The business traveler is willing to pay," he said. "They are not concerned with a few dollars either way."

Larry Broughton, president of Broughton Hospitality Group in Huntington Beach, Calif., which manages six upscale hotels and is bringing three more online, said rates have been adjusted upward 5 percent to 13 percent in the last year.

"There has not been much resistance at all," Broughton said.

He believes that corporate business travelers have higher expectations, especially about technology, and know that properties will offer broadband and wireless Internet access.

"There is a willingness to shop if their needs are not met," he said.

As an example, increasing rates to $79 from $70 for midlevel business travelers met with objections, but there was no negative reaction from executives to upping the rates to $189 from $169, Broughton said.

Cory G. Jackson Jr., president of Jackson Hospitality Services, which manages hotels in the Southeast, said his company has been raising rates for the last 12 months. With the growth in business travel, Jackson Hospitality is looking to build upscale hotels in markets where there is less opportunity for competition.

"The year 2004 was a major turning point for our lodging business," Marriott said. "The strengthening economy has increased demand for hotels, driving room rates and property profitability higher."

Marriott is opening as many as 30,000 new guestrooms this year, so it expects to capture more market share.

"We estimate North American [revenue per available room] growth for 2005 of between 7 [percent] to 9 percent and 0.5 to 2 percentage points improvement in house profit margins," Marriott said.

Most hoteliers say it has not been necessary to add more in-room amenities to accommodate business travelers, but many brands have been installing new beds and wireless Internet access.

In addition to broadband and wireless in nearly all Hilton rooms, Shea said it will be replacing televisions with larger ones and in some cases, flat-screen televisions because business travelers are spending more time working in their rooms.

According to the NBTA study, moderately priced lodging is favored by 44 percent of the business travelers surveyed. Three in 10 stay most often at an expensive chain or independent hotel, while 16 percent say they prefer a budget chain. The study found that one in five business travelers increased their number of hotel stays in the past 12 months.

hmm@advanstar.com

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