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Business travel shifts out of neutral

John P. Walsh

National Report--There's mixed reaction among hotel executives about whether business travel is back. However, there's a consensus that business travel during 2004 will be better than 2003. Ty Helms, senior v.p. of sales for Hyatt Hotels Corp., said "back" is a relative term.

"Business travel is certainly not back, but it is improving," he said.

"We're not back to 2000 levels yet," said Knud Svendsen, v.p. of sales for Adam's Mark Hotels & Resorts. "We're seeing some positive signs, such as looking at future contracts with transient business and overall [Global Distribution System] traffic."

Jamie Walters, senior v.p. of sales for Wyndham International, had a different take.

"In '04 for the industry and Wyndham, the issue isn't the number of people traveling, it's the rate business travelers are paying," he said.

Wayne Goldberg, senior v.p. of operations for La Quinta Corp., said the lodging industry trails the general economy by about six months, and while business travel has improved, it's not where the company wants or needs it to be.

A survey of several hundred corporate travel managers representing a cross-section of the Fortune 1000 companies conducted by Smith Barney in September stated business travel contributes about 75 percent to the profitability of the major lodging companies. But business-travel levels are difficult to project because of short booking windows and lags between travel demand and the broader economy.

Survey results include:

* 67 percent indicated that 2004 travel spending was expected to exceed 2003 levels;

* 2004 travel spending is expected to increase about 5 percent;

* 73 percent of respondents indicated travel providers have become tougher about pricing and terms for future travel; and

* 43 percent of travel managers cited their 2004 outlook as improving.

The improvement of business travel began late last summer and almost mirrored the positive trends of the stock market, according to Helms. He said Hyatt's third and fourth quarters were better than the same periods during 2002, and that gave the company momentum to finish 2003 about 5 percent ahead of the previous year.

"Our goal at Hyatt the last two years has been to get into as many corporate travel programs as possible ... to increase our odds in each city ... then focus on the needs of the guests and their corporations," Helms said. "Bottom line, if you are not in the approved programs when the purse strings loosen, you can't play."

Maureen O'Hanlon, senior v.p. of sales and marketing for Prime Hospitality Corp., said business travel has improved steadily since the dismal first quarter of 2003.

"The year ended with a great recovery," she said.

Svendsen said 2003 was slightly spotty for business travelers. Markets such as Jacksonville, Fla., and Denver did well, but markets such as Tulsa, Okla., and Kansas City, Mo., didn't.

Walters said 2003 had tangible proof that business travel is back. He said Wyndham's deals with 275 corporations were 14 percent more than during 2002 for occupied rooms. He said there was revenue growth of only 8 percent during 2003, which was due to a 4-percent rate decline. Corporate group business declined 4 percent during 2003 from 2002 in the number of occupied rooms.

"That should grow in 2004 based on our presence in the Caribbean and Florida," he said. O'Hanlon said it's more difficult to predict business travel because business travelers who are using the Internet to book rooms are booking rates that would be associated with leisure travel.

"The demand is there," she said.

O'Hanlon said Prime has increased the number of corporate accounts for 2004, and it expects more business from existing accounts in 2004 compared to 2003.

Goldberg said it's difficult to measure the company's advanced booking because the average booking window is seven to 14 days. He said the company's midweek performance improved steadily as 2003 progressed.

"'03 was the first bidding season where we didn't see rates decline," he said. "Also, a large number of our corporate customers requested two-year contracts."

Svendsen said this year will be a slight improvement over last year and that during 2005 there should be considerable improvement based on advanced bookings.

Helms said it's too early to tell what 2004 will be like, but he's cautiously optimistic. "We are in 10 percent more corporate travel programs than last year, so we have more rooms in the game, and if the trends continue, we should have a better year," he said. "The market needs to remain strong, and we need to avoid any terror threats, diseases, plagues, floods or asteroids hitting the planet, and we should be OK." Walters said half of Wyndham's group business for 2003 was booked at the end of 2002, and the company is ahead of that mark for 2004.

Walters said Wyndham is projecting a higher number of occupied rooms during 2004.

"Business travel is close to back," he said. "There are bodies out there traveling. But the methods of researching and booking have changed."

Signs business travel is picking up

* increase of overall average rate

* occupancy growth

* increase of group business

* booked business for 2004

* lodging performance of gateway cities

* corporations hiring more people, particularly in sales

* full flights

Source: H&MM research

jwalsh@advanstar.com

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