It’s All in a Hard Day’s Work

For years, first-class travel has been a perk of hotshot executives, who enjoyed the best seats on the plane, the most extravagant hotels and the fanciest meals, all courtesy of virtually limitless expense accounts. But travel budgets are often the first to be cut in a downturn, and by the fourth quarter of 2008, many companies had seriously curtailed business travel, or implemented a freeze altogether.

The collapse of Lehman Brothers last September trigged the sharp drop. Then AIG spent more than $443,000 for a group of executives to stay at a St. Regis resort days after the company accepted an $85 billion federal bailout, turning corporate junkets—and business travel in general—into bywords for the excesses of the era. The "AIG effect," as it is now called in the industry, has demonized corporate meetings and junkets, which used to represent a sizable chunk of annual occupancy at many U.S. resorts. According to Smith Travel Research (STR), the U.S. hotel industry's occupancy rate was down 11.6 percent this March over last, with revenue per available room down 20 percent—due in part to a decline in business travelers. According to the American Express Traveler Monitor, business-class travel from North America went from half of all international bookings in 2008 to 39 percent in the first quarter of 2009. Meanwhile, economy-class international air travel surged 13 percentage points to 56 percent of all travel in the first quarter of this year, versus a steady 43 percent in 2008.

Corporate trips are starting to pick up again, but they are definitely not business travel as usual. In the current economic climate, when business travel must be justified to employers and shareholders alike, corporate travelers are eschewing accommodations with golf courses, state-of-the-art fitness centers and sophisticated restaurants in lieu of those offering more practical amenities: a good location, Wi-Fi connectivity, easy check-in and checkout, and a quiet room. "Travelers are really focusing on the business at hand," says David Brett, president of the travel-technology provider Amadeus Asia Pacific, which recently commissioned a survey showing that a majority of business travelers value convenience over comfort. "We're seeing shorter trips, very much focused on getting the business done. They are willing to forgo luxurious rooms, the gym, the spa, but they still want to have Wi-Fi and anything that will make their business life easier."

It's a downshift that runs counter to the industry's direction over the last several years, during which many hotels sought to attract lucrative corporate meetings by adding elaborate spas, cutting-edge restaurants and plush business clubs. "What we're really seeing now is people responding to travel cutbacks and trying to be more imaginative," says Brett. "Rather than ax trips completely, they are willing to give up some of these extras."

The bean counters wouldn't have it any other way. In the past, company travel policies typically "recommended" particular airlines and hotels, but enforcement could be pretty lax. Now they are implementing much tighter travel directives. "Today 90 percent of our corporate clients are making those travel rules mandatory, and the traveler has to go to a preferred hotel, one which has a rate that was negotiated by the company," explains Sébastien Marchon, director of Carlson Wagonlit's Travel Hotel Solutions Group for EMEA, one of the world largest travel management companies.

Today the appearance of frugality definitely matters. Firms are even willing to incur additional expenses relocating a planned event to a location that is perceived as "less fancy" and write off deposits and cancel meetings that could have attracted an unwelcome media spotlight. Negative publicity about business meetings was a contributing factor in the 5.6 percent decline in business travel over the past year, according to statistics compiled by the U.S. Travel Association. A recent survey by the Association for Corporate Travel Executives showed that 60 percent of American companies would avoid planning a business trip to an exotic locale to avoid public backlash—even if the proposed exotic location were cheaper than a more mundane destination. Las Vegas, for example, which is perceived as a party town, has suffered dearly from this perception.