The decline in business travel will remain in effect for the rest of 2009, and it will not begin to change until the next budget cycle in the late fourth quarter of 2009, says a new study by Hudson Crossings, a strategic advisory and research firm. The report examines how current trends are shaping the future of travel, as well as predictions for 2009. "Q2 2009 Travel Industry Insight” says the decline of business travel, typically viewed as the highest margin revenue for travel suppliers, to be a key factor driving adjustments within the travel industry in the second quarter.
“Big adjustments are being made by travel businesses," said Michael W. McCormick, managing partner, Hudson Crossing. “We are seeing everyone from suppliers to travel agencies get much more creative in their approach to generating revenue. From deep discounts to the disappearance of fees, travel businesses are taking bold action to acquire a disproportionately larger share of a diminished pool of travelers. We believe these actions are a leading indictor that the industry is in process of establishing a new point of equilibrium.”
Key observations include:
* With cost reductions typical of most recessions now compounded with a social stigma tied to corporate events, suppliers will pull out all the stops to generate demand.
* Online Travel Agents (OTA) fees will be mothballed until better days, which will have a minor impact on consumers, but may have a pronounced effect on the balance sheet of OTAs. Did someone say consolidation?
* What Hudson Crossing calls The Great Point Giveaway, hotels will leverage their loyalty programs to creatively strengthen their balance sheets.
* For now, there will be no significant change in the downward trend of business travel spending.
Hudson Crossing expects that suppliers will take bold action with their loyalty programs and offer aggressively priced packages to lure travelers. Online booking fees from online travel agencies such as Orbitz.com and Travelocity are likely gone for good, Hudson Crossings says.