Goodbye globe-trotting

Nov 24 2008 by Nic Paton Print This Article

General Motors executives were publicly vilified last week for using expensive corporate jets while at the same time begging for cash from the public purse.

Now, with new figures suggesting the cost of corporate travel is set to rise sharply next year just as budgets are being equally sharply squeezed, it is clear the days of jumping on a plane without a second thought Ė whether it's luxury private jet or a "cattle class" budget operator Ė are well and truly over.

GM chief executive Rick Wagoner, along with the CEOs of Ford and Chrysler, sparked a storm of outrage last week after it was revealed they flew to Washington in luxury corporate jets to plead for federal aid, with GM pledging it would return its two leased corporate jets as a result.

If that wasn't enough, according to the U.S National Business Travel Association, business travel costs will rise by between five and eight per cent over the coming year.

What it all means for hard-pressed managers is that it is going to be even harder to justify jumping on a plane to meet clients, customers and remote teams, however important having a bit of "face time" is to the survival of the business in the long term.

And when a business trip is given the OK there will be much tougher scrutiny of what is spent, where and how.

The bulk of the rises will be because of more expensive airfares, which are predicted to rise by between seven and 10 per cent, with airlines being forced to ramp up costs because of rising fees at their end and fluctuating oil prices, said the association.

But hotel rates will also be increasing, and are forecast to rise by between one per cent and four per cent, while car rental costs will rise at a similar rate.

These increases will take the average cost of a round-trip domestic business flight rising to $354, hotel rates going up to on average $130 a room and the average car rental costing $44, estimated the association.

"This year we saw a slowdown in the growth of business travel from the rate of growth we saw in 2004 through 2007. In 2009, we will see a continuation of that slowdown in growth," said NBTA president and chief executive Kevin Maguire.

"The expansion of the trend is the result of measures that travel managers are implementing to contain travel costs during an economic downturn.

"The measures vary widely from company to company. In some companies, we are already seeing major cutbacks in travel, while other companies have higher travel budgets in place for 2009. Across the board, we can expect to see some changes in the way travel is managed to further maximise value," he added.

The findings add to growing evidence that business travel was hitting a brick wall even before the financial and economic meltdown.

In June, for example, the U.S Travel Industry Association concluded that long delays, cancellations, airport chaos, spiralling costs and time-consuming security checks were all prompting managers to look long and hard at whether they really needed to travel.

American managers avoided going on 12 million business trips in the previous 12 months, it added.

The National Business Travel Association study has predicted that the executives in charge of corporate travel budgets will be looking at all options when it comes to cutting back.

Top of the list are likely to be encouraging managers to not to travel unless it is absolutely essential, putting in tougher new travel policies and guidelines, using new technology to monitor spending within hotels and tougher scrutiny of expense claims, it added.