The travel and hospitality industry continues to be a major victim of the recession. In fact, many economists consider it an industry that may very well be a key litmus test for the prospects of recovery. While many continue to watch the banks for signs of economic revival, some carefully eye the business traveler as a key indicator.
Here is a perfect illustration of just how critical the business traveler is to the economy: Raymond, a vice president of sales for commercial energy saving electrical bulbs, used to travel at least once a month to visit some of his distributors in various parts of the country. In addition, he would also fly to at least 3-4 large trade shows a year. He estimates that he spends an average of four days on the road on each of his trips.
In the good days, Raymond would travel in first class whenever he was able to upgrade his reservation. He usually stayed in what he calls 4-star hotels, ate out in good restaurants, and spent considerable amounts of money to entertain distributors. In 2009, the company began to feel the effects of the recession and as part of some cost-cutting measures slashed Raymond’s budget to include only 4-5 trips to distributors and at most two trade shows.
Raymond’s new budget meant that hotels would loose out on some 40 hotel nights at an average of $250 per night. The airlines lost some 10 trips and then there were the restaurants, taxis, and many other services that he would normally utilize that also lost out.
When the economy went south several years ago, Raymond’s story repeated itself in thousands of businesses. The cutbacks in travel had a snowball effect on many related businesses. The trade show industry, for example, took it on the chin. The number of exhibitors declined as did the number of visitors. Not only did the travel and hospitality industry suffer from the decline in trade show participation, but so did graphic artists, producers of exhibits, bus companies and so forth. Oh, let’s not forget the local governments who benefited from sales tax.
What is perhaps even more troubling is that Raymond may never return to his pre-recession routine. In the past few months, the company is doing much better but management has gotten used to the idea of the more austere way of life, which means that there is a good chance that even if the recession ended tomorrow, Raymond would still not resume his pre-recession ways.
The airline industry is beginning to recognize the challenge of doing business without the coveted business traveler, or at least not as many business travelers. It is pitching its upscale services to people with high net worth in the hope that they will fill the seats of the missing executives. Hotels too are offering all kinds of incentives to attract the premium traveler.
There are new reasons why Raymond might never return to his old ways. He has learned to effectively use such tools as videoconferencing and skype with good results. He can now communicate with some of his distributors in a one or two hour meeting and does not have to spend four days on the road for the same meeting.
Unless someone comes up with a good reason why Raymond is physically needed at these meeting, he will certainly be asked to conduct business from home. There are many good minds at work trying to revive what some have called the “eyeball-to-eyeball” way of doing business. This is a school of thought that says that technology can never replace human contact. One businessman wrote: “There is no replacement for looking someone in the eye and observing body language. I just can’t see doing large business deals based on a video image.” But many businesses are not buying into it and are cutting out travel altogether in favor of the technological methods of communications. One large law firm with many offices abroad has completely banned travel.
The hotel industry seems to have shifted its focus from relying on the business traveler to more regional and local business. They are putting up new hotels in cities that are regional hubs which might involve bus or car travel. In fact, a recent fad is intercity bus service that offers passengers such amenities as Wi-Fi in an effort to lure regional business travelers.
In the ‘90’s many start-up trade shows were able to compete with existing trade events just by relying on hefty travel budgets, In the past few years that has dramatically changed with the number of start-up trade shows declining. Existing trade show strongholds like Las Vegas have also taken a hit as has almost every major city.
Despite the ominous facts that the business traveler is a fraction of what it was, many in the travel and hospitality industry still believe that a comeback is in the offing when the rest of the economy rebounds. But most executives are making the necessary adjustments to deal with what appears to be a new era in business travel. Even if the industry does come back some believe it will be far more restricted. Raymond, for example, may visit one city and then rent a car to travel to another city for a day or two, a destination he would normally fly to separately. So when you see a business traveler rushing through an airport, make way. The economy may depend on him.