Strategic Meetings Summit London, 26 September,
September 29 2022, Kimpton Fitzroy London
Friday 30 September 2022, JW Marriott Grosvenor
As we enter 2010 and a General Election year, that old Labour anthem Things Can Only Get Better may not be ringing in Gordon Brown's ears, but - assuming no more terrorist incidents - it might be a suitable tune for the business travel sector to hum to itself.
Her Majesty Queen Elizabeth II might famously have described 1992 as "Annus Horribilis", but for many in business travel, 2009 has been worse. Looking forward to next year, there must at least be hope of improvement, since the global overview is that demand for flights and hotels is increasing and that corporate travellers will be on the move more in 2010.
Despite some high profile leisure airline collapses in 2009, there were no big scheduled airline failures and in December, OAG estimated that the number of airline seats available worldwide - almost 295 million - was up 4% year on year, although the increase was driven by the no-frills sector, which grew 10%. This rise brings the industry back to the levels of December 2007, before the economic crisis took hold.
IATA also points to a recovery. Its 230 airlines lost $11 billion in 2009, but will collectively lose only half this amount in 2010 - not good, but, getting better. In the words of IATA director general and chief executive officer Giovanni Bisignani, "The worst is likely behind us."
The airlines also appear cautiously optimistic, even British Airways, which tried unsuccessfully to paint an apocalyptic picture to ward off a vote for industrial action by cabin crew. BA says passenger numbers and yields have now "stabilized", albeit from a very low base. In November, its premium traffic was down 1.7% year on year. Tellingly, within this, Club Europe sales were down 20%, but Club World was up 1.5%.
Norman Gage, Advantage Travel's business travel director said airfare revenue was up year on year in October and November but said 2010's outlook was still "uncertain".
"It's another journey into the unknown. It's disappointing that the country hasn't officially come out of recession, but if our goods are cheaper, maybe business travellers will travel more," he said.
In the hotel sector, the tentative signs are that business travellers are moving again, with American Express's Business Travel Monitor in December at least showing things are not getting worse. Globally, Amex estimates that third quarter hotel rates fell year on year by 10% to $239, but it points out that on a quarterly basis, the pace of room rate decreases "has slowed substantially", with US domestic rates growing for the first month in October since the end of 2008.
According to Deloitte, London is leading Europe's hotel sector recovery, with a "dramatic" increase in revenue per room of 10% in November compared with the previous month, ending 13 consecutive months of decline. However, Margaret Bowler HRG's director, global hotel relations, said London was an anomaly because of a lack of supply. "With a few exceptions, rates are flat because of the market conditions," she said.
She added that although rates had not yet risen generally, hotels were once again being bold enough to add booking conditions for corporates. "We are starting to see hotels put in minimum stay requirements and closing down certain room types, such as making standard room types unavailable."
Another inevitable consequence of the recession is that just as in the airline industry, the cheaper end of the market is winning through. Amex's figures reveal a 7% increase in sales over the previous quarter in the budget hotel sector, compared with only 1% in the mid-price category.
The budget sector has blossomed with a rash of new openings and international expansion such as that by Premier Inn, which opened the first of 10 planned properties in India last month.
"There are more and more budget hotels as Premier Inn continues to take them over," said HRG's Bowler. "The hotel world is going through exactly the same as what happened to the airlines."
However, Bowler warns that like no-frills airlines, cheap hotels may not always represent the best choice. "Budget hotels are not always the cheapest option, particularly when you have negotiated rates, as there are always things that have to be added on, like breakfast."
Given the pressure on corporate spending, the budget accommodation sector will continue expanding in 2010. Unlike airlines, hotels are not prevented from making cross border investments - ironic, considering one deals in bricks and mortar and the other doesn't.
Having put the Annus Horribilis behind them, if there is one thing that airline chiefs wish for in 2010, it is to emulate the hotel sector. IATA's Bisignani calls the current investment restrictions on airlines "archaic".
"The industry cannot afford the mounting losses of the status quo. The next decade must facilitate consolidation," he said.
It may be that soon, politicians from around the world, having perhaps been forced to fly to a conference on a budget airline, realize that something has to be done for the legacy carriers and that 2010, or at least the next decade, really is the time to do it.