Certain segments of the business travel market have produced mixed to positive indicators — such as comments from AirPlus, the Guild of Travel Management Companies and Marriott — but the broadest signals of where corporate travel demand is going are not good for business travel sellers.
In the June quarter, global corporate sales fell 4% at American Express, the second consecutive quarter of declining figures, while HRG reported a 3% decline in transactions and a 7% decrease in client spending.
Mega-agency transactions through ARC in the month of June dropped 6.5%, the largest decline in 32 months. Hotel reservations booked in the month of June through GDSs fell 10.6% worldwide, according to Pegasus Solutions.
And two GDS executives speaking with The Beat at the Global Business Travel Association conference in Boston reinforced the more negative of these outlooks — following GBTA's own downward revision on projected demand, announced in June.
Amadeus CEO Luis Maroto said, "It's going to be weaker, definitely. The first part of the year has been good overall. The second quarter will be weaker than the first. And in my view, the third quarter will be even weaker. The world is not the same. Economies are evolving differently, and business travel is very much linked to confidence and the economy.
"Some countries are growing strongly, but in Europe, there will be negative growth in business travel even if today the expectation was more or less flat. The economic situation is deteriorating quickly. So this will be a tough year. In May, June and July the figures have weakened."
Amadeus takes cues on business travel from trends in premium-class airline bookings and stats on business travel-oriented agencies (which all use GDSs). Amadeus will announce its June quarter results on Friday.
Sabre Travel Network President Greg Webb might have been more optimistic, but only in relative terms: "Through the first half of the year, we saw decent strength in business travel. The United States has not grown dramatically year over year, although we still see pretty solid demand. Airlines have done a great job on constraining capacity, so fares are up. The average daily rate at hotels is up. And you still see planes are full. The demand is pretty strong right now.
"But the second quarter was a little weak in different places," Webb added. "There's a perception that people — both consumers and corporations —travel when the economy is good. That's not it. They travel when they feel like the economy is good, and they feel like they're doing well. It's a consumer-confidence question. 'Do I think my business will do more well next year? Great, I'll travel this year.' It is a future-looking perception."
While corporate profits remain high, the Wall Street Journal and others have reported that growth forecasts are turning negative. A Fortune report highlighted one estimate for an overall decline in corporate profitability in the June quarter — the first in three years — though not all results are in.
Does this mean an immediate hit to business travel?
"I think that has started," said Maroto. "It's not like the recession in 2008 and 2009 where suddenly everyone felt this was the end. Results and expectations are weaker than at the beginning of the year, but I haven't seen companies cutting travel everywhere. I believe there will be adjustments. I believe there is a progressive trend of controlling travel more than five or six months ago."
At Carlson Wagonlit Travel, Solutions Group senior director Joel Wartgow told Business Travel News that CWT is "not seeing our customers pull back on travel; they want to travel but they want to stretch the dollar. There is some reluctance from the travel buyer, some hesitation now because of what is happening globally that is causing our customers to be a little more cautious in how they buy."
"Once we get through the shoulder season, August to September, we'll have a better understanding of full-year demand," said Sabre's Webb.
Indicators in emerging markets remain positive, sources said, but as Maroto noted, Europe and the United States still carry the most weight.
Source: The Beat