ROCHESTER, Wis. -- Companies will increase their travel budgets
6.5% next year, according to Runzheimer International.
"Cloudy skies are showing glimmers of blue, and for the first
time in three years, we expect that most organizations will be
increasing their travel budget, not maintaining or reducing it,"
the travel management consulting firm said in its report.
Because companies have significantly improved their bottom lines
during the past three years by cutting costs, including travel,
firms are in a better position to increase investment in travel and
grow their businesses, according to Runzheimer.
"A positive correlation exists between travel investment and
profitability," the report said.
Air-travel spending will rise 10% in 2004, Runzheimer predicts,
even though competitive pricing will continue to flourish in
markets where low-cost airlines operate.
The expansion of low-cost carriers -- and their increasing
popularity among business travelers -- means the major network
carriers "don't have much leverage for pricing escalation," said
Runzheimer.
Low published fares will be plentiful in 2004, but the firm said
it expects the financially strapped airlines to be more stingy at
the negotiating table.
Because fewer discounts will be offered by the major carriers,
the report recommends that travel managers concentrate on city-pair
negotiations and bypass systemwide initiatives.
On the hotel front, the firm predicts a 5% increase in corporate
spending but projects midprice properties will benefit most from
any increase.
"Thriftiness has replaced extravagance within most
organizations," the report said.
Companies will continue to find themselves in a favorable
position with hoteliers when negotiating rates for 2004, according
to Runzheimer, because the diminished meetings and conference
business during 2002 and 2003 has hotels hungry to fill rooms with
transient business travelers.
Car-rental spending will increase 4%, Runzheimer forecasted,
largely due to increased travel demand. The firm added that car
rental companies have been "holding their own" since 9/11 by
reducing fleets and renting vehicles to business travelers looking
for an alternative to air travel in short-haul markets.
Competitive pressure from the low-cost car brands will sustain
"reasonable" rates in 2004. Runzheimer said the top four car rental
companies are losing footing to the low-cost brands as travel
managers seek "more lucrative deals."
Spending on meals is expected to rise 3%, as restaurateurs make
an effort to entice travelers with fixed-price menus and value-adds
like free parking.
Since 2001, upscale restaurants have realized significant
revenue loss, said Runzheimer, often finding themselves competing
with fast-food establishments.