Business Expected To Travel More

November 15, 2004
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GRAND RAPIDS — There is only one reason that the occupancy rate at local hotels remains down and why lodging excise tax receipts are lagging.

Fewer business travelers are making overnight visits here, especially those affiliated with the office furniture industry, and it’s been a problem for the past three years.

In 2001, the hotel local occupancy rate was 62.3 percent. This year it’s projected to be 54.5 percent.

In 2001, revenue from the lodging excise tax reached $4.17 million. This year it’s projected to be about $170,000 less at $4 million.

Steve Wilson, president of the Convention and Visitors Bureau, and Daryl Delabbio, county administrator and controller, agree that the root cause for both situations is the decline in business travel.

Both recently said that business travel is the “bread and butter” of the local lodging industry and the hotel-motel tax revenue.

A lackluster economy combined with higher energy and health care costs have forced firms to cut back on expenses. Travel budgets didn’t escape those cuts.

And for those companies that continue to fly the friendly skies, their costs are going to rise.

Although the National Business Travel Association used results from its mid-summer survey to predict an increase in business travel for the last half of this year, the Virginia-based organization also recently reported that trips next year would cost more to make.

Two weeks ago, the NTBA reported costs for corporate travel would climb by 7 percent in 2005, more than double the expected inflation rate. Airline tickets will rise by 5 percent. Hotel rates will go up by 7.5 percent. Rates to rent a car will increase by 5 percent. And the price for a decent meal will run 3 percent more.

For the NTBA, those increases average out to an overall travel hike of 7 percent.

Why? Because companies are expected to travel more in 2005, possibly reaching the level of activity business travel had in 2000 when the hotel occupancy rate here was 65.7 percent and receipts to the lodging excise account were just under $4.2 million.

The NTBA based its corporate-travel prediction on three factors:

•Companies have discovered new efficiencies during the downturn.

•A new demand for services has surfaced as the economy has improved.

•Security concerns have “waned” and new markets have opened.

Those three add up to more business activity, which means more travel. More travel lets “travel suppliers regain pricing power and increase travel costs.”

“NTBA is pleased to forecast the recovery of business travel in 2005,” said Carol Devine, NTBA president and CEO, in a statement.

“Travel managers have used their expertise to contain their companies’ travel costs in recent years. As travel expands in 2005, travel managers will continue to provide value by negotiating the best contracts and setting corporate travel policy to get the best value for each travel dollar in the rapidly changing travel market,” she said.

The NTBA mid-summer survey revealed that 60 percent of travel managers reported their companies were spending more on travel this year than in 2003.

“More than three-quarters of those reporting higher travel spending indicated increases of 10 percent or less, showing that corporate travel managers are mitigating price increases and containing costs for their companies,” said Devine.

The NTBA wasn’t alone in predicting more travel or higher costs to do so.

The Travel Industry Association of America said its Travel Price Index rose 4.1 percent in September compared to the same month last year. Airfares were off by 5.4 percent, but lodging costs rose by 7.1 percent.

TIA also reported that business travel would be up this fall, rising from 41.8 million person-trips in fall 2003 to 43.2 million for September, October and November of 2004, a gain of 3.3 percent.

“Consumers’ pent-up demand and corporate America’s healthier bottom line are merging to create a ripe environment for the travel market,” said Suzanne Cook, TIA senior vice president of research.

The TIA reported that 1.14 billion person-trips were made domestically in 2003, with 182.4 million of those because of business or convention travel. Sixteen percent of all those travelers flew last year.    

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