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Companies increasingly are shunning business travel in favor of less-costly videoconferencing.
Alix Stuart, CFO Magazine
November 1, 2009
Many companies slashed travel spending during the past year to conserve cash. Now, even as the economy stabilizes, it looks like business travel will more often than not entail a walk to the conference room rather than a flight across the country.
"As the world emerges from the recession, businesses are adapting to a fundamental shift in thinking focused on proving the value of travel and every employee connection," says Hervé Sedky, vice president and general manager at American Express Business Travel.
In-person internal meetings and trips to conferences have sustained the greatest declines, with precious travel dollars being reserved for sales meetings with clients and prospects, says Susan Gurley, president of the Association of Corporate Travel Executives. A recent ACTE poll suggests that 75% of companies will spend the same or less on travel next year, with only a quarter planning to spend more.
Even for sales-related travel, finance executives are being judicious. Sedky says a nascent trend among Amex customers is to hire the firm to conduct rigorous ROI analyses of meetings, surveying participants on pre-meeting expectations and post-meeting accomplishments, as well as looking at resulting close rates or sales volumes to track effectiveness.
Phil Oreste, vice president of finance at Splunk, a start-up that provides search capabilities for corporate IT infrastructure, says nearly all of the company's product demonstrations for potential clients are now done remotely, via Webex, online-meeting software owned by Cisco Systems. "The software still has occasional quirks," such as screen freezes, says Oreste, but "the understanding in the technology community is that it's a good way for both parties to make time without having to arrange for travel." When Splunk released a new product last summer, Oreste estimates the company saved "tens of thousands of dollars" by doing most of its 40 analyst briefings via Webex instead of traveling to the East Coast for in-person meetings.
Overall, Amex expects the average domestic business trip to increase 1.2%, or $13, to a total of around $1,080. International business trips are likely to increase 2.4%, or about $67, to $2,818. The increases are largely driven by higher airfares and more-expensive car rentals, as well as higher ancillary fees. Both business- and economy-class fares out of North America are likely to rise within the 1% to 7% range over the next year as many airlines cut capacity.
Hotels, on the other hand, could be a relative bargain. Already, Marriott CFO Carl Berquist announced that corporate room rates declined 19% from 2008 levels in the third quarter, and that he expects they "will continue to be weak until we see meaningful occupancy improvement." Amex projects that, on average, midrange hotels in North America could cut rates by up to 4%.