Slow Recovery Likely for Business Travel

Firms are a long way from returning to the days of big spending.

Business travel faces a long comeback. Although the industry will grow this year and on through 2013, the number of trips in 2013 will be only 485 million compared with nearly 567 million in 2000.

Videoconferencing is one reason. It’s now cheap enough and of sufficient quality to replace many face-to-face meetings, says Suzanne Cook, senior vice president of the U.S. Travel Association. Still, “not all travel can be replaced by sitting in front of a screen,” says Cook. Corporate travel policies that were tightened during the recession will be eased but will continue to require road warriors to justify each and every trip.

That will restrain any recuperation of hotels and restaurants. A modest uptick of 3% in revenue per hotel room is likely this year, followed by a 6.5% increase in 2011. It will take four to five years before the industry will fully recover from the downturn, analysts say.

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Luxury hotels, which were particularly hard hit by the recession, will also make gains this year. Revenue per hotel room will be up about 5% after dropping 23% last year as companies, fearing bad publicity from having employees attend events in luxury surroundings, canceled trips and group meetings at those properties.

Full-service restaurants will see a slight increase of 1.2% this year after a 4% drop last year. But fast-food outlets and nonalcoholic beverage bars (think Starbucks) are sitting pretty. Fast-food establishments grew throughout the recession, while this year the Seattle coffee giant will enjoy a smart revenue rebound after a sales decline in 2009.

Martha Lynn Craver
Associate Editor, The Kiplinger Letter