Motorola employees once practically needed their own carrier for all their trips between the East Valley and the Semiconductor Products Sector headquarters in Austin, Texas.
“Sometimes we jokingly call some of the Southwest or America West flights the Motorola shuttle,” said Amy Halm, company spokeswoman.
Company travel restrictions put in place last year and reinforced during the Asian SARS outbreak have employees trading the bag of airline peanuts for a computer screen and telephone.
It is part a trend that some experts argue will change the nature of corporate travel forever. A weak economy and political unrest around the world has companies closely examining their shrinking travel budgets. Instead of face-to-face meetings, many businesses are communicating with customers using technology. Even optimists who are convinced companies will return to the high flying 1990s when high-priced airline tickets and resort hotel rooms were the norm admit the future will likely result in smaller meetings and shorter stays.
“We’re traveling on critical trips only,” Halm said, adding the company often uses Micorsoft's NetMeeting instead of flying. The software allows customers and employees around the world to simultaneously view charts and slides online during a teleconference.
“That has caught on like wildfire here,” Halm said. “People find it extremely convenient.”
The days are gone when a pampered business traveler walked up to the airline counter, purchased an expensive ticket and flew first-class to see a client.
“Business travelers are traveling less and when they are traveling, they’re paying less,” said David Stempler, president of the Air Travelers Association, a passenger advocacy group. The shift presents problems for airlines still smarting from terrorist attacks nearly two years ago.
“They had a system which we called the 60/40 rule,” Stempler said. “About 40 percent of the passengers were providing about 60 percent of their revenue. Now, the business travelers are no longer providing that big source of extra revenue to make up for the lower fares in the leisure category so their whole cost structure was out of line.”
Since 2000, airline traffic numbers have declined 7 percent to 10 percent, he said, but the yield, the revenue airlines receive for each passenger, dropped 25 percent or 30 percent. “People just aren't spending money and, if they do, it's going to be at bargain fares,” Stempler said.
Fully 40 percent of North American businesses decreased their travel budgets this year compared with 2002, according to a joint survey by Runzheimer International and the Association of Corporate Travel Executives. Another 34 percent of businesses reported their budget remained the same for both years. According to the 280 corporate travel professionals surveyed, the main reasons for the decrease are fewer domestic trips taken, cited by 64 percent; fewer international trips taken, 59 percent; increased use of travel alternatives such as telephone, Web, and videoconferencing, 56 percent; and use of self-directed, online booking systems, 30 percent.
Phyllis Schumann, senior editor of the newsletter that published the poll, said while corporations are restricting or limiting travel for security reasons, the most common reason cited was to improve profitability.
“Although an improved economy, corporate profitability, and world peace were most often cited by respondents as conditions that must be present for organizations to return air travel to previous levels, many travel professionals agree that travel will never return to previous levels,” Schumann said. “Increased use of technology, teleconferencing, Web conferencing, and has gained ground and is widely accepted within many organizations. The word ‘alternative’ as it relates to travel will eventually disappear. These technologies will simply be regarded as another business tool, just as the telephone, fax, and e-mail.”
Some trade groups are more optimistic things will turn around. A survey of 204 travel managers conducted in June showed 58 percent report some decrease in travel spending compared with the same time last year, according to the National Business Travel Association. About 31 percent indicated their travel spending has increased.
“Over the last couple of years, the business travel industry has been hit by major economic, political and health crises,” said Kevin Iwamoto, the group's president. “But travel is an essential part of doing business and we will start to see a return to healthy spending as companies gradually return to normal commerce and business activity.” Whatever the future holds, there is no question technology is being used to communicate more.
In the last year, Qwest has seen a 40 percent increase in audio conferencing, said Jeff Mirasola, company spokesman. “We've also seen an an incremental increase in Web conferencing by over 100 percent,” he said. “We attribute it to the economy and businesses just trying to decrease expenses. We're still seeing the effects of Sept. 11, but the interesting thing to me was the outbreak of severe acute respiratory syndrome. We're getting a lot of that, where people aren't traveling there. I just think the use of Web conferencing in business has just become more standard in the past year. As people do it, they're more comfortable with it.”
Arizona State University MBA students that once would have flown to meet with project teams around the globe now use alternatives, said Greg Moorhead, a professor in the management department of the W.P. Carey School of Business.
"They're using teleconferencing and then they'll follow it up with an fax or e-mail to confirm that this is what the group agreed upon,” he said. “They still travel. Periodically, they will get their team together. They'll do some face-to-face because that's an important part of understanding electronic communication is knowing whose on the other end. But . . . they are traveling less because they are able to do it with electronic means. They do it so often it's becoming second nature to them.” At Intel, the largest employer in the East Valley with about 9,500 employees, executives have always looked for ways to limit flights, said Dawn Jones, company spokeswoman.
“Intel supports business travel when it's absolutely necessary,” she said. “But we do a lot of teleconferencing, utilizing bridge calls and internet meetings. All of the employees are encouraged to find the lowest cost option. If it's cheaper to fly as opposed to setting up the teleconferencing and bridge calling equipment, then we do that.”
According to the Arizona Office of Tourism, more business travelers visited the state in 2002 than in 2001, but they spent less. The numbers show that 26.7 million business travelers came in 2002 versus 24.4 million the year before. But they spent just over $140 a day in 2002 compared with more than $147 in 2001.
Rachel Sacco, Scottsdale Convention and Visitors Bureau CEO, said her organization has found while individual travelers are looking for alternatives to flying, company executives are still planning meetings to interact with one another. “It's easier for individual business travelers to find alternate ways to reach their customers than it is for the corporate meeting planners to really see alternate ways to effectively communicate about new products, develop camaraderie and launch initiatives,” she said.
Stempler said many business travelers are booking inexpensive tickets online and often putting trips off to get hot deals. Airlines seeking to beat competitor’s fares are getting rid of the perks and service business customers once expected, experts said. Carriers are using smaller, regional jets on longer flights, making them crowded and giving the frequent flier less room than before. In many cases, because of less demand, there are fewer flights from which to choose.
“Frequent flier miles are tending to stay because they are a customer loyalty program,” Stempler said. “But a lot of the other perks have been stripped out because passengers are just looking strictly at price, and they’re not valuing, at least among the full service carriers, some of these other benefits and perks.”
The shift has been especially difficult for big airlines who are not accustomed to simply giving cheap seats, snacks and a sodas, he said. “Once the major carriers start providing that same level of service, people say ‘What the hell do we need to use these full service carriers for? There's really not much difference,’ " Stempler said. At Tempe-based America West Airlines, the industry change has been good for the airline, said Ron Cole, vice president of sales. Last year the company reduced the last-minute fares traditionally used by businesses by 40 percent to 75 percent, he said.
“Overall business revenue for the industry is down, Cole said, adding the company recently won the industry's biggest award for its frequent flier program. “But business revenue for America West is actually up.”
In the first quarter of 2002, the company’s revenue from business travelers was 34 percent, Cole said. In the first quarter of 2003, the number inched up to 38 percent and the company expects it will be closer to 40 percent this quarter.
“The days of corporations buying $1,200 one-way fares are gone,” Cole said. “They've learned a new way to do business and they just won't be willing, even in strong economy, to go back to buying what they saw as egregiously high fares. Business travel is going to be as strong as it ever was . . . they're just not going pay those high fares anymore.”
Sacco, at Scottsdale’s visitors bureau, also predicts company travel will return to higher levels. “The size of meetings may change,” she said. “We're seeing a trend in smaller meetings and meetings that are held over shorter duration. That holds really well for us in Scottsdale because, not being a convention center city, most of our meetings are 50 to 75 people or under and we do really well in servicing that type of a group.”