Travel expenses take dip amid recession cuts

Date: July 6 2009
Source: Idaho Business Review
Website: http://www.idahobusiness.net/archive.htm/2009/07/06/Travel-expenses-take-dip-amid-recession-cuts

Reduced spending on business travel and on executive relocations as the economy stays sluggish impacts the Owyhee Plaza Hotel and Paragon Corporate Housing in different ways.

At the Owyhee Plaza in downtown Boise, owner and General Manager John May estimates that “room nights” booked by business travelers are down 20 percent from a year ago. Total revenues probably are down 20 to 25 percent due to a downturn in all segments and a reduction in average nightly room fees, he said.

“All segments of travel are down, but corporate travel is seeing the biggest reduction,” he said.

Government travel has seen a smaller downturn, but revenue from that segment is down as more hotels compete for that business, May said.

The number of conventions and groups at the Owyhee Plaza has been fairly steady, but the number of attendees – and in some cases the total number of nights they stay – is down, he said. October and November event bookings indicate that business could pick up late this year or in 2010, he said.

Owyhee Plaza occupancy picks up a bit in the summer, typically, “but I don’t anticipate it being great,” May said. “We’re still kind of behind.”

Paragon Corporate Housing is based in Richland, Wash., and fields a Boise office. The company provides furnished, fully appointed apartment suites to people who are residing somewhere temporarily for business purposes or who plan to relocate. Doreen Compton, vice president of business development for the company, is based in Boise.

“In many cases, people are choosing not to relocate right away,” she said. “They may go on a project for an extended period of time while they determine if a permanent relocation is in their best interest.”

The clientele for a corporate housing company is wide-ranging. Wolff Services, a relocation services company that operates in Boise, says in company information that its clients include corporate travelers, human resources managers, medical professionals, officials with placement companies, corporate interns, government agency personnel, and individuals.

Compared to when southwest Idaho’s housing market and in-migration were strong, the corporate housing business is driven less by individuals who are waiting to buy and occupy single-family homes and more by business people completing temporary projects or relocating, said Compton of Paragon Corporate Housing. In Boise, Paragon’s revenue is a mix of project-based business and corporate relocation, she said. Some people who are staying in Paragon-booked apartments or plan to do so are coming in to purchase homes – but this segment is much less active than it was a few years ago.

For the corporate business that remains available, “companies are asking for value-added solutions, a symptom of the economy,” she said.

Business-related relocations are down from a year ago, reflecting tight budgets as well as layoffs; instead of sending people to a work site, a company can more easily find talent available locally, Compton said. A bright spot is government projects – economic-stimulus spending is boosting demand for temporary housing in some locations, such as the Tri-Cities region where Paragon is based.

The Corporate Housing Providers Association reported that corporate housing was a $2.77 billion industry in the U.S. in 2008, down 5.8 percent from 2007. A first-quarter 2009 figure was not available.

“We have seen some difficult times in the past,” said Compton, who has worked in the industry for about 16 years. “We really feel that the economy and corporations are beginning to recover.” Growth in southwest Idaho probably will come from businesses diverse by their size and their offerings, she said.

Boise-based Micron Technology has pursued a number of initiatives over the past two years, during the economic downturn, to drive greater cost efficiencies across its operations, spokesman Dan Francisco said via e-mail. The company has made significant progress as shown by “aggressive” cost reductions per unit produced and the relative strength of its balance sheet compared to competitors, he said. “Of course, reducing travel expenses and allowing only business-critical travel have been included among these overall initiatives.”

Supervalu Inc., like most organizations, is “taking a hard look at all our expenses to make sure we’re running our business as efficiently as possible,” spokeswoman Haley Meyer said via e-mail. “Because our operations are located across the country, however, we are continuing to travel when absolutely necessary.” The Minnesota-based company owns all Albertsons grocery stores in Idaho and bases its Intermountain West division in Boise.