Business Travel Begins to Return; Rebound Has a Long Way to Go

Date: April 30 2010
Source: Wall Street Journal
Website: http://online.wsj.com/article/SB20001424052748703441404575206411164965800.html?mod=index_to_businesses

Business travelers are taking to the road and skies again after going AWOL last year, some airlines and hotels say, in another sign the U.S. economy is bouncing back from a deep recession.

But corporate travel budgets remain well short of the levels they soared to in late 2007 and early 2008, before the economic downturn forced companies to pare back on business trips.

On Thursday, Starwood Hotels & Resorts Worldwide boosted its outlook for the year based on what chief financial officer Vasant Prabhu called "unanticipated late-breaking corporate business" that has been especially apparent the last two months. His comments follow a string of major airlines and hotel companies noting an upturn in business travel.

"Business travelers are clearly back," said Richard Anderson, Delta Air Lines' chief executive, on a recent conference call. Delta said its corporate-contract revenue in April was up about 50% from a year ago.

AMR Corp.'s American Airlines said its corporate domestic revenue rose roughly 30% in March from a year earlier. "We are seeing a pretty significant inflection point," Tom Horton, American's chief financial officer, told investors last week.

At US Airways Group Inc., where first-quarter revenue rose 7.9% from a year earlier, the upturn "was driven largely by improving business demand,'' said President Scott Kirby on Tuesday. Booked corporate revenue soared 35% in the period, he added, though, "remarkably,'' it's still down 6% from 2008.

Marriott International Inc. said demand from business travelers is roughly 16% higher at its hotels in the U.S. and Canada thus far in 2010 from a year earlier, including a 21% jump in March. With that bounce-back extending into April, and 70% of Marriott's business coming from business travelers, the company last week boosted its 2010 revenue outlook.

Frank Dulce, global travel manager at OSI Systems, said travel spending at his Hawthorne, Calif., company has jumped more than 30% so far this year over last year, as the sales force capitalizes on growing demand for its electronic health care and security systems.

The U.S. Travel Association estimated in January that domestic travel spending by businesses would rise 5.3% in 2010 to $226 billion, but Roger Dow, the trade group's head, now believes the increase could be "a couple percentage points higher than that.'' Still, such a rebound wouldn't be enough to make up for last year's 12.2% fall in business travel spending.

"You're not going to get a sharp V. We're going to get a slower rise," Mr. Dow said.