Economy putting crimp on business travel

With the economy in a tailspin, companies are slashing travel and entertainment budgets in a shift toward frugality.

They are requiring employees to book trips earlier to get better deals, fly coach instead of business- and first-class, take day trips rather than stay overnight, choose less expensive hotels, and limit travel to only what is essential to see customers.

Cuts in attendance at trade shows and meetings is just one example of the new austerity, said Andrew Ziolkowski, a vice president at Carpenter Technology Corp., of Reading, which trimmed its travel budget 25 percent last month.

The specialty-steel manufacturer traditionally sent 10 people to an annual trade show in Las Vegas, but last month sent only five. Rather than booking rooms at the swank Mandalay Bay, they stayed next door at the more modest Luxor hotel at about one-third the cost, Ziolkowski said.

"Normally I would have gone to schmooze, and go out to dinner with our key customers," said the executive. But, with the crisis in the financial markets, Ziolkowski stayed home. "We still took people out to dinner, but scaled down, and took fewer people out."

The impact of less corporate travel hurts airlines, which rely on business travel to help boost profitability, and hotels, whose occupancy rates are down as corporate meetings have canceled - and others wait longer to book.

"December feels real soft, and this January and February could be one of the worst first quarters we've seen in a long time," said Bill Fitzgerald, president of the Greater Philadelphia Hotel Association and general manager of the Doubletree in Center City.

Holiday parties are getting canceled or downsized, he said.

"You are feeling the belt tightening, people reducing their counts," the hotelier said. "Maybe holding the event, but not making it as fancy. Cutting back on the bar, on the food."

Airlines are seeing a sharp drop in business travelers who could be counted on to pay top dollar for flexibility and last-minute purchases.

In September, the number of people buying first-class or business-class airfare fell 8 percent from a year ago, said the International Air Transport Association, which represents 230 airlines.

With the meltdown on Wall Street, companies have been freezing their travel plans.

Although there is an "eerie similarity" to the last downturn in 2000, "there is an order of magnitude increase in the seriousness of the current situation and in corporate responses" about travel, the Radnor-based Business Travel Coalition said in a recent survey of 196 travel managers in 17 countries.

The advocacy group said about one-quarter of corporate travel departments said they had imposed emergency cutbacks as a direct result of the financial crisis.

As economic weakness erodes travel budgets, companies are looking to alternatives - virtual meetings using Web, video and teleconferencing. Employees are encouraged to use online booking tools that steer them to cheaper airline and hotel options.

Firms are negotiating rates with hotels for next year, and talks have been difficult. "We're on the fourth and fifth renegotiation on some of these accounts," said Dawn Friedman, senior account executive at Philadelphia Marriott Hotels. "My rate negotiations have been very difficult" because firms are cutting back on costs.

Here is how several area firms are reducing travel.

SAP AG. German-based SAP AG, which employs 2,150 in Newtown Square, has limited travel "primarily to customer-facing situations only," said spokesman Andy Kendzie. If it's discretionary travel, it is postponed.

"We also have put restrictions on business- and first-class travel, limiting it to coach," Kendzie said.

Vanguard Corp. Vanguard Corp., of Malvern, has curtailed employee trips to its other company sites in Scottsdale, Ariz., and Charlotte, N.C. Meetings and training sessions now use video and teleconferencing, said spokesman John Woerth.

Vanguard still travels regularly to visit clients and business prospects. "In a period of financial uncertainty, we believe it's important to get out and see our clients face to face," Woerth said. Vanguard never flew business- or first-class. Even chief executive officer Bill McNabb, at 6-foot-4, "pulls his knees in and sits coach."

Rohm & Haas Co. In January, Rohm & Haas limited business-class travel to top directors and executives.

Workers at the chemical company are using Webcasts and teleconferences more often for meetings. "Customer travel is the exception. Face-to-face meetings is still a priority," said spokeswoman Leslie Johnson.

Lockheed Martin Corp. Employees at the Maryland-based defense contractor, which has operations in South Jersey, purchase their travel using an online reservation tool in order to receive discounts negotiated with airlines, rental-car companies and hotels.

"We are seeing savings," said Lockheed travel manager Richard Wooten. "The focus in the last year has been getting our employees to purchase tickets more in advance so we get lower-price tickets."

To make the best of a bad economy, the Philadelphia Convention and Visitors Bureau is launching a "Bring it Home" marketing campaign, enlisting chambers of commerce in Philadelphia and surrounding counties to urge members to keep their corporate meetings in Philadelphia - instead of elsewhere.

"Typically, in the first quarter, a lot of companies would have gone to warmer-weather locations," said the Doubletree's Fitzgerald. "Philadelphia may have an opportunity to get some meetings they wouldn't have otherwise."