U.S. businesses seek to trim soaring travel costs

Businesses, large and small, are limiting staff travel and seeking to trim costs in response to rising prices for plane tickets, hotel rooms and rental cars. The corporate cutbacks could be an early indication of weakening demand in the $173 billion U.S. business travel industry.

"As new trips come up, instead of sending five, we'll send two. We're avoiding costs," said Kevin Maguire, director of global travel services for Applied Materials Inc. (AMAT.O) The leading supplier of equipment for making microchips employs 14,000 people.

Business travel spending makes up about 20 percent of the overall U.S. travel market, but that segment is generally more lucrative because corporate travelers tend to buy tickets at shorter notice and stay at pricier hotels.

A broad falloff in demand could threaten the nascent recovery of the U.S. airline industry, but the more immediate threat may be to the record profits at hotel operators such as Marriott International Inc. (MAR.N), Hilton Hotels Corp. (HLT.N) and Starwood Hotels & Resorts Worldwide Inc. (HOT.N) as business travelers opt for cheaper rooms.

"If you want to talk about what are travel managers doing (to address rising travel costs), then as an industry, they are looking at lowering the tiers of hotels being used," said Suzanne Fletcher, president of the National Business Travel Association and director of travel and meetings for wood and box products company Weyerhaeuser Co. (WY.N)

Hotel room rates have been rising steadily for the last three years. According to Smith Travel Research, average hotel room rates are expected to rise to over $96 a night this year, about $14 more than in 2003.

But the increases for business hotels, known as upper upscale, have been outpacing the overall sector, rising 7.3 percent so far this year compared with an industry average rise of 6.8 percent, said Smith Travel Vice President Jan Freitag.

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Source - Reuters


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