COMMENT: A Happy New Year - it's not likely (Jan 5)

ABTN sincerely wishes its readers a Happy New Year - but it doesn't look as if it will be

The world economy has been on a slow slide since the credit crunch was sparked by the sub-prime lending crisis in the United States in 2007. The pace of the slide has quickened considerably since the banking crisis in the autumn.

It was in the last quarter of 2008 that business travel felt the force of the downturn. Up until then, things had remained largely on an even keel.  When the UK Guild of Travel Management Companies (GTMC) released its figures for the three months of July, August and September, it reported an 8% rise in the number of transactions handled compared with the same three months in 2007 with bookings for hotels and rail "booming."

Even air bookings were 14% up on 2007. But there was a slight sting in the tail. The GTMC noted that air bookings by its members had increased by only 2% throughout the year while its ceo, Philip Carlisle noted that the preliminary reports for the fourth quarter suggested things would be "more challenging."

Airlines reported significant falls in demand, especially for premium travel, while hotels which had optimistically expected the 2008 negotiations to emphasise it was still a seller's market instead found their position much weaker. One analyst spoke of panic among hoteliers.   

There seems to be little if any evidence that things have changed since then or are likely to do so in the next few months.  Sadly there is a widespread feeling that things are more likely to get worse before they get better.

This is not a happy outlook for business travel or its main suppliers, the airlines and hotels. More airlines are likely to go bust with low cost carriers feeling the pinch as much as the legacy ones. Hotels will see a fall in the number of their guests, especially their business traveller customers. Hotels consultants like PKF and TRI Hospitality have already noted this happening.

But it would be wrong to get too carried away and assume the end of the world is nigh. Most businesses need some measure of travel to keep going.  There are still old contacts to meet, new ones to be made and deals to be signed. All of this needs travel. So while travel is likely to be reduced, there will always be some taking place.

The crucial questions - and ones that can not be answered - are just how much will it be reduced and for how long. While some companies have gone the whole hog and put a freeze on travel, others have taken a different approach by selecting which are the vital trips that need to be undertaken, perhaps to secure a new contra ct, and which are those whose objectives can equally well be achieved through video conferencing or even a telephone call. Most often these dispensable trips seem to be meetings between colleagues from the same company which may not have the same, tangible return on investment that a trip to secure a contract demonstrably has.

Hopefully the number of trips deemed essential will be high or at least high enough to keep most airlines busy and hotels reasonably full.

But a downturn is also a time when companies, watching all their spending, start to inquire after value. Agents, well used to demands that they spell out their value but not particularly articulate at doing so, are likely to be among those scrutinised.

This is not necessarily a signal to panic. Agents which can not only persuade their clients of their value but also demonstrate it practically in cheaper fare or lower hotel rates, have little to fear. Those who struggle to do this may have more reason to worry

But as the downturn bites harder and companies examine their outgoings, there could not be a better time for agents to prove their worth.