Despite the recent fiscal impasse sparking market fears, trade with Uncle Sam remains in rude health. Nick Easen reports
“Go west, young man” may be a quote attributed to American author Horace Greeley concerning America’s expansion westward in the 19th century, but it could easily be used by British business travellers today. There are plenty of good reasons to hop on a plane to visit the world’s largest economy.
Forget eurozone countries – the US is still the UK’s largest single export market, and it is a long-established trading partner and a significant destination for British investments. Trade between the two countries amounts to more than £130 billion every year, according to the UK Trade and Investment body (UKTI) and British companies employ around a million people in the US.
The fact is, it takes a lot of buying of business travel in the UK to maintain this level of trade. Certainly the federal shutdown in the US, after Congress failed to agree a new budget, highlighted once again the importance of business, trade and, therefore, travel between the two countries. The first such shutdown in 17 years, it sparked fears that business would be hurt – yet the US economy is showing signs of a robust pick-up led by housing construction and firm consumer spending. Long-term prospects for business travel to this nation still look good.
Also, political paralysis in the US is hardly something new: there have been 17 stand-offs since 1977. Knowing this, the global markets in general just yawned, and businesses from Kentucky to Kennebunkport moved on. That said, the current agreement struck at Congress is only a temporary measure, and the situation may well be repeated during ‘round two’ at the beginning of 2014.
Business travel to and within North America has been evolving in recent times. The biggest element of change is the consolidation of capacity into the major airline alliances, which continues to this day, meaning less choice for the business traveller. These alliances increasingly encourage travel via their hubs instead of direct, non-stop flights.
“There are now higher fares for itineraries that do not have Saturday-night stay and same-day travel,” says Mike Davidson, chief operating officer at Hess Travel, a business travel agent in Utah.
US domestic air fares have, on average, increased much faster than inflation over the past several years. “We were extremely surprised, shocked even, at the cost of booking last-minute air tickets to, from and around the US for a recent television shoot,” says Kurston Hanniford-Jane, who works for a media company in the south-west of England. “We had to be extremely flexible when we could send out and bring back our teams. These escalating costs are something that appears to be recent and really ate into our budgets.”
There’s been the merger of Delta and Northwest, Continental combining with United, and Southwest acquiring Air Tran; then there’s the proposed American Airlines-US Airways merger which is due to be finalised by December 9. The combination of American and US, the fifth-largest airline, would create the world’s largest carrier – watch the airspace for upcoming changes likely to rock this sector. “Buyers need to be aware of how mergers are affecting their buying power and may need to be prepared to shift volume or consolidate with fewer suppliers,” says Vincent Lebunetel, senior director at CWT Solutions Group.
Certainly, the increasing prominence of ancillary pricing should be factored in when buying air travel for the US. Although the base fare for the ticket may appear reasonable, fees for baggage, in-flight wireless internet access, refreshments and fuel surcharges can seriously add to the cost of travel. If you don’t have ‘elite airline’ status, many extra fees will be chargeable. “We’re seeing more unbundling of product and hence rising costs for ancillaries, with, in some instances, lower service levels than you would expect on European and Middle Eastern carriers,” explains Andy Grodecki, the newly appointed manager for industry partners at the GTMC.
REACHING FULL CAPACITY
When booking hotel rooms you can expect modest rate increases across the US in 2014. Hotels in many key business destinations are already operating at near capacity, so buyers can expect to pay a premium at properties, especially in New York, San Francisco and Miami.
“Now the issue is actually finding a room in some key markets,” says one travel buyer for a London-based finance house. “We see much higher hotel occupancy rates with a lot fewer discounts. Getting the hotel rooms we want is not always easy.”
Last room availability (LRA) will certainly remain a staple of managed hotel programmes. “Booking early isn’t always the right thing to do for hotels, as prices can get lower nearer arrival date,” says Ken McLeod, corporate director at Advantage Travel Centres.
Amenities and ancillaries also now account for a large portion of the hotel bill. “Where possible, you should try to negotiate things like internet and breakfast in the agreed rate – this is what we did recently when organising our business trips to the US,” says Hanniford-Jane.
Some hotel chains now offer free internet to loyalty programme members, so buyers may want to make an effort to encourage frequent travellers to join. In some cases, free basic internet service may be offered by the hotel, yet higher-speed access has to be paid for as an extra.
In this era of cost control, trips to the US now tend to be less frequent and longer in duration. Prior to the economic crisis it was not uncommon to see travellers going to America on a weekly basis and only staying for one night, but buyers are seeing this happening less frequently now.
“The number of multi-destination trips has also increased as travellers save money by visiting two or more destinations within the US as part of the same trip,” says Hillgate Travel’s Julian Munsey.
Across the board this seems to be more common: make the longer trip more worthwhile with more meetings, more destinations and more internal flights.
Overall, it does appear that ancillary charges are an ever-increasing burden on the business traveller and travel buyer looking at US travel.
“It’s not just the cost, but the complexity and variation by airline, hotel and car rental company,” says Advantage’s McLeod. “There is a real suspicion that the add-on costs are now becoming mainstream revenue earners and they do not reflect an improved level of service. To be honest, in the US, Ryanair boss Michael O’Leary’s ‘pound for a pee’ idea may not be that far off…”
IN CONVERSATION: Greg Treasure
Greg Treasure, president of HRG North America, knows a thing or two about the US market. He has a number of ideas for British travel buyers. BBT caught up with him in his New York office
What are the real trends that will affect business travel buying from the UK?
The current economic environment in the US is improving and buyer attitudes are becoming cautiously optimistic.
What are the issues geographically?
Target and research your destinations – some cities such as New York, Chicago or Houston may be very tight due to greater demand from travellers, while others may be soft, such as Atlanta or Detroit. You may even see conflicting trends in two different markets that are in close proximity to each other. You need to be on the ball.
When buying business travel in the US, what should I be most aware of?
These days it is essential to pre-plan your options – the earlier the better – and be careful which suppliers you select, especially airlines. Global alliances with US partners may provide unique benefits, and individual loyalty programmes may do so as well.
ADVICE FOR US TRAVEL
- Book the flight early and the hotel late.
- Entry into the US is the number one headache by far.
- Out of town hotels don’t often save money – the cost of getting around can be wasteful.
- Although loyalty cards may not be popular with many buyers, they do hold value for travellers when in the US – airlines and hotels typically reward loyalty not just with points, but by ensuring travellers have a comfortable experience. Changing flights and upgrades are easier to do with the right card.
- Small increases are expected in car rental rates in the US. This marks the first time in years that US suppliers have been able to increase rates, even slightly.
- For conventions, meetings and events, Las Vegas is still number one, with Orlando a close second. Both destinations still rule for quality and value.
- New York is still expensive for hotels, though some bargains can be found outside the traditional Mid-Town and Central Park areas, in places such as in the Village, the Flatiron District and the Lower East Side. These are up-and-coming areas with smaller boutique properties that work well with business travellers.