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With Prices for Airfare, Hotel Rooms and Rental Cars Increasing, the Push
 and Pull Between Travel Buyers and Suppliers Intensifies
By Suzanne Marta, The Dallas Morning NewsMcClatchy-Tribune Regional News

Nov. 8, 2007 - Corporate travelers take note: It's going to be more expensive to hit the road next year.

With prices for airfare, hotel rooms and rental cars increasing, the traditional push and pull between travel buyers and suppliers has intensified. Companies are looking to tightly control costs in an uncertain economy, while suppliers are battling rising energy costs and trying to leverage a seller's market.

Much to the distress of corporate travel managers -- and their road warriors, who increasingly face crowded planes and sold-out hotels -- demand is expected to continue outpacing supply next year.

As a result, the average cost of a domestic trip in 2008 is expected to rise 6 percent, or $63, to $1,110, according to research by American Express Business Travel. Overseas trips are forecast to rise 7 percent, or $205, to $3,171.

The growing costs have caused corporate travel managers to think creatively about ways to save.

In a survey by the National Business Travel Association, 16 percent of travel managers reported that they would restrict business-class airline tickets. That's up from 8 percent who said last year that they would limit the premium-class tickets.

At Dallas-based health care staffing firm Delta Cos., free rental car coupons generated from frequent bookings are reserved for the most expensive markets.

"We save a couple thousand dollars a month doing that," said Stacy Collins, Delta's travel manager.

7-Eleven Inc. travel manager Mona Crisp said the Dallas-based company is trying to hold its travel budget flat for 2008 by being savvier on trip planning.

She said the focus on travel costs has radically changed the way employees approach trips. Instead of booking airline tickets a week before departure, "our average is now 14 to 21 days in advance," Ms. Crisp said. "Our employees have educated themselves and become smart travelers."

This year, 7-Eleven is tackling an expense that has recently come under scrutiny by the travel management industry: internal meetings.

The convenience store franchiser -- which holds eight internal trade shows a year that require between 200 and 300 hotel rooms -- will implement an online meetings tool that makes it easier to get proposals from hotels and for employees to identify where they should book.

Kathleen Mason, president and chief executive of Dallas-based Tuesday Morning Corp., said she's trying to combine trips as a way to trim costs.

Ms. Mason, who travels nearly every week, uses a corporate booking tool to better track travel spending and has shifted internal meetings away from big cities where hotel prices have soared.

"We're going to places that are more cost-effective," she said.

Precise pricing

Challenges for corporate travel management are not limited to rising costs.

Suppliers are also employing more sophisticated technology to make sure they're getting the highest price for their product. That's making negotiations for corporate discounts more complicated.

LQ Management, which operates La Quinta Hotels, has invested in sophisticated property management and reservations tools that enable hotels to juggle as many as 16 prices each day.

"Before we could only do three, and it had to be the same for weekday or weekend," said Feliz Jarvis, Irving-based LQ Management's executive vice president for sales.

Ms. Jarvis said negotiated room rates for the midprice hotel chain will rise around 5 percent for 2008, slightly lower than the average 8 percent increase this year.

Increased complexity

John Hackett, who oversees global business sales for Irving-based Omni Hotels, said his deals are also getting more complex as his team crunches more data about demand and buyers.

He said deals today consider not only rate and a hotel's "last room available," but also room types, length of stay, days of the week and competition.

"These are things we didn't look at five years ago," Mr. Hackett said.

Airfare discounts have also gotten more complex as carriers create more pricing tiers.

"You can have as many as 10 to 15" fare types, said DeAnne Dale, who oversees travel forecasting services for clients of Southlake-based Travelocity Business.

"The deals and tiers are so complex that it's really hard for corporations to know what they're going to save."

In some cases, buyers have found that contract discounts applied to too few room types, meaning travelers ended up booking rooms without a negotiated price when the designated types sold out, Ms. Dale said.

David Cush, American Airlines Inc.'s senior vice president of global sales, said the carrier has been trying to smooth things over with corporate customers by talking about plans to improve service and avoid a repeat of the dismal delays last summer.

A little nervousness

"More than luxury, they are looking for a predictable and efficient process," Mr. Cush said.

Anecdotal reports signal that customers are "cautiously optimistic" about their travel, but "everyone has an eye on Wall Street and the mortgage situation," Mr. Cush said.

Fort Worth-based American maintains around 1,500 contracts for corporate-negotiated discounts, down from 2,000 just three years ago. Since then, the airline has overhauled its program and begun implementing a more sophisticated system for tracking customer volume.

Expanding reach

Mr. Cush said the airline's biggest challenge remains tapping into small and medium-size businesses, many of which don't have a formal travel program.

"That's where a lot of business travel growth is," he said.

Southwest Airlines Co. has put more energy behind its corporate effort, boosting its sales team from five members to 15 and signing a deal to publish its fares on Galileo's central reservations system.

Recently, the Dallas-based carrier said it may consider corporate discounts for the first time. On Wednesday, Southwest announced its first-ever fares targeted specifically at corporate travelers that offer extra perks for a small premium.

Another big change in Southwest's sales pitch this year is its Dallas Love Field service. Eased restrictions under the Wright amendment mean the carrier can now talk to local travel managers about one-stop service around the country, rather than just to Texas and nearby states.

"We're now a player in those markets," said Rob Brown, the airline's director of sales and distribution.


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