Business travel helping hotels

By DAR HADDIX, UPI Business Correspondent  |  Feb. 10, 2005 at 2:48 PM
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WASHINGTON, Feb. 10 (UPI) -- Business travel is finally on the upswing, and some travel-related businesses, including many hotels, say they are seeing increased activity as a result, despite hurdles including a growing trend to substitute technology for travel.

However, some business travel groups are anxious that airline ticket fee increases could hurt this budding recovery.

Starwood, Hilton and Marriott all reported this month that increased business travel significantly boosted fourth-quarter 2004 revenues.

The 2004 Business and Convention Travelers Report, released this week by the Travel Industry Association of America (TIA), the National Business Travel Association (NBTA) and the Institute of Business Travel Management, shows that business travel volume grew more than 4 percent in 2004 after declining more than 14 percent from 1998-2003, and is expected to grow strongly over the next few years as well.

Earlier this month, White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc. said its fourth-quarter profits rose 15 percent, a gain it credited at least partly to increased business travel as it raised room rates in New York, Boston, Chicago, San Francisco, Los Angeles, New Orleans, Miami and Washington D.C. "We as others in our industry are benefiting from a robust recovery in business travel," said one Starwood executive on a conference call earlier this month. A more than 70 percent increase in room occupancy rates helped fourth-quarter 2004 per-room revenue rise 11.1 percent at Starwood hotels worldwide, and 11 percent at North American hotels, compared to 2003.

Bethesda, Md.-based Marriott International Inc. said that fourth-quarter profit rose 12 percent, as increased business travel allowed the hotel chain to raise rates at hotels in New York and Washington, D.C., among other locations. Worldwide, revenue per room climbed 9.6 percent to $3.14 billion, while North American revenue per room increased by 8.5 percent in 2004, driven by a 3.8 percent increase in average daily rate and a 3.1 percentage point increase in occupancy, boosting it to more than a 71 percent occupancy.

"After three years of unprecedented challenges, the travel industry is booming, especially in the United States and Asia, as people travel again for business and pleasure," said J.W. Marriott, Jr., chairman and chief executive officer of Marriott International.

"For our full-service hotels, group business strengthened substantially. Compared to 2003, meeting planners booked more meetings and booked them at higher rates," he added.

"Business is so strong that some meeting planners are finding they have reserved too few rooms for the number of attendees," Marriott CFO Arne Sorenson said in a interview with

Universal Air Travel Plan, Inc. (UATP), a corporate travel payment system used by more than 200 airlines worldwide, said Wednesday that it saw business travel volume rise 10 percent in 2004, with $7.7 billion in sales.

"UATP's 2004 volume is another indicator that business travel is continuing its recovery from post 9/11 declines and that companies want to lower the cost of credit card transactions as part of their business strategy," said Ralph Kaiser, president and chief executive, UATP. "We have seen significant growth in all of our worldwide markets segments."

These gains have occurred despite the fact that technology such as webconferencing has to a point replaced business travel -- nearly 40 percent of all business air travelers substituted some kind of online business communication technology for travel in 2004, and 71 percent of all business air travelers in 2004 felt that teleconferencing, webcasting or videoconferencing was to various degrees more efficient than travel.

However, only 37 percent of business air travelers feel that using such technology is more effective than a face-to-face meeting.

But increases to current airline security fees in President Bush's proposed fiscal year 2006 federal budget could hurt a recovering but still fragile business travel industry, industry groups said Thursday. The increase would raise $1.5 billion for the U.S. Department of Homeland Security.

Air travel fees would increase from $2.50 to $5.50 on one-way airline tickets and from a $10 maximum per roundtrip flight up to a maximum of $16. "We now know that travel security is national security, and it should be funded as a program that protects all Americans," said Bill Connors, executive director and COO, National Business Travel Association. "But travel is an essential gear in the American economic engine. It should not be discouraged by higher taxes. This proposed fee hike would cost businesses more than $400 million per year. Such an increase is likely to suppress demand among price-sensitive businesses travelers and create a negative impact on the nation's economy."

"A near doubling of the aviation security tax will only discourage travelers from flying for business and pleasure. This will also harm hotels, attractions, resorts, car rental firms and other travel industry companies and destinations that depend on these travelers for their economic livelihood," said Roger Dow, president and CEO of the Travel Industry Association of America (TIA).

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