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 Up Front With Martin B. Deutsch

martin BACK TO THE FUTURE
OF BUSINESS TRAVEL


BY MARTIN B. DEUTSCH

February 23, 2006 -- Academics say that history repeats itself and they are probably right. About this time in 1992, I wrote the column below that appeared in Frequent Flyer magazine. It cited ten reasons why 1991 had been the worst travel year ever. Just about all of these factors remain in play today, except that the hotel industry has experienced a dramatic turnaround with record occupancies and record-high room rates. But my guess is that the brass in the hotel executive suites will again dampen the lodging outlook by overbuilding, something they are doing right now. Otherwise, most of the influences that brought woe to both business and leisure travel in 1991 are with us again in 2006. So join me for a glimpse back fifteen years, a glimpse back to the future.

April, 1992 -- I've spent 36 years in travel publishing and if one certainty has evolved from this experience, it's this: Hands down, without fear of contradiction, 1991 was the worst travel year ever.

Many ingredients go into such a harsh and uncompromising judgment, but the major--and obvious--factors were the recession, the Gulf War and the iron grip of a travel depression. Further, I'm not certain that 1992 will be any better, despite the fact that it's an election year and that there were some reports of upturns on isolated fronts in January and February.

In light of the vested interest in travel among our readers, I've decided to reintroduce an exercise that we've sidetracked in recent years. I refer to "The Industry's Top Ten Issues," an annual compilation and analysis from the editors of travel management daily, a sister publication of Frequent Flyer. This feature looks back to last year and through 1992. What follows is a condensation of several of the newsletter's top issues that particularly affect the business traveler.

The Recession The horrific effects of the worldwide travel recession mean 1991 may well be remembered as a shakeout period of industry-wide proportions. The weaker operators were felled and companies with deeper pockets, simply by surviving, positioned themselves for future growth.

The Gulf War When fighting began against Iraq, every sector of the travel industry took a blow. The most obvious casualty: air travel. Fearing that terrorist strikes could materialize anywhere in the world, passengers disappeared from airports. (Parenthetically, I should mention that one of the few good things that happened last year was that terrorism did not materialize.)

Turmoil in the Airline Industry Nineteen ninety-one was a year most airlines would like to forget. On the heels of a record loss in 1990, the U.S. carriers sloughed through 1991 complaining of increasing labor and fuel costs, a stagnant travel market and undue price competition from weak airlines. Although the demise of Pan American was lamented as a momentous loss because of the airline's history, it ultimately was cataloged as just another of many calamities in 1991. Domestic route structures were shaken up as well. Both of the Boston-New York-Washington shuttles found new operators. USAir eliminated points in the West it purchased when it bought PSA and closed the Dayton, Ohio, hub it picked up in the Piedmont merger. American bowed out of the Los Angeles-San Francisco shuttle market. United nearly tripled its presence at Orlando. Even commuter carriers got involved in the industry turbulence in 1991.

New Carriers Overseas The Department of Transportation heralded the upheaval in international airline service right at the start of 1991. The result was a year-long bazaar in which Pan Am transferred its overseas routes to United and Delta, and TWA sold many of its best European links to American and USAir. Northwest grabbed some plums, including America West's Honolulu-Sydney route.

Taxation and Politics Taxation was often the central issue for the travel industry in 1991. Governments at every level found travelers an easy source of income. More important, it didn't matter if travelers objected since they don't vote in the places they paid the taxes. A study by the Travel and Tourism Government Affairs council found that local and federal taxes and fees on the tourism industry had increased $4 billion between 1984 and 1989.

Hotels Still Slumping In 1991, the hotel industry continued to weather the consequences of overbuilding in the 1980s and the recession of the 1990s. Nationwide, hotel occupancy looked to be off about two points from 1990. As 1992 gets under way, hotels are offering a variety of incentives to fill rooms, from reduced rates to bonus amenities. Another trend: a new respect for budget hotels. Business and leisure travelers looking to trim costs gave more consideration to economy properties and some major hotel companies reported their budget lines performing better than their higher-end products.

More Value-Oriented Marketing In a tough economic year, industry marketing experts stressed value as never before. The trick was not simply to lower prices, but to provide--or at least be seen as providing--additional perks for a certain amount. Destinations that are notorious for high costs, like Japan, Western Europe, and New York City, will have to struggle to fight the perception that they are becoming too expensive for price-conscious travelers.

Copyright 2001-2006 by Martin B. Deutsch. All rights reserved.