Corporate travel weakness, along with macroeconomic concerns, are a real concern for airline and hotel executives this year.
Global distribution system technology providers are feeling the crunch, as well, according to statements during their latest round of earnings announcements.
“We see more of a softness on the business travel side,” said Tom Klein, CEO of Southlake, Texas-based Sabre, on the company’s second quarter earnings call last week. “And I think there’s been softness in segment-specific areas. You certainly have seen now a multi-year softness in the energy sector where I would say the trips went away, not looking for cheaper fares.”
While U.S. business travelers aren’t traveling as much, there are still signs that global business travel demand remains strong. But big spenders in the U.S. are now looking for more of a bargain, which is impacting the bottom line of travel companies when it comes to bookings on a global basis.
The finance sector, which has long been one of the biggest spenders in corporate travel, is showing signs of a spending slowdown.
“Energy sector trips went away; in the financial sector, trips have also gone away,” said Klein. “So yeah, there’s been a lot of cost-cutting as banks and – banks in particular had earning shortfalls and they cut cost and travel is one of those expenses that is early in the queue when broader cost-cutting is going on… [those are] primarily the big sectors that we’ve seen, but in the U.S., it’s been soft now for quite awhile on the business travel side. I think that flows into the big corporate markets around the world as well.”
Gordon Wilson, CEO of Langley, UK-headquartered Travelport, echoed the same concerns on his company’s second quarter earnings call.
“I think the top line in the corporate market is kind of certain factors, such as energy and to a degree banking as opposed to across the board,” said Wilson. “And so, I think it’s actually pretty gloomy perspective on corporate travel. I just think it depends on your mix of corporate travel and business and we’re pleased with that we’ve signed a couple of big corporate accounts, central businesses in the United States.”
Events like Brexit, with the UK deciding to exit the European Union, and terror attacks in Europe are leading companies to be more cautious in their expectations, but the true impact of these events has yet to be seen.
“You know what’s going on in the world, there are a lot of uncertainties,” said Amadeus IT Group president CEO Luis Maroto, who’s based at headquarters in Madrid. “There is some uncertainty going around… the uncertainty is making us a little bit more cautious. Speaking of Brexit… it’s not so significant to have an impact on us. But what is going on with the overall global economy may impact the overall traffic and business… for the time being it is still too early to understand the impact.”