Bargain time in business class

Author: Lisa Allen
Date: 12/11/2009
Publication: Australian Financial Review
 
The carriers are competing hard for the corporate dollar, leaving business travellers in prime position to reduce costs over the long term.

Got a long-haul trip to Europe coming up?  Really need a business-class seat to arrive in Hong Kong fresh and bright for a mid-morning meeting an hour after you touch down at Chek Lap Kok?  Corporate and finance types - and those still lucky enough to have spare pennies floating around despite the global financial crisis - should be scouring airline and hotel websites.  There are still good deals to be had on business-class travel.

Although the worst of the business-travel downturn appears to be coming to an end, the negotiating outlook for airline and hotel business next year should still be excellent.  Those clients who can offer airlines strong forward business should be able to secure good discounts, particularly for business class.

The good news does not stop there.  A five-star hotel bed with Egyptian cotton sheets in Sydney is 11 per cent cheaper than it was this time last year.  And it was only 12 months ago that an average international flight booking with Webjet to the United Kingdom cost $2570; today it costs $2128.

However, the biggest drops have been on flights from Australia to the United States.  Last year, flight bookings averaged $3578 on Webjet; this year, the average booking through the online travel service is $2272 - a drop of nearly 40 per cent.

Given Qantas's profit was down 87 per cent to $117 million and Virgin Blue made a $160 million loss for the year ended June 30, Webjet managing director David Clarke says the business-travel market has not recovered.

He stresses that Webjet's total ticket value accelerated by more than 50 per cent in October compared with October last year, but the broader corporate-travel market remains in the doldrums.

"Whilst overall industry and economic data remains uncertain, it is clear our current marketing activities are resulting in a trend which is massively better than the general travel market,'' Clarke told the Australian Securities Exchange recently.

"International business travel compared to last year is down probably 25 per cent year on year.  In the case of flights on the business market, airfare reductions are very substantial.''

The chief executive of Melbourne's historic Windsor Hotel, David Perry, is more upbeat.

"October showed signs the corporate market has come back," he says.  "At the end of last year, the business market, particularly the larger accounts with international operations, was running for cover.  [But] domestic travel has certainly increased in the last month or so.

"Whether that is a sign that business has returned to normal or whether it's a sign that the market has recovered significantly since this time last year, I would suggest it is the latter.  [But] any recovery can be fragile and business travel is one of the earliest indicators of general economic health.  We are an early signpost.

"Things are better but we are not back to normal.  [Revenue per available room] for October 2009 was down 69¢ compared with October 2008.  We ended October with 88 per cent occupancy at an average rate of just over $200.  It's been a tough year.''

Hotel analyst Dean Dransfield reveals some worrying data about capital-city hotels.

"In the June 2009 quarter, the Australian hotel market performed very poorly with an average city revenue per available room decline of 10.6 per cent compared to the corresponding quarter in 2008,'' the Dransfield report for the June quarter says.

The decline in average available rooms was the result of a 5.5 per cent average rate decline and a near 3 per cent decrease in demand.  National occupancies fell by 4 per cent to 69 per cent in June from the same month last year.

Some of the worst declines have been in Brisbane, where rates are down by an average of 2.1 per cent for the year to date and occupancies are collapsing.  Canberra's hoteliers have also suffered with average room rates falling nearly 11 per cent off an increase of 20.2 per cent in the June 2008 quarter.

Despite the travails of Qantas and Virgin Blue, analysts are more confident of a recovery in premium airline travel than they are regarding a recovery in the hotel sector.

"We continue to expect increased demand for air travel (particularly premium), alongside a recovery in general economic conditions, to result in continued improvement in load factors and ultimately some recovery in yields during the second half of 2010,'' Goldman Sachs JBWere says in an investment report.

Qantas has reported that total domestic yield in September was down 12 per cent on the previous year, but Virgin Blue reports its September numbers slid 1.5 per cent.

Qantas and Jetstar international operations yield was down by 24.2 per cent compared with the same period last year.  Overall, Virgin Blue increased its revenue load factor by 3.1 per cent in September on the previous corresponding period.

Travel agents say confidence is returning and markets are recovering slowly.

A recent Tourism & Transport Forum-MasterCard survey of 96 senior executives working for leading hotels, airlines and tour operators finds the real concern is the dollar.

TTF managing director Christopher Brown says the rising dollar is great news for the economy but "it makes our exports more expensive - and that includes tourism".