A return to business class? About time too!

A return to business class? About time too!

Posted by Pete Loughlin in Category Management, Travel Spend 11 Oct 2011

Spend on business class airline tickets and high end hotels is showing signs of an increase. And about time too!

What’s happening to travel spend? What does this mean for travel managers and does it say anything about longer term business confidence?

Purchasing Insight logoAccording to the Edmonton Journal, citing the Global Business Travel Association, the number of North American companies that allow premium-class air travel rose five percentage points to 56 per cent in 2011 from a year ago.

In Europe, despite the economic gloom, 46 per cent of travel managers surveyed say they’re approving premium-class airline travel to North America vs. 34 per cent last year at this time. The International Air Transport Association also reported last week that traveling overseas in first or business-class seats rose 7.5 per cent in July compared with a year ago.

And there’s more. Higher-end hotels are seeing a pickup too. According to UBS Investment Research, revenue per room for luxury hotels in the U.S. rose 16.9 per cent in mid-September, outpacing other types of hotels. In comparison, revenue per room rose 10.1 per cent for all hotels in the U.S.

What’s happening to travel spend and why?

Travel, for many organisations, rightly or wrongly, is seen as discretionary spend. When times get tough the travel budget is the first to be hit – whether that’s to restrict business travel or to ban travel all together – it’s an easy target and it delivers results immediately. Over the last 10 years, airlines have seen their business class traveler numbers diminish significantly so the news that there is an albeit tentative return to the business class way of thinking, will come as a source for optimism but from a category management point of view, is it right to be loosening the controls now?

I’m all in favor of tight cost control on travel and I’m not a business class snob by any means but there’s something about that situation when you’re trying to complete an important proposal on your laptop, sharing a legroom-free table with 3 unwashed Swedish backpackers that makes you think there must be another way.

The rise in premium travel spend may reflect an increased business optimism but it’s more likely that it reflects the fact that it’s out of the spotlight. The severe constraints on business class travel have been as much about PR as they have been about pragmatic cost control. While real people are facing real hardship, a business that is seen as rewarding it frequent travelers with ostentatious travel perks is a business that’s lost touch with reality. But a little bit of common sense fell through the cracks over the last few years and it good to see that businesses recognize that frequent travelers do need a few creature comforts.

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