12 November 2008

Cutting Starts in Travel Distribution

With a 10% capacity cut across the board at the airlines - it was only a matter of time before other parts of the food chain started to feel the pinch of the reduction in both capacity and more importantly traffic.

I have no numbers in Hotels but believe that there has been widespread cuts in Hotels both front line and managerial staffs in the properties and at the head offices.

Orbitz earlier this week announced a loss and a 10% staff cut across the board. Not to be outdone, At least one of the GDSs has quietly been laying off staff in the US market. We wait to see if there have been cuts at Travelport who should announce their numbers in the next 10 days.

Returning to Orbitz, Steve Barnhart was none to optimistic. On the Analysts call he said: "Although we achieved our target growth rate for net revenue in the third quarter, we do not expect to reach that long-term target range of 9 percent to 12 percent growth in gross bookings and net revenue again until economic conditions improve..." .

We have already seen hiring freezes across the board. Restrictions on travel and indeed any expense. Cutting back on all cost generation and delaying investment.

This is not going to get better any time soon. Budgets for next year's corporate travel have been slashed. Based on our discussions with players with large budgets in all 4 major geographies (North America, South America, EMEA and Asia Pac) we believe that budgets have been cut an estimate 15-20% across the board. From prior experience that tends towards a lower cut number only because exceptions are made. One characteristic we have seen is a decision to lower the budget for trips. IE fewer and fewer premium class authorizations.


And whats in your budget?

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