Opinion: Has recession killed the corporate expense account?

Opinion: Has recession killed the corporate expense account?

Are we witnessing the sudden death of the corporate expense account? There are two main reasons why I found myself asking this question.

First, British Airways announced that premium traffic (business class) has fallen by 20% in the past 12 months. While its main rival, Virgin Atlantic, may not have seen such a severe slump, we know there are still problems because it is planning significant redundancies.

Second, I read in the Guardian that spending on business lunches had recently seen a major decline. One hundred restaurants in London have already closed this year, largely as a result, and 50 more are predicted to close over the next few months.

One may have presumed that corporate travellers and entertainers were simply trading down to cheaper options, but unfortunately even easyJet saw a 7% fall in traffic over the same period, while business hotel brands – from Hilton to Premier Inn – are reporting similar declines.

Anecdotally, bosses are putting blanket travel bans on their employees and the lunch invites we journalists used to enjoy have become thin on the ground. (Not everyone is suffering.  Alastair Campbell recently mentioned on Twitter that he has ‘just ended a long lunch with Tony Blair’.)

Over the past five years, business travel has provided a major boost for the industry, but this growth now looks under major threat.

For the airlines in particular, it is devastating. Premium cabins provide a large chunk of the profits for long-haul carriers and without passengers willing to chuck several grand on expenses for a return to New York, they suddenly look rather empty.

So, presuming this recession has some time to go, how can travel brands cope in the medium term?

The answer must be by offering normal punters ‘affordable luxuries’. Top restaurants are already offering amazing deals at off-peak times, opening them up to a whole new audience. And the smarter hotel chains have been broadening their product ranges to provide a taste of luxury at different price levels.

As for the airlines, they simply have to cut routes and staff in the short term, but arguably they should be doing more to improve their economy and premium economy offerings, neglected for some time.

This downturn won’t last forever, but it will hopefully force travel and hospitality providers to be a bit more creative and marketing savvy towards the man on the street.


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