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Business travel rebounds as economic optimism continues to climb

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NEW YORK » Business travel is bouncing back.

U.S. companies are forecast to spend 5 percent more on travel in 2011 than they did last year — a sign of confidence in the economy that is giving a boost to airlines, hotels and rental-car companies. That is double the growth rate from 2010, which followed two years of decline.

Last year’s bump in business travel — companies spent an estimated $228 billion — helped U.S. airlines post their first collective profit in three years. And profits are rising at hotel chains like Marriott and Hyatt and rental-car companies like Avis and Hertz.

Perhaps the most telling sign of a rebound, industry officials say, is the return of corporate retreats. They had vanished during the recession, part of an effort by businesses to avoid the appearance of extravagance at a time of government bailouts and rising unemployment.

Executives sending their workers back on the road say travel is critical to their companies’ success.

"You need to have face time," says Robert P. Genco, vice president of operations for Synopsis, a Silicon Valley company that makes software for microchip manufacturers. Synopsis cut its travel budget by about 60 percent during the recession. Now it is nearly back to a pre-recession level, with salesmen and top executives visiting old and new clients in China, India and Japan.

Elyria Foundry, an Ohio manufacturer of metal parts for the wind turbine, natural gas and mining industries, has been sending engineers and salesmen on the road again to let customers know they are important.

"If you look at the younger generation, they seem addicted to text messages," says CEO Bruce Smith. "When you are there in person, the quality of information you transmit goes up dramatically."

U.S. economic output returned to its pre-recession level in the fourth quarter of 2010, and the economy is forecast to grow faster in 2011. But spending on business travel is not expected to return to its pre-recession level until the middle of 2013, says Michael W. McCormick, executive director of the Global Business Travel Association. That is partly because companies are asking employees to travel frugally.

The average cost per trip in the first quarter is forecast to be $538, 6 percent below the same period in 2008, according to the business travel association.

Corporate travel managers are asking employees to spend fewer nights on the road, stay at less expensive hotels, rent smaller cars and, in some cases, book cheaper flights that are not nonstop.

The companies are also asking more of their travel providers. For example, travel managers are asking hotels to throw in free breakfast, Internet, parking and gym use, says Best Western CEO David T. Kong.

The extra miles business travelers are racking up are a boon to an industry that suffered badly during the downturn.

In 2009, business travelers spent $222.7 billion, the lowest level since 2003, according to the business travel group. The largest U.S. airlines lost a combined $3.4 billion that year.

 

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