Traveling Workers Told to Trim Expenses

Faced with a weakening economy, more companies are targeting travel and entertainment expenses.

"Everyone's starting to think about what's going to happen if there's an economic downturn," says Adam Weissenberg, who heads Deloitte's travel industry consulting division.

"Travel is one of the more controllable expenses."

Penny-pinching strategies vary. Some companies are asking employees to travel more cheaply by booking advance-purchase airline tickets, less-fancy hotels or more-fuel-efficient rental cars. Others are forcing them to cut trips or replace them with audio, Web or phone conferences.

"Our CEO (Fred Festa) has put out a mandate to cut travel costs. He wants to reduce it as much as possible," says Guy Welty, global networks manager for W.R. Grace & Co., a Fortune 1,000 company with 6,400 employees in 40 countries.

Now, the materials and chemicals company lets people travel "only when absolutely necessary," Welty says. As a result, conferencing use is soaring, especially with offices in Asia, he says. Last year, conferencing saved W.R. Grace more than $5 million in travel costs. More savings are expected this year.

Some companies are shrinking trips by creating more obstacles.

United Rentals, a publicly traded company based in Greenwich, Conn., with 11,000 employees, requires some travelers to obtain supervisors' approval before booking, says Megan Adams, United's purchasing chief. The new rule, implemented in January, will cut about 20% of their trips, she says.

Travel cutbacks aren't limited to big corporations. Fielding Fowler, a professional comedian from Saginaw, Mich., says he's increasingly being put up in cheaper hotels or having to share a four-star room with another comedian. Comedy clubs, bars and colleges in cities such as Chicago, Cleveland and Columbus, Ohio, are spending less on guest lodging, he says.

New travel policies and stricter enforcement will cause the average U.S. hotel occupancy rate to fall slightly to 62.6% this year vs. 63.2% in 2007, says Bjorn Hanson, chief lodging consultant for PricewaterhouseCoopers. Tighter policies will fuel "the largest decline in U.S. hotel occupancy since 1999," excluding the dramatic cuts in travel post-9/11, Hanson says.

Rental car companies are also vulnerable to belt-tightening, even though contract rates are expected to climb by only about 2% this year, says Neil Abrams, president of industry tracker Abrams Consulting.

No more 'bells and whistles'

Companies are increasingly telling travelers to hire smaller cars or that they won't reimburse them for "bells and whistles," such as navigation systems, he says. They're also targeting unnecessary costs, such as the refueling bill when a car is returned with an empty tank. Car rental agencies charge as much as about $7 a gallon, which for a 20-gallon tank and thousands of rentals a year adds up.

Some travelers are starting to watch what they eat — even at power lunch spots.

Joe Bastianich caters to diners with big expense accounts at high-profile restaurants, including Del Posto in Manhattan, which he owns with two celebrity chefs: his mother, Lidia Bastianich, and Mario Batali. At lunchtime, Del Posto sells $175 tasting menus by request and signature dishes such as a Dover sole dish for two for $120.

Overall, business remains strong as Europeans account for a bigger share of business, he says. Yet, Bastianich says, he's seeing a shift in customer purchases. Some are starting to frown on items "that are very showy or exclusively priced" and instead are seeking items that represent better value: a $300 bottle of Barolo vs. a $1,000 California cult cabernet, he says.

Even business diners at moderately priced restaurants are watching their tabs. David Robinson, a sales executive from Lenoir City, Tenn., no longer reaches for the check first when dining with work colleagues, even though they would get reimbursed by the same company, so the amount won't count against his budget.

"In past years, I'd grab for it first just to get out of there. Now, I'll wait," Robinson says.

At some companies, travelers who fail to follow the new policies are risking their reimbursement., an online real estate media company with 1,700 employees, adopted a "very heavy policy" in the last year to curb costs, says Cyndy Hayes, the company's travel manager. If employees break the rules, they are contacted by a supervisor — and multiple offenders risk being denied reimbursement, she says.

"We're a publicly traded company. We have to show shareholder value," Hayes says.

Consultant Chris Pearson of Westfield, Ind., says he's seen "major crackdowns" in other ways. Since fall, his firm requires him to file expenses within 30 days or risk not getting reimbursed, he says.

"Unless you want to fund your own travel, you toe the line," he says.