Flight Path To Survival: Business process outsourcing helps airlines, hotels, car rental industry su

Significantly declining demand. Yo-yo-ing fuel costs. Labor relations issues. Capacity management challenges. Commoditization and lack of pricing transparency. Possible government- regulated passenger 'bill of rights.' Plummeting revenue per available room night. Intense scrutiny and potential regulation for group and incentive businesses. Sky-rocketing fleet costs.

Rate deflation. Failing health of the automobile industry. Is it any surprise the airline, hospitality and car rental industries feel like they're up the proverbial creek without a paddle as a result of today's abysmal economic conditions?

The current state of these travel and hospitality industry segments is worryingly bleak. Recently third-party statistics tell the story

Airlines

The International Air Transportation Association's (IATA) March 2009 Financial Forecast declared that the airline industry is in debt by $170 billion, net losses in 2009 are expected to be higher than previously forecasted at $4.7 billion, revenue will decline by 12 percent ($63 billion), overall traffic demand is expected to shrink by 7.8 percent, and passenger traffic will drop by 5.7 percent.

And in a March 24, 2009 press release, IATA's Director General and CEO, Giovanni Bisignani, said, "…the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues. The industry is in intensive care." Bisignani continued, "…It will be a grim 2009. And while prospects may improve towards the end of the year, expecting a significant recovery in 2010 would require more optimism than realism."

Hotels

Smith Travel Research, a leading hotel industry analyst firm, stated that in the week of March 22, 2009, in year-over-year measurements, the U.S. hotel industry's occupancy rate dropped 12.3 percent, average daily rate fell 8.8 percent, and revenue per available room decreased 20 percent. European hotels fared a bit better with mixed year-over-year results in February 2009, with figures for occupancy, average daily rate and revenue per available room night ranging from double-digit losses to single-digit gains. And while several Asia-Pacific markets posted gains or smaller decreases, the overall region's occupancy dropped 18.3 percent, average daily rate declined 12.1 percent, and revenue per available room fell 28.3 percent.

Carrental companies

Annual reports and quarterly filings reprise a litany of challenges. These include:

1) a disruption in the ability to obtain financing and an increase in the cost of financing;

2) substantial debt; 3) the financial condition of automobile manufacturers; 4) intense competition that could lead to downward

pricing; 5) decreased acquisition or disposition of cars through repurchase and guaranteed depreciation programs; 6) environmental laws and regulations and the costs of compliance; and 7) too much reliance on asset-backed financing. And the industry's symbiotic relationship with air travel exacerbates the situation. For example, one major car rental company estimated approximately 69 percent of its worldwide car rental revenues during 2008 were generated at its airport rental locations. Significantly reduced air travel traffic demand thus has a major impact on the car rental industry. And the National Business Travel Association's (NBTA) prediction – in its 2009

Business Travel Overview & Cost Forecast – of nominal car rental rate increases of 1 to 3 percent provides very little consolation to this ailing industry.

BPO to the rescue for the travel and hospitality industry

Business process outsourcing (BPO) represents a strategic and efficient life raft for companies striving to stay afloat in these tumultuous times. If implemented properly, BPO can be a fast and simple solution to rapidly reduce costs, help companies survive the economic downturn and set the stage for future growth and expansion after the economic tidal wave subsides.

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