Virtual Travel Gives the Airlines Real Heartburn

Below is an article taken from the New York Times, By Jane L . Levere

There was no way the four architects at Kohn Pedersen Fox Associates in New York were going to fly to Beijing last month in the midst of the SARS epidemic for a meeting with officials of the developer of an office tower there and two consultants who were supposed to be arriving from the Philippines.

Instead, said James R. Brogan, K.P.F.'s director of information technology, the various parties - all 40 of them - got the job done over the Web and by videoconferencing. "We used WebEx to share material, a PowerPoint presentation, CAD drawings and digital images," Mr. Brogan said. "We could also sketch and mark things up. It was completely interactive."

Mr. Brogan's delight at the outcome - not only did his firm accomplish what it set out to do, but it also saved a lot of time and money - is enough to make a grown airline chief executive cry. Battered by terrorist attacks, a wobbly world economy and the severe acute respiratory syndrome scare, the entire travel industry now has to cope with corporate America's growing love affair with teleconferencing.

Though teleconferencing has been around for years, new technology is making it easier and cheaper than ever, meaning that it will probably continue to eat into the revenues of airlines, hotels, car rental companies and other segments of the travel industry even if all the other ordeals the industry has gone through fade away.

"In the search for a credible explanation as to why business travel spending has fallen three times more in this downturn then in the past, bandwidth must certainly play a role," said Sam Buttrick, an airline analyst for UBS Warburg. "Over the past decade, and particularly in recent years, bandwidth has gotten faster and cheaper, neither of which could be said about business travel."

Elliot Gold, president of TeleSpan Publishing, an Altadena, Calif., market research company, said the use of all types of teleconferencing, including audioconferencing, videoconferencing and Web conferencing, jumped more than 35 percent after the Sept. 11 terrorist attacks. Though it then tapered off, the trend is clear: More than 78 percent of corporate travel managers surveyed last spring by the Business Travel Coalition, a lobbying group, said they had increased their reliance on teleconferencing and 86 percent said they planned to do so in 2002. A similar poll last month indicated that the SARS epidemic was contributing to the shift to technology from air travel.

It helps that the number of products and services available is growing rapidly. Companies supplying them include Polycom and Tandberg, the two largest suppliers of videoconferencing equipment; AT&T and MCI, the telecommunications giants that do an estimated $500 million each in teleconferencing business annually; and a parade of smaller players like ACT Teleconferencing; Genesys Conferencing; Global Crossing; Intercall; Sprint; V-SPAN; Premiere Conferencing, a unit of Ptek Holdings; Wire One Technologies; TeleSuite; WebEx; and PlaceWare, now being acquired by Microsoft. And companies like Affinity, Proximity, HQ Global Workplaces and Kinko's rent out videoconference rooms.

All this competition is driving the cost of teleconferencing down. Andrew W. Davis, managing partner of Wainhouse Research, a Brookline, Mass., consulting company that specializes in the industry, says the price of installing a videoconferencing system in a corporate office has fallen to around $9,000 today from $27,000 in 1998. The cost of a
videoconference call has dropped to just 80 cents a minute per site from $1.60 in 1998, he says, while that of an audioconference call has dropped to just 12 to 19 cents a minute per site, from 33 or 34 cents in 1998.

Some travel companies figure that if you can't beat them, join them. Marriott International will set up conference sessions at any location through its EventCom Technologies division. Even two large corporate-travel companies, Rosenbluth International and TQ3 Travel Solutions, offer teleconferencing services to clients as an alternative to business travel. Rosenbluth refers its clients to TeleSuite, while TQ3 works with V-SPAN; both receive commissions for referrals.

A few companies have embraced teleconferencing with the fervor of religious converts. One V-SPAN customer, Nick Walker, chief executive of Xpherix, a San Jose software company, says it has replaced all but one or two of the company's monthly sales meetings for an annual savings of $100,000. Not only that, a sales representative in Australia who used to
skip the meetings for budgetary reasons can now take part, he says, and the time that employees save from travel frees them up "to spend the day with customers."

Another believer is Darlene MacKinnon, a Midland, Mich., public affairs official for Dow Chemical, who said she chopped her business travel expenditures by more than one-third in the first quarter.

"One year ago, I would have purchased a bunch of plane tickets and flown to Brazil, Hong Kong, Switzerland, Italy and Germany" to meet with her 25 staff members scattered around the world, she said. "Instead, because travel has been severely restricted, I held a videoconference."

It was not just a satisfactory substitute for hitting the road, she said, it was a significant improvement. "It was more than ideal," Ms. MacKinnon said. "All of us got to see each other for the first time. I'm a working mom, with a 7- and a 4-year-old. I could meet with 25 people from around the world, and then be home for dinner with my kids."