By Joe Brancatelli
September 23, 2009 -- A year after Lehman Brothers collapsed and took a chunk of the world economy with it, we also have the answer to a cosmic question: Horny bankers didn't save the travel industry.

We discussed the Horny Banker Theory of Business Travel immediately after Lehman tanked. For decades, the travel industry's contention has been that free-spending bankers and their corporate cousins would always pay inflated prices to travel in style, thus shielding airlines and hotels from the worst effects of a global downturn.

Not this time. Bankers and other high-yield business travelers have largely disappeared. Some have simply stopped traveling, of course. But many of us who are still traveling have relocated to the coach cabins and lower-priced hotels that were once the province of bargain-hunting vacationers. And those few who still have the cash or the corporate clout to fly up front and stay in luxury hotels are paying sharply lower airfares and room rates.

"Unprecedented" doesn't quite cover the speed and the scope of the decompression of the travel industry since Lehman's last gasp. Business travel has fallen so far and so fast that the numbers are hard to comprehend. Consider:

* The International Air Transport Association (IATA), the global airline trade group, said last week that premium-class travel was down 14 percent in July compared to last year. The organization actually spun that dreadful performance as an improvement because the decline was 21 percent in May and has consistently been in the 20 percent range since last fall. Passenger revenue has cratered too. IATA says fliers in the front of the plane are paying 35 to 40 percent less than last year. At Continental Airlines, generally considered the nation's best-managed full-service carrier, business travel revenue fell 35 percent in June, 31 percent in July, and 28 percent last month.

* According to lodging-industry statisticians, hotel occupancy in the United States has dipped below 50 percent during some weeks this year. Experts suggest as many as one in three hotels and resorts are upside down on their mortgages. Several major properties, including the W Hotel in San Diego and the St. Regis Monarch Beach in Orange County, California, have been taken over by their lenders. Others, including the five-year-old Four Seasons in the Bahamas and the year-old Nikki Beach in the Turks and Caicos, simply closed their doors. A survey by the reservations service Hotels.com claims global lodging rates have plunged 17 percent and are at their lowest levels since 2003.

If anything, conditions are likely to get worse before they get better. IATA estimates that the airline industry, never particularly profitable even in the good times, will lose a combined $11 billion this year after a nearly $17 billion loss in 2008. Overall revenue is expected to decline by 15 percent. Two of the nation's largest carriers, American and United, say they see third-quarter revenue falling 14 to 19 percent.

"This," said IATA chief executive Giovanni Bisignani, "is not a short-term shock. Eighty billion dollars will disappear from the industry's top line. That loss of revenue will take years to recover."

The hotel industry's outlook is at least as grim. Since it takes years to plan, permit, and build a hotel, hundreds of new properties conceived in the boom times of the mid-2000s gushed out of the development pipeline this year as occupancy and room rates at existing hotels were dropping. The "AIG Effect"—companies shunning high-end hotels for meetings and conventions to avoid the appearance of fiscal profligacy—will continue to plague luxury properties. As a result, experts predict hotel revenues will continue to plunge for the next 18 months.

On the surface and at least for a little while, all this woe is good news for business travelers. There are eye-popping bargains everywhere. With a modest amount of advance planning, a business-class ticket across the Atlantic from the U.S. East Coast can be had for as little as $2,000 round-trip, as much as 75 percent less than the walk-up rate. Transpacific business-class trips from the West Coast have declined by about the same percentage. Hotels, even the luxury chains, are cutting rates with abandon, pitching free nights, free meals, and value-added perks like gas cards, shopping discounts, and complimentary spa services. Desperate to encourage the one-time free spenders amongst us, several airlines and hotels are offering double credit toward the coveted "elite status" levels in their 2010 frequent-travel programs.

But this short-term bonanza is likely to come at the expense of our long-term comfort and convenience. A shrinking travel industry isn't only bad for the economy at large, it's bad for our productivity too.

An analysis by OAG, the worldwide keeper of airline schedules, says that the U.S. industry will shrink 6.8 percent by the end of the year compared to its already-reduced 2008 levels. That's the equivalent of wiping US Airways, the nation's fifth-largest traditional carrier, off the country's route map. It's also twice the size of the industry's contraction in 2002 in reaction to the 9/11 terrorism attacks.

Fewer airline seats and a shriveled route network means fewer nonstop flights, more connections, longer travel times, and, eventually, higher fares. Carriers are switching to smaller aircraft and reducing the size of their first-class and business-class sections. They are laying off ground workers, reservations agents, pilots, and flight attendants. That means more erratic service even as the carriers invent and increase junk fares on everything from checked luggage to advance seat selection.

Hotels are thinking smaller too. They are slashing operating hours for restaurants, room service, and laundry and dry cleaning operations. Several fancy properties have eliminated concierge desks. Others have outsourced housekeeping duties to third-party contractors. Front-desk and back-of-the-house staffs are being slashed, guaranteeing less efficient service and less timely delivery of basic hotel functions.

In other words, buckle up for hard times. We'll all pay—in dollars and in comfort—for the disappearance of those free-spending, hard-traveling horny bankers.

The Fine Print…
Looking for a short-term antidote for the long-term gloom and doom? How about this: Continental Airlines' annual blow-the-doors off business-class sale to Europe during Thanksgiving, Christmas, and New Year. Prices start as low as $1,130 round-trip during Thanksgiving week and $1,348 round-trip in late December and early January.

ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.

THE FINE PRINT This column is Copyright © 2009 Condé Nast Inc. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2009 by Joe Brancatelli. All rights reserved.