The first week of the federal government shutdown has had a devastating impact on travel agencies handling government business, leading to furloughed employees and a significant loss of revenue.
Not only is the government shutdown slamming agencies with government clients, it’s a growing concern for agencies and other businesses dependent on corporate travel, according to Patty Higginbotham, vice president of government relations and general counsel for the Global Business Travel Association (GBTA).
“There is an overall sense of angst and uncertainty among our members,” Higginbotham said. “We’re a week into the shutdown and there is concern not only about the damage already done, but about the possible long-term effects.
“And now it’s rolling into a heated debate about the debt ceiling. There is no end in sight.”
A double-edge sword
For travel agencies with government clients, the implications are a “double-edged sword” that has not only stymied current business but has put new business at a standstill, she said. “There is no possibility of gaining new clients or expanding your services to the ones you have.”
The government shutdown has also deeply affected private-sector companies dependent on government contracts. That’s led to layoffs that have negative implications for business travel, she added.
“Lockheed Martin, which is dependent on government contracts, just announced they are laying off 2,400 people,” Higginbotham said. “So the shutdown means lost revenue for the whole economy – it goes far beyond the 800,000 federal employees on furlough.”
Agents on split-shift
The shutdown is “costing tens of thousands of dollars a week” for Duluth Travel, an agency in Duluth, Ga., that derives 70% of its business from federal government clients, owner Arthur Salus told Travel Market Report.
While Salus kept all 37 of his employees at full pay last week, this week they are working on a rotational, split-shift basis.
“We hate to do this because many of them are living paycheck-to-paycheck, but there is no other option,” he said. “My management staff and I aren’t taking any pay at all now.”
Early last week, Duluth Travel was busy flying travelers back home who had been ordered to cut their trips short by the federal agencies who employ them. Duluth handles travel for several major federal agencies, including the Veterans Administration.
“The shutdown has not only affected the travel for V.A. employees, but even for V.A. hospital patients,” Salus said.
While currently a headache for the agency, Salus said federal government travel is a specialty he plans to continue.
“Ordinarily this is good, steady business and a very good deal for agencies to get into,” he said. “The new federal contracts we’re getting are for 15 years, so it’s something you can really count on.”
Reduced hours at Omega
Omega Travel World, which handles travel for government agencies as well as companies with government contracts, has had to furlough about 10% of its workforce, according to executive vice president Goran Gligorovic.
“For some of our clients, travel has been cut down considerably,” he said. “So we’ve had to do a combination of reduced hours and furloughs as we can’t afford to keep everyone on the payroll.”
The agency will not cut any jobs permanently and plans to put everyone back to work as soon as the shutdown is lifted, Gligorovic said.
“Preserving those jobs is very important – we would hate to lose any of our people.”
‘Environment of uncertainty’
While his agency has not been directly impacted by the shutdown, Michael Cameron, CEO of Christopherson Business Travel, agreed with GBTA’s Higginbotham that the impasse in Washington, D.C, is creating an “environment of uncertainty” that does not bode well for travel.
“Business travel has been sluggish this year, when it should have been growing,” he said. “The business community doesn’t like uncertainty – it scares them. So I’m very worried about the shutdown from that point of view.”