By Barbara S. Peterson

updated 3:37 p.m. ET May 15, 2008

In the late 1990s, when he worked for a private consulting firm, Michael Bazigos traveled business class for any flight over three hours and stayed in top hotels without hearing a peep from the bean counters. Then his company was acquired by a Fortune 100 corporation, giving him his first taste of middle-seat hell: Under the new travel policy, he had to fly at least eight hours to rate a spot in the front of the plane.

But that, it seems, was the good old days. Now he's got to fly 10 hours or more to sit in business class and must seek out the nearest budget hotel chain to stay within stingy per-diem guidelines.

"One of the things that made these trips more palatable was that you could travel right," says Bazigos, who flew enough to earn lifetime gold status on American Airlines. The belt-tightening is understandable, he concedes. "But you definitely feel the 'take away,' and it can encourage feelings of resentment toward your employer."

Many road warriors say they are being ordered to live more frugally while traveling on company business, thanks to the double whammy of a slumping economy and spiking travel costs. Business-class airfares jumped 12.4 percent in February over the same year-ago period, higher than the 6.2 percent increase in economy fares, according to reservations giant Sabre Travel Network. And hotel rates have risen 15 percent in the past three years, industry surveys show. Adding to the sticker shock are all the surcharges and fees that now pop up each time you plug in your laptop or check a bag.

Companies say they have no choice but to inflict some nickel-and-diming on their employees. "It used to be that companies would simply chop the travel budget by a certain amount" when times were tough, says Kevin Mitchell, chairman of the Business Travel Coalition, which represents corporate-travel buyers. "But now it's all about control. Travel policies are tighter, and they're being enforced." Indeed, calls to executives at a half-dozen large organizations show that coach class is pretty much the norm for flights under 10 hours, ruling out premium class on such popular runs as New York to Los Angeles or New York to London. The penny-pinching is even extending into some executive suites; until this year, top officers at troubled online brokerage E-Trade could avail themselves of corporate jets and company apartments in New York and Washington. In a recent S.E.C. filing, the company disclosed that it had gotten rid of these perquisites.

Mitchell says he expects the trend to worsen in the next few months, especially if other airlines follow United Airlines' decision to reimpose the Saturday night-stay rule for discount fares, to make them less enticing to business fliers. "That's an immediate $300 fare hike that could have a dramatic effect on travel budgets," he says.

Many larger companies are clamping down on travel costs by negotiating agreements with airlines and hotels to hold down prices. That can mean fewer choices for travelers as employers promise higher volume to specific lodging chains or air carriers in exchange for lower rates.

"You used to be able to pick your accommodations," says financial analyst Alan Murray, who works for a major credit rating firm in New York. "Where you stayed sent a message to the client." Now, he says, the reaction he gets from the home office is, "Haven't you heard of Motel 6?"

"And if that's how they feel, you sort of wonder: Why go?" he says.

But for companies in the financial sector and other industries that are laying off thousands of employees, such concerns may not engender much sympathy.

Michael Derchin, a securities analyst for FTN Midwest Securities in New York, says he books his own travel and doesn't have to be told to seek out alternative airlines and moderately priced hotels. "I'd feel funny submitting an expense report that could be seen as at all excessive," he says. "These days, it just isn't politically correct."

Bjorn Hanson, a hotel industry expert with PricewaterhouseCoopers, says that steady increases in hotel prices could force more travelers to go down-market. But some lodging firms see that as an opportunity to attract customers who once sneered at the prospect of staying at an expressway-exit chain. Hanson notes that of 38 new hotel brands that debuted in the past three years, about half are self-styled budget lines, and that most big chains like Hyatt and Hilton have launched spin-offs in the mid-priced range. On the flip side, Motel 6 has come out with a more upscale product to lure corporate business.

The same trends apply for international travel. Achala Srivatsa, who travels often for her job with the Nielsen Company, says part of the problem is the decline of the dollar versus the euro. "We definitely can't stay in a luxury hotel when we go to Europe," she says. But on a recent trip to Stockholm, she stayed in a boutique property in a nice part of town, somewhat compensating for having to travel overnight from New York in coach.

Boutique airlines haven't fared so well; the demise of lower-priced business airlines like Maxjet and Eos, which both flew between New York and London, has narrowed the options for those banned from traditional business- or first-class digs. Virgin Atlantic, though, reports strong demand for its "premium economy" cabin—a hybrid of its economy and business cabins.

And some large international airlines claim that they haven't seen any slowing in demand for their premium services. Singapore Airlines, which has a number of super-long hauls where business class is justified, is introducing an all -business-class jet with 100 seats on the 18-hour Newark, New Jersey, to Singapore nonstop run, as well as its Los Angeles-Singapore route. "If anything, we're seeing that many travelers will pay a premium for the time savings and extra comfort," says James Boyd, a spokesman for the carrier.

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