Business Travel On The Rebound
After putting the kibosh on travel spending during much of the economic recession, Corporate America is back on the road.
The Global Business Travel Association, GBTA, projects business total travel spending will climb nearly 7 percent in 2011 to $246 billion, while total U.S. trip volume will rise 3.2 percent to 446 million.
The increase is all the more impressive given that travel was down 14 percent in 2009.
GBTA also expects the number of business trips taken to grow 3 percent to 114 million between 2009 and 2012, while total business travel spending on hotels, airfare and rental cars is projected to grow 17 percent to over $70.5 billion.
“We’re still not at pre-recession levels, but we’ve seen across-the-board increases in volume starting last year and continuing into this year,” says Lane Dubin, vice president of American Express Global Business Travel. “We had seen some customers cut back their travel budgets by as much as 50 percent during the recession, and I think they’re recognizing now that was too extreme. If you want to grow your business you’ve got to get your people out there talking to customers. If you don’t do it the competition will.”
Indeed, a recent study by Oxford Economics USA, a global research group, found that companies realize $12.50 in incremental value and $3.80 in profits for every dollar spent on business travel, whether that's for meetings, conventions, training or as an incentive for performance.
It further notes that the average U.S. business would forfeit 15 percent of its profits in the first year of eliminating business travel, taking three years for profits to recover.
By sector, the industries with the largest projected increase in business travel spending over the next five years include utilities ($38.2 billion), food processing and services ($32.2 billion,) real estate ($23.2 billion), rubber and plastic manufacturing ($18.2 billion) and social and personal Services ($17.9 billion), according to the GBTA.
As companies loosen their purse strings — a result of growing confidence in the economic recovery — they’re taking a more strategic tack.
Client meetings and business development events, which contribute to top line revenue growth, are claiming the bulk of travel expenditures, while internal meetings and training sessions are still largely the preserve of less expensive videoconferencing technology.
But Brian Hace, vice president of client services for Carlson Wagonlit Travel, a Minneapolis-based travel agency for business clients, even expects that kind of travel to resume growth — albeit more slowly.
“Some firms are replacing travel with videoconferencing, but we’re also seeing some pent-up demand where companies that may have cancelled all internal meetings for the last year or 18 months are starting to plan internal meetings again twice a year now that the economy is coming back," says Hace.
By far, international business travel is experiencing the strongest rebound, as businesses look to capitalize on growth opportunities abroad.
The GBTA projects an 8 percent jump in international travel spend this year, following a 17 percent spike last year.
Both are a far cry from the nearly 9 percent drop in 2009, the largest decline the industry has seen since the downturn of 2001 triggered by recession and the 9/11 terror attack.
The NBTA, meanwhile, expects global business travel spending to reach $1.2 trillion by 2014.
The recovery, however, will not be uniform across the globe.
China and other Asian markets are already adding business travel spending at about four times the rate of the United States, the NBTA reports, noting China is expected to add nearly $130 billion in new business travel spend by 2014, surpassing the U.S. market in size by as early as 2015.
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“Companies wanting to grow their business and emerging markets, in light of where they sit on the continuum, are very attractive from a business growth perspective,” says Dubin.
Energy Wild Card
Some of the increase in corporate travel budgets, of course, is not by choice.
A GBTA survey released in early May cited increased airline fees (71 percent) and higher rates and fares (69 percent) as the key contributor to larger travel budgets.
Indeed, domestic and international airfares both jumped 7 percent in 2010, compared with 2009.