Business Travel Spending to Remain Steady Despite Slow Economy
A new survey by the Global Business Travel Association (GBTA) finds that business travel spending and volume remained steady in the second quarter of 2011, despite threats to the economic recovery. Indeed, GBTA found business travel spending in the second quarter reached an estimated $62.2 billion, up 6.3 percent compared to the same quarter last year,
What’s more, GBTA is forecasting total business travel spending growth in 2011 to remain strong at 6.9 percent according to the latest Business Travel Quarterly Outlook for the United States from the Global Business Travel Association Foundation, GBTA’s education and research arm.
GBTA said continued business travel spending suggests the U.S. economic recovery will march on and resist a backslide or double-dip recession despite setbacks this year, including rising oil prices, natural disasters, slowing global growth, and shaky consumer confidence. It will also remain steady, according to GBTA, even though travel prices are also on the rise, with growing demand allowing suppliers to raise rates.
“By the end of 2010, it looked like the light at the end of the ‘recession tunnel’ was becoming brighter as the economy overall and business travel specifically were gathering positive momentum,” said Michael McCormick, GBTA executive director and chief operating officer. “We've now hit a soft patch in the economic revival, but business travel spend levels tell us the recovery should continue as companies invest in driving future growth. Now is the time when companies will absolutely call upon their strategic travel programs to help offset rising costs and keep travelers doing business.”
GBTA said its Business Travel Index (BTI), currently at 112 for the first quarter, is estimated to have reached 114 in the second quarter of 2011 – compared with 108 in the second quarter of 2010. In fact, while the economy slowed in the first quarter of 2011, the BTI is now expected to reach its pre-recession peak of 120 a quarter sooner than expected – in the second quarter of 2012. Part of this increase is driven by a higher projection for travel price increases, which will push spending higher over the forecast period.
That said, travel prices are on the rise, with increases expected to continue throughout the rest of 2011, but at a more moderate pace than earlier in the year. Airfares have spiked due to rising energy prices, constrained capacity and relatively strong demand. Higher lodging rates also are driving increases in company travel costs while corporate demand also continues to grow, particularly for luxury hotel rooms. As a result, business travel prices are expected to increase by 4.5 percent to 5 percent in 2011.
While higher rates contribute to the rising cost of each trip, the Business Travel Quarterly also revealed that in 2010 companies actually spent 1.4 percent more per trip than in 2009 when adjusted for price increases. So far in 2011, it is estimated that when adjusted for price increases, spending on business trips will remain relatively flat. This means that companies will keep putting their travelers on the road at a similar pace to 2010 – but paying more per trip due to higher rates.
With international trade driving global growth, U.S. companies are increasing their investment in international travel, according to GBTA. Total spend on trips abroad is estimated to hit $31.8 billion in 2011, a 9.1 percent increase over 2010 and a substantially higher rate of increase than total spending growth. The same market forces that are causing travel prices to rise and generating higher spending for transient business travel are also forecasted to push group travel spending to $107.2 billion for 2011, an increase of 6.8 percent over 2010.