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Corporate Travel Cuts May Threaten Economic Recovery

March 12, 2009 By: Amber Silverman


It seems that when companies have to cut costs, corporate travel is suddenly deemed unnecessary. A recent survey reveals, however, that most business leaders do not agree with decreasing travel budgets in a slow economy. In fact, 72 percent believe that increasing travel budgets will allow companies to gain a competitive edge by building market share and forging new customer relationships.  

In a survey commissioned by the U.S. Travel Association, APCO Insight interviewed 401 business executives (at companies with more that $50 million in annual sales) and found that 82 percent feel travel is important to achieving business results. Additionally, 81 percent of business executives believe more client contact is necessary in an economic downturn, and 59 percent strongly agree that in-person contact grows business. Furthermore, 53 percent believe that companies reducing business travel give an advantage to their competitors.    

Kellogg Business School Professor Daniel Diermeier stated, “It’s a classic trade off between short term cost-reductions and long term value. During times like these, many companies will go too far, and actually cut back on the activities that would best position them to compete in the future.”

Dr. Suzanne Cook, U.S. Travel’s senior vice president of research noted, “It’s also clear from our survey results that the old maxim remains true; if you don’t take care of your customers, someone else will.”

Regardless of the consequences for cutting business travel, it continues to be the trend. According to the head of commercial operations at Amadeus, business travel bookings through agencies dropped 20 percent in January and February, while leisure travel bookings dropped only 12 percent.

In an article published in The Washington Post, J.W.Marriott Jr., chairman and chief executive of Marriot International, echoes the sentiments of all those promoting increased spending on corporate travel. He writes, "One in every eight jobs in the United States is linked to travel and tourism, the U.S. Travel Association has found. Meetings support 1 million jobs and provide $16 billion in annual tax revenue at the federal, state and local levels. A healthy travel industry is a powerful stimulus and is pivotal to economic activity and growth. Continuing to scapegoat business travel will only hinder recovery." 



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