An improving economic outlook with business and consumer confidence on the rise is expected to boost business travel in 2013, leading the Global Business Travel Association (GBTA) to upgrade its forecast for the year.
Stronger corporate profits, increasing job development and improvements in key export markets are fueling business travel spending after a sluggish fourth quarter that was dampened by political uncertainty due to the “fiscal cliff” debate, GBTA said.
According to the GBTA BTI Outlook – United States 2013 Q1, a report from the GBTA and sponsored by Visa, Inc., U.S. business travel is now expected to rise 5.1 percent in 2013 to $268.5 billion, which is an upgrade from the 4.6 percent growth to $266.7 billion that GBTA predicted last quarter and a substantial increase from 1.8 percent growth in 2012.
· GBTA’s forecast upgrade will be driven in part by stronger growth in group spending, which is now expected to increase 6.0 percent to $115.9 billion – up from 5.2 percent growth forecast in Q4.
· GBTA’s outlook for trip volume remains essentially the same from last quarter – a slight decline of -1.1 percent to 431.7 million person-trips.
“Business confidence is up and the need to compete in the global economy is driving companies to invest in business travel,” said Michael W. McCormick, GBTA executive director and COO.
“Despite continued political uncertainty in the U.S. and around the world, businesses are beginning to break out of their holding pattern and seek growth more aggressively. While there are still many factors that could hamper the economy again, from the impact of sequestration to rising energy prices, business travel spending is heading in the right direction so far in 2013," McCormick said.
“As corporate and consumer spending confidence rises, the business travel forecast in the United States is starting to brighten,” said Tad Fordyce, head of global commercial solutions at Visa Inc. “While the report shows the trip volume among business travelers will remain steady, we remain optimistic that stronger spending will help 2013 business travel exceed its pre-recession high.”
GBTA BTI to Surpass Pre-Recession High: The GBTA BTI, a proprietary index of business travel activity, is now estimated to reach 121 in Q1 2013. This means the BTI would finally exceed its pre-recession high of 120 and mark a comeback from its low of 97 in Q4 2009.
The BTI is expected to continue rising for the rest of 2013, reaching 126 by the end of the year.
Stock Performance Bodes Well: The report uncovered a strong correlation between stock prices and business travel spending, revealing that stock prices historically lead trip volume by 1-2 quarters. With the market hitting record highs in Q1, business travel should be poised to pick up additional momentum throughout the second half of 2013. This is a good sign, indicating what GBTA believes will be an improving environment for business spending and hiring.
Notably, job development is now on the rise in industries that tend to require more business travel such as business services, finance, and utilities. This is a marked shift from late last year when job creation favored less travel-prone sectors like retail and restaurants, GBTA reports.
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