Business travel spending growth in developed economies is slowing compared to previous economic forecasts, but emerging markets continue to grow rapidly, according to the Global Business Travel Association (GBTA), who calls it a tale of two economies.
In 2011, emerging markets such as Brazil, Russia, India and China all experienced growth rates over 15 percent in business travel spending, more than making up for the substantially slower growth rates of the U.S. and Western Europe, GBTA reports.
The outlook for 2012 is for global business travel spending to grow at 4.6 percent to $1.07 trillion, followed by significant growth in 2013, advancing another 8.1 percent.
Notably, China will surpass the U.S. in total business travel spending by 2014 – a year earlier than previously forecast. This is due to slower U.S. spending growth and continued robust spending in China, GBTA says.
The 4th annual GBTA report analyzes the current state of global business travel spending and growth projections for the next five years. The GBTA BTI Outlook – Annual Global Report and Forecast, Prospects for Global Business Travel 2012-2016, is sponsored by Visa Inc.
“These are complicated economic times," noted Michael W. McCormick, GBTA executive director and COO. “Our projections last year suggested that the economic recovery was affecting certain types of countries and markets very differently than others, and the data we have this year reinforce those trends. The continued growth in emerging markets should continue to generate significant expansion in business travel, as more people will need to meet face-to-face to make deals benefiting their companies. Conditions are more uncertain in the developed markets, in part due to the ongoing European debt crisis. Until that crisis is resolved, business travel is unlikely to grow at its pre-recession rate.”
“Emerging markets are proving to be a big draw for business and leisure travelers alike,” said Tad Fordyce, head of global commercial solutions at Visa Inc. “For example, in 2011, we saw Brazilian Visa account holders increase international tourism spend by 32 percent to $6.3 billion and inbound travel increased 10 percent to $2.3 billion.”
In the more developed regions of the world, such as the United States and Western Europe, important drivers of domestic and international outbound business travel have slowed, the GBTA report says. "Corporate profit growth and business equipment spending have both slowed markedly since last fall. Along with them, business confidence has dropped back from levels achieved earlier this year. This has ushered in a more cautious stance on hiring, equipment purchases and business travel. Companies are still dispatching their road warriors, but are doing so at a more cautious pace," GBTA reports.
Inertia will play a major role in the rise and fall in business travel markets over the next few years, GBTA says. "It is becoming increasingly clear that short-run economic growth will be sluggish in the developed world. Countries like the U.S., Germany, the U.K. and Japan are all expected to see sub-3 percent growth in the near-term. In such a scenario, spending growth on business travel in the developed world will also be sluggish."
Since the turn of the millennium, spending on global business travel has grown at an annual rate of 4.5 percent to a 2011 level of $1.02 trillion USD. Average annual growth has swung wildly – from a loss of -11.4 percent in 2001 as the 9/11 attacks compounded the downward pressure from the early-2000s recession – to 15.9 percent in 2007, the peak of a global expansion. Corporate spending on business travel hit the brakes in 2009, falling 7.5 percent as a result of the Great Recession, GBTA says.
In 2012 the business travel market continues to be dominated by a few major players – over two-thirds of global spending stems from the U.S., China and Western Europe, GBTA says. Spending on business travel is projected to hit $1.07 trillion this year, 4.6 percent growth over 2011.
GBTA expects spending to advance another 8.1 percent in 2013 as the economy works through its current doldrums. By 2016, GBTA projects total spending on business travel will hit $1.4 trillion, representing a compound annual growth of 7.7 percent. However, the downside risks to the outlook for global business travel are abnormally high, hinging on the direction and severity of the crisis in the Euro-zone, GBTA says.
The GBTA BTI trends show stark differences from country to country, GBTA says. The developed nations of Germany and the U.S. have both experienced modest growth in business travel – 27 percent and 15 percent, respectively, since the GBTA BTI base year of 2005. Meanwhile, the emerging business travel market of India has more than doubled to 228 and China has more than tripled its 2005 value of 100 to 312.
These trends will persist through the end of the outlook’s horizon in 2016, when China’s GBTA BTI value will again double to 660. Likewise, India’s current GBTA BTI value will more than double over the next five years to 482. The mature travel markets of Germany and the U.S. will see much more modest growth over the period – Germany’s GBTA BTI will grow another 24 percent to 158 and the GBTA BTI in the U.S. will grow another 18 percent to 135.
The GBTA BTI provides a way to distill market performance and the outlook for business travel into a single metric that can be tracked over time.