Business travel will maintain its upward trajectory in 2012, but a stagnant U.S. economy is driving increasing corporate uncertainty and leading to projections of slower U.S. business travel spending growth next year, according to the latest Business Travel Quarterly Outlook – United States from the Global Business Travel Association (GBTA).
2011 has been a year of resurgence, with business travel spend expected to grow 6.9 percent compared to 2010, hitting $250.2 billion. However, troubles in the economy are fostering more of a wait-and-see approach among corporations heading into next year, leading to a forecast of 4.3 percent growth in business travel spending for 2012 (or $260.9 billion), GBTA reports.
“Uncertain economic conditions around the world continue to impact companies, which in turn impacts business travel plans and can lead to hesitation in spending. However, business travel spending growth remains vibrant, and the current environment does not portend a dramatic travel slowdown,” said Michael W. McCormick, GBTA executive director and COO.
“Companies are still investing in travel because they have become smarter and more conscious about the level of business travel that is critical to driving growth,” McCormick added. “They recognize where they cut back too much during the recession and won’t make the same mistakes twice, because they know there is great value in personal relationships and business travel is a critical component in sealing those bonds.”
GBTA finds that the expected growth in spend for 2012 will be largely spurred by price increases in travel goods and services. But although travel prices are projected to increase in 2012, pressure in the economy will mean that prices will grow more slowly than in 2011. GBTA predicts U.S. business travel price inflation to be 2.4 percent in 2012, compared to price inflation of 4.3 percent for 2011.
The GBTA Business Travel Index (BTI) for Q2 2011 reached 115, higher than previously projected, and is expected stay the same for Q3 2011. This means 2011 is likely to wrap up as a comeback year for business travel as corporations were resolute about increasing their investment in travel.
Looking farther out, the BTI has been revised to climb at a slower pace than previously projected in light of difficult economic conditions and anemic economic growth. The Q4 2011 forecast for the BTI is 116, up from 112 at the start of 2011.
The BTI provides a way to distill market performance and the outlook for business travel into a single metric that can be tracked over time, GBTA notes.
While the U.S. economy faces challenges, many markets abroad, particularly in Asia, continue to grow at a much faster pace. U.S. companies operating globally are enjoying export booms and gains in their overall competitiveness.
GBTA is projecting that corporations are expected to book 3.3 percent more trips abroad in 2012 and increase their international travel spend 7.7 percent to $34.3 billion. This follows 2011 growth of 9.1 percent in international travel spend as currently forecast.
“While international trips are more expensive and time consuming, their reward can be worth every cent as many export-driven companies are in a strong position to weather economic storms,” McCormick said. “As international travel continues to expand, corporations are doing more to help their travelers on these journeys. They are investing wisely in their people and allowing for more premium class travel and amenities for these long trips because they know if their executives are well rested and prepared, they can make the maximum impact.”
While spending on group travel such as meetings and conventions bounced back in 2010 and 2011, the uncertainty in the economy will likely lead to a spending slowdown for meetings travel next year. GBTA projects groups and meetings travel spending to grow at 3.5 percent in 2012, about half as fast as the expected 6.8 percent growth in 2011.