A severe European debt crisis could result in a 9 percent decline in trips and 16 percent drop in spending – a loss of nearly $88 billion, according to new research released by the Global Business Travel Association Foundation (GBTA). According to a new report, U.S. Business Travel Outlook: European Debt Crisis Scenario, if the European debt crisis grows significantly worse it would wreak havoc on U.S. business travel.
Given the critical role of business travel in facilitating economic growth, the current slow U.S. recovery could be severely hampered if the European debt crisis is not resolved, GBTA says. "International outbound travel, which has played an outsized part in the revival of business travel since the recession, would be crushed by further deterioration in the Eurozone."
The GBTA research identified three different scenarios for the European Debt Crisis:
- Baseline/Current Scenario: A mini recession in Europe, which is already expected, would be short lived and would result in continued growth in U.S. business travel spending at $263.5 and $277.3 billion in 2012 and 2013 respectively. The number of trips taken is also projected to grow slightly at 443.1 and 443.6 million trips in 2012 and 2013 in the baseline situation.
- Moderate Scenario: A prolonged recession in Europe would result in business travel growth flattening with a reduction in spend of almost $40 billion (-7 percent) and roughly 42 million trips (-5 percent) forecast between 2012 and 2013.
- Severe/Extreme Scenario: Widespread debt and banking failures across the Eurozone and possible dissolution of the European Union would push spending back to levels not seen since the Great Recession with a reduction of spend of nearly $88 billion (-16 percent) and trip volume by over 76 million trips (-9 percent) forecast between 2012 and 2013.
“This data serves as a wakeup call to the entire industry as we watch European policy makers work to contain the debt crisis. While these problems are happening abroad, they most certainly can have an effect at home,” said Michael W. McCormick, executive director and COO, GBTA.
“We’ve seen a resurgence in business travel investment, meaning slow but strong economic recovery for the U.S. However, in a severe situation where the Eurozone may even break apart, business travel would drop dramatically, severely impeding economic growth overall,” McCormick said.
The research was conducted through an analysis and econometric model used in GBTA’s Business Travel Quarterly Outlook reports which was altered or “shocked” to assume conditions of a worsening European debt crisis.