This morning, the Global Business Travel Association Foundation issued its quarterly report on U.S. business travel, finding that US-originated business travel spending increased more than 7 percent year-over-year to $72.8 billion in the second quarter of 2014.
This rise in spending comes despite a slight year-over-year reduction of -0.1 percent in the total number of trips taken in the second quarter. Likewise, during the 2014 calendar year, group business trips – travel to business meetings or conferences – are expected to dip 3.3 percent, while spending on group business travel is expected to increase by 5.9 percent. Together, these findings underscore the fact that businesses are spending more per trip, indicating a strengthening economy.
“The continued strong demand in business travel spending is a positive sign for our economy – this signals that companies are continuing to put travelers on the road to achieve their business objectives,” Michael W. McCormick, GBTA executive director and COO, said in a statement. “As always, business travel spending is a leading indicator of overall economic growth.”
The report’s key findings include:
- While individual business travel volume is only expected to grow 2.3 percent in 2014 – in line with GBTA’s 2Q 2014 forecast – spending is expected to increase 7 percent year-over-year, driven by higher travel prices and additional spend-per-trip.
- Similar to individual business travel, group travel spending is expected to disproportionately increase over volume, increasing 5.9 percent year-over-year in spend while simultaneously declining 3.3 percent in volume. Evolving meeting technology and other substitutes is one possibility to explain the loss of volume.
- Travel costs are expected to increase 2.9 percent this year and an additional 3.5 percent in 2015, led by rising food and beverage costs, hotel prices and airfares. These expectations have been raised from the previous quarter, mainly due to increasingly higher food and beverage costs and airfare.
In addition, the study identified other key trends that could impact business travel in the coming months, including household and business sentiment, international outbound business travel and inflation concerns.
Households and Businesses’ Increased Positive Sentiment Lead to Increased Spending
Households and businesses are feeling optimistic about the near-term future and their spending behavior will begin to reflect that sentiment. Consequently, businesses are poised to step up their investment in equipment, information technology, and structures. This activity will be accompanied by gains in business travel spending.
International Outbound Business Travel Increases, Slowed by Global Factors
International outbound business travel, a key indicator of the global economic recovery, is expected to grow in volume by 5.6 percent in 2014, followed by another 6.5 percent in 2015. This comes after a minor 1.1 percent increase in 2013. Key factors that prevent international outbound business travel from rising at a faster pace include the struggling European recovery, a moderating Chinese economy and economic challenges in many emerging markets in Latin America.
Rising Inflation Concerns Speculative…For Now
With unemployment falling and the GDP accelerating – reaching 4.6 percent in 2Q 2014 – attention has shifted to the risk of rising inflation with some analysts drawing similarities to the 1970s. Currently, there is no evidence of rapidly rising consumer prices, runaway borrowing or dangerous asset bubbles. While this could change at any time, underlying evidence suggests continued moderation for now.
GBTA BTI Progresses Upward
The GBTA BTI, a proprietary index of business travel activity, is estimated to reach 136 in Q3 2014, bolstered by a strengthening domestic economy, an improving external environment and slightly higher travel prices. This represents a two-point gain over the previous quarter.
The BTI is expected to continue rising for the rest of 2014, reaching 137 by the end of the year.
Key Metrics
The GBTA BTI Outlook – United States report is available exclusively to GBTA members by clicking here and non-members may purchase the report through the GBTA Foundation by emailing [email protected].