GBTA Findings Suggest Economy Will Resist a “Double Dip” as Companies Pay Higher Prices to Keep Travelers on the Road
Alexandria, VA (July 12, 2011) – Business travel spending and volume remained steady in Q2 2011 despite headwinds facing the economic recovery, reaching an estimated $62.2 billion in spend. Year over year, this represented growth of 6.3% compared to Q2 2010. The forecast for total business travel spending growth in 2011 also remains strong at 6.9% according to the latest Business Travel Quarterly Outlook – United States from the Global Business Travel Association Foundation, the education and research arm of the Global Business Travel Association (GBTA), sponsored by Visa.
Continued business travel spending suggests the U.S. economic recovery will march on and resist a backslide or double-dip recession despite setbacks this year including rising oil prices, natural disasters, slowing global growth, and shaky consumer confidence. Travel prices are also on the rise, with growing demand providing suppliers with the ammunition needed to boost rates.
“By the end of 2010, it looked like the light at the end of the ‘recession tunnel’ was becoming brighter as the economy overall and business travel specifically were gathering positive momentum. We’ve now hit a soft patch in the economic revival, but business travel spend levels tell us the recovery should continue as companies invest in driving future growth,” said Michael W. McCormick, GBTA executive director and COO. “Now is the time when companies will absolutely call upon their strategic travel programs to help offset rising costs and keep travelers doing business.”
GBTA Business Travel Index™ Indicates Long-Term Momentum
The GBTA Business Travel Index (BTI)™ will continue its growth trajectory. Currently at 112 for the first quarter, the BTI™ is estimated to have reached 114 in Q2 2011 – compared with 108 in Q2 2010. 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.
In fact, although the economy slowed in Q1 2011, the BTI™ is now expected to reach its pre-recession peak of 120 a quarter sooner than expected – in Q2 2012. Part of this increase is driven by a higher projection for travel price increases, which will contribute to pushing spend higher over the forecast horizon.
Spend Per Trip – Higher Travel Rates and ‘Real Spending’ Increases
Travel prices are on the rise, with increases expected to continue throughout the rest of 2011, but at a more moderate pace than earlier in the year. Airfares have swelled due to rising energy prices, constrained capacity and relatively strong demand. Higher lodging rates are also driving increases in company travel costs while corporate demand also continues to grow, particularly for luxury hotel rooms. As a result, business travel prices are expected to increase by 4.5% to 5% in 2011.
While higher rates contribute to the rising cost of each trip, the Business Travel Quarterly also revealed that in 2010 companies actually spent 1.4% more per trip than in 2009 when adjusted for price increases. So far in 2011, it is estimated that when adjusted for price increases, spending on business trips will remain relatively flat. This means that companies will keep putting their travelers on the road at a similar pace to 2010 – but paying more per trip due to higher rates.
International Travel Is Key Contributor to Total Spending
As international trade continues to drive global growth, U.S. companies are upping their investment in international travel. Total spend on trips abroad is estimated to hit $31.8 billion in 2011, a 9.1% increase over 2010 and a substantially higher rate of increase than total spending growth.
The same market forces that are causing travel prices to rise and generating higher spending for transient business travel are also forecasted to push group travel spending to $107.2 billion for 2011, an increase of 6.8% over 2010.
McCormick concluded: “Corporate and management confidence remains high, which is why we’re still seeing companies put employees on the road. We think there is good reason to maintain measured optimism about the growth of the economy.”
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About the Business Travel Quarterly Outlook
The Business Travel Quarterly Outlook – United States projects aggregate business travel trends over the next eight quarters and includes key buy-side metrics such as total business travel volume and spending, plus supply-side projections of changes in costs, across both transient and meetings travel. Business Travel Quarterly Outlook – 2011 Q2 United States is the fourth report in the series with subsequent releases being published on the second Tuesday of each quarter of the Fiscal Year 2011.
The Business Travel Quarterly Outlook uses an econometric model to better inform the forecast process. The model explicitly relates measures of business trip volume and spending, sourced from D.K. Shifflet & Associates to key economic and market drivers of business travel including: U.S. Gross Domestic Product (GDP) and its components, U.S. Corporate Profits and Cash Flow, U.S. Employment & Unemployment, ISM Business Sentiment Index, Key Travel Components of CPI (airfare, lodging, food away from home, rental cars, fuel, transportation), among other components.