LONDON – June 12, 2012 – The Global Business Travel Association (GBTA), the world’s premier business travel and corporate meetings organization, announces the results of its inaugural “GBTA Business Travel Index (BTI)™ Outlook – Western Europe” economic analysis, sponsored by Visa Inc.
This semi-annual series includes the GBTA BTI which provides a method for distilling market performance and the outlook for business travel into a single metric to be tracked over time. “GBTA BTI™ Outlook – Western Europe” includes an analysis of the five most critical business travel markets in Europe: Germany, the UK, France, Italy and Spain.
• Growth in business travel spending (“BTS”) in the three major European economies: Germany, the UK and France will be nearly flat in 2012:
o UK is forecast to grow BTS by 0.7%
o Germany is forecast to grow BTS by 0.6%
o French BTS is forecast to decline by 0.6%
• Forecast levels of 2012 BTS in Germany, UK and France all exhibit growth in domestic travel, but declines in international outbound spending (“IOB”):
o UK domestic BTS is forecast to grow by 2.7% but IOB is forecast to fall by 2.8%
o German domestic BTS is forecast to grow by 1.1% but IOB is forecast to fall by 1.4%
o French domestic BTS is forecast to grow by 0.7% but IOB is forecast to fall by 2.7%
• Growth levels in 2013 BTS in Germany, the UK and France will be much stronger with both domestic BTS and IOB showing increases:
o Germany is forecast to grow overall BTS by 5.4%
o France is forecast to grow overall BTS by 5.1%
o The UK is forecast to grow overall BTS by 4.0%
• Southern European countries, Spain and Italy will experience even steeper declines in BTS due to slower economic growth rates and austerity measures. 2012 is forecast to see declines of 4.1% and 5.0% for Spain and Italy, respectively
• Overall, the European economic situation will weigh heavily on countries’ economic growth levels. In 2012, GDP in Germany, France and the UK are forecast to grow by 0.5%, 0.6% and 0.7% respectively. This will be due more to the indirect impact of Southern Europe rather than domestic weaknesses
• Sovereign debt crises in Italy and Spain will lead to 1.8% and 1.9% declines in 2012 GDP, respectively
Michael McCormick, Executive Director and COO of GBTA, commented:
“We are delighted to produce our inaugural analysis for Western Europe assessing likely business travel spend and economic growth levels for one of the world’s most important trading zones. We found that economic growth across Europe will be constrained in 2012 with weakness in the first half giving way to improving prospects later in the year. Increasing economic growth in Germany, France and the UK will be offset by declines in many Southern European economies. Business travel is a leading indicator of the economy, so we’re expecting a challenging scenario over the next year.”
Paul Tilstone, Managing Director of GBTA Europe, commented:
“As for business travel; all five of the countries in the report are relatively mature and together form nearly 70% of Europe’s business travel market. As such, the results are highly indicative of the Continent’s overall performance. Forecasts for 2013 are very positive but 2012 shows a significant disconnect between Northern and Southern economies and domestic and international business travel spend.”
“Whether for business or pleasure, Visa account holders spent more than $235 billion on travel related purchases in 2011—a 14 percent increase from 2010,” said Tad Fordyce, head of global commercial solutions at Visa Inc. “Our relationship with the GBTA and our support for research such as the BTI provides us with an opportunity to understand the key trends in the business travel industry and ensure that the solutions we provide to financial institution customers and their clients in the public and private sectors continue to be best-in-class.”
Spending on business travel in Germany totaled $50.0 billion in 2011, down 4.2% from its 2008 peak. Germany has a relatively strong and well-diversified domestic economy that helps to somewhat insulate it from the regional impacts of the sovereign debt crisis to the south. Historically, spending on German domestic business travel comprises a large percentage of total German business travel (79%).
Our analysis forecasts that German business travel will grow slightly in 2012 with total spending on business travel growing 0.6% to $50.3 billion. Slow growth is mainly the result of the expectation for a Eurozone recession over the first couple of quarters of 2012.
Business travel spending will increase during 2013 as the Euro Area begins to recover and will grow an estimated 5.4% to $52.9 billion. Putting this slower growth performance in perspective, it will take until the third quarter of 2013 for German business travel spending to regain its previous cyclical peak (Q3 2008).
Spending on domestic business travel in 2011 was up 4.9% and will grow an estimated 1.1% in 2012 as regional woes will lead to firms cutting out more discretionary business trips and moving executives into lower hotel and air classes through the year. This trend will ease toward the end of 2012 and into 2013 with spending on domestic business travel expected to rise another 5.6% in 2013.
IOB spending in Germany will decline 1.4% in 2012 as result of weakened trade activity in the region and abroad. It is expected that this will improve in 2013, on the assumption that the European continent can avoid an all-out banking crisis. A rebound of 4.6% is expected in spending on international outbound business travel.
The UK has the second highest level of spending on business travel in Western Europe measured at $40.2 billion in 2011. While the UK suffers from the same regional problems as Continental Europe, its diversified economy and the flexibility of having its own currency and monetary policy have led to a relatively healthier environment for business travel.
The “GBTA BTI™ Outlook – Western Europe” economic analysis forecasts that spending on business travel in the UK will advance slightly, 0.7%, in 2012. Total spending on domestic business travel is expected to grow 2.7% in 2012, after advancing 3.2% in 2011.
International outbound travel from the UK will fall 2.8% in 2012, as debt troubles in Southern Europe will more than offset any benefit that British business travelers will gain in purchasing power in the Eurozone from the relative strength of the British Pound. The Olympics are set to displace some business travel, although we expect much of it to be rescheduled later in the year.
In 2013, we expect a full recovery in British business travel with spending projected to advance 4.0% to $42.1 billion with spending on domestic business travel gaining 5.0% and spending on international outbound business travel gaining 2.0%.
French business travel spending peaked at $36.6 billion in 2008, before suffering a steep decline of 10.6% due to the recession in 2009. Spending experienced an equally strong recovery in 2010, bouncing back 9.0% to $35.6 billion USD. The recovery has flat lined in 2011 as the French economy continues to suffer the same woes as those of Germany and the UK – a weakened environment due to spillover effects of the sovereign debt crisis to the south.
The expectation is that French business travel will suffer a small loss in 2012 with total spending on business travel falling 0.6% to $36.3 billion, a result of the expectation for a Eurozone recession over the first couple of quarters of 2012. Business travel spending in France will begin to recover along with the broader European economy in 2013 and will grow an estimated 3.3% to $37.4 billion. The recovery in French business travel spending will mainly be driven by domestic travel, which is expected to expand 0.7% in 2012 followed by growth of 5.1% in 2013. Outbound international travel from France is expected to fall 2.7% in 2012 and struggling to recover in 2013 with projected growth of 0.3%.
Spending on business travel in Italy totaled $35.3 billion in 2011, down 6.6% from a peak of $37.8 billion in 2008. The majority of business travel spending in Italy is on domestic travel, with only 9% allocated to international outbound in 2011. Domestic business travel in Italy is mainly centered on the more industrialized northern part of the country.
Spending on business travel in Italy snapped back sharply after the Great Recession but has since entered into another period of decline. Thus far, austerity measures and ECB bailouts have kept the troubled economy afloat but slow growth and high bond yields confirm that the Italian economy is a long way from entirely escaping default.
The report predicts a number of quarters of negative economic growth that will undoubtedly take their toll on business travel. The expectation is that Italian business travel will fall in line with broader expectations for the Italian economy with total spending on business travel falling 5.0% in 2012 and continue to decline into 2013, by another 0.8% to $33.3 billion. Spending on domestic business travel will fall 5.2% in 2012, followed by another 0.6% drop in 2013. Spending on international outbound business travel will fare slightly better in 2013, falling 3.2%, but will see another drop of 1.9% in 2013.
Business travel in Spain totaled $19.4 billion in 2011, down 7.7% from a peak of $21.0 billion in 2008. Spain represents a small proportion of European business travel but growth over the last decade has been nothing short of impressive. Liberalizing its economy since the beginning of the century contributed to a more economically diverse and globally oriented economy – one more in line with its developed neighbors.
However, the Spanish economy has been one of the most challenged. As Spain has recovered from the Global Recession in 2009, its overheated real estate market has begun to correct itself after years of steep price increases, unemployment has soared to nearly 25%, Spanish inflation is the highest on the European continent, and, not surprisingly, government bond yields continue to rise. Recent data have shown that the Spanish economy fell back into recession in 2012 Q1.
It is expected that spending on Spanish business travel will decrease by 4.1% in 2012, falling to $18.6 billion. Trip volume, as well as the amount spent per business trip, is expected to fall, as Spanish travelers will be pushed into more economical air and hotel classes. Total domestic business travel spending in Spain will drop by 4.1% in 2012 followed by a slight gain of 1.9% in 2013. International outbound business travel from Spain will fall at an even greater rate than domestic, 4.3% in 2012 and 1.1% in 2013.
The “GBTA BTI™ Outlook – Western Europe,” includes the GBTA Business Travel Index™ (GBTA BTI™) for each of the five countries reviewed. 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. The GBTA BTI™ in each country has been derived from total business travel spending and an index base year of 2005 was chosen for consistency with GBTA BTI™ in other countries. Specifically, the GBTA BTI™ in each country is set equal to 100 in 2005 Q2.
The Great Recession hit German business travel hard in 2009 Q1, as the GBTA BTI™ in Germany plummeted to 110, only 10% above the index quarter of 2005 Q2. The drop comes after the GBTA BTI™ in Germany peaked at 136 in the third quarter of 2008. The 2011 Q4 GBTA BTI™ in Germany came in at 128, four points down from its Q3 value of 132. This reflects the deteriorating economic environment on the European continent. GBTA’s expectation is for two more periods of declines in the level of the GBTA BTI™ in Germany before finally seeing a bit of growth towards the end of the year. The GBTA BTI™ in Germany will continue on its slow growth pattern through the forecast horizon where it will finally eclipse its former peak of 136.
The GBTA BTI™ in the UK began to recover from the Great Recession, with a seven-point jump to 108 in 2010 Q1. Since then the recovery has been slow and steady with GBTA BTI™ in the UK taking a two-step-forward, one-step-back approach as it has gained roughly a half a point per quarter over the last two years. The 2011 Q4 GBTA BTI™ in the UK came in at 112, showing no growth from 2011 Q3. GBTA expects the GBTA BTI™ in the UK to drop to 111 in 2012 Q1 and stay there before getting a push from the Summer Olympics in Q3. We expect growth in the GBTA BTI™ in the UK to really pick up steam in 2013 – ending at 117 in Q4 as the European economy stabilizes.
The GBTA BTI™ in France saw a strong snapback from the Great Recession. The 2011 Q4 GBTA BTI™ in France came in at 134, where it has been for the last three quarters. This stagnation reflects the uncertain economic environment in Europe. GBTA expects the GBTA BTI™ in France to continue to stagnate through 2012, before finally picking up some steam through 2013 when it will eclipse its former peak of 136.
The GBTA BTI™ in Spain experienced robust growth leading up to its peak of 148 in 2008 Q3 – nearly 50% above its 2005 Q2 base value before plummeting to a low of 124 in 2009 Q3. The 2011 Q4 GBTA BTI™ in Spain came in at 131, three points down from its Q3 value of 134, again reflecting an unstable economic environment in Spain. GBTA expects that GBTA BTI™ in Spain will continue to decline through 2012 before finally seeing some growth in 2013. GBTA expects the GBTA BTI™ in Spain to reach 133 by the end of our forecast horizon, two points higher than its current value.
The GBTA BTI™ in Italy has struggled to grow since early 2010 as economic uncertainty has taken its toll on Italian business travel. The 2011 Q4 GBTA BTI™ in Italy came in at 120, three points down from its Q3 value of 123. Our expectation is for three more periods of declines in the level of the GBTA BTI™ in Italy before it finally levels off at a value of 116 and remains there for the remainder of the forecast period.
Pelham Bell Pottinger
Victoria Geoghegan / Harriet Blackburn / Corinna Hoyer +44 20 7861 3232
About the GBTA BTI™ Outlook – Western Europe
The GBTA BTI™ Outlook projects aggregate business travel trends over the next eight quarters. The report tracks business travel spending in total and by domestic and outbound segments. It relates unfolding economic events at home and abroad to their resulting impacts on Europe’s business travel market. GBTA BTI™ Outlook – Western Europe - Spring 2012 is the inaugural report in the semiannual series. Releases are planned for April and October.
The GBTA BTI™ Outlook uses an econometric model to better inform the forecast process. The model explicitly relates measures of business travel spending, uniquely sourced from other GBTA Foundation research, to key economic and market drivers of business travel including: Gross Domestic Product (GDP) and its components; employment and unemployment; measures of business and consumer confidence; international trade, foreign direct investment and exchange rates; commodity and oil prices; inflation measures; productivity rates for business travel; International Air Transport Association (IATA) Passenger and Revenue Performance and Smith Travel Research (STR) Global Hotel Performance.
The GBTA BTI™ Outlook – Western Europe is free of charge to all GBTA Members by clicking here. Non-members may purchase the report through the GBTA Foundation by emailing email@example.com.