Alexandria, U.S.A. — The GBTA Foundation, the research and education arm of the Global Business Travel Association (GBTA), released on July 23 the 4th annual comprehensive report analyzing the current state of global business travel spend and growth projections for the next five years. The GBTA BTI Outlook – Annual Global Report and Forecast, Prospects for Global Business Travel 2012-2016, sponsored by Visa Inc., found that business travel spending growth in developed economies is slowing compared to previous forecasts, but emerging markets continue to grow rapidly.

In 2011, emerging markets such as Brazil, Russia, India and China all experienced growth rates over 15% in business travel spending, more than making up for the substantially slower growth rates of the U.S. and Western Europe. The outlook for 2012 is for global business travel spending to grow at 4.6% to $1.07 trillion, followed by significant growth in 2013, advancing another 8.1%.

Notably, China will surpass the U.S. in total business travel spending by 2014 – a year earlier than previously forecast. This is due to slower U.S. spending growth and continued robust spending in China.

“These are complicated economic times,” noted Michael W. McCormick, GBTA executive director and COO. “Our projections last year suggested that the economic recovery was affecting certain types of countries and markets very differently than others, and the data we have this year reinforce those trends. The continued growth in emerging markets should continue to generate significant expansion in business travel, as more people will need to meet face-to-face to make deals benefiting their companies. Conditions are more uncertain in the developed markets, in part due to the ongoing European debt crisis. Until that crisis is resolved, business travel is unlikely to grow at its pre-recession rate.”

“Emerging markets are proving to be a big draw for business and leisure travelers alike,”said Tad Fordyce, head of global commercial solutions at Visa Inc. “For example, in 2011, we saw Brazilian Visa account holders increase international tourism spend by 32 percent to $6.3 billion and inbound travel increased 10 percent to $2.3 billion.”

In the more developed regions of the world, such as the United States and Western Europe, important drivers of domestic and international outbound business travel have slowed. Corporate profit growth and business equipment spending have both slowed markedly since last fall.  Along with them, business confidence has dropped back from levels achieved earlier this year. This has ushered in a more cautious stance on hiring, equipment purchases and business travel. Companies are still dispatching their road warriors, but are doing so at a more cautious pace.

A tale of two economies

Inertia will play a major role in the rise and fall in business travel markets over the next few years. It is becoming increasingly clear that short-run economic growth will be sluggish in the developed world. Countries like the U.S., Germany, the U.K. and Japan are all expected to see sub-3% growth in the near-term. In such a scenario, spending growth on business travel in the developed world will also be sluggish.

Since the turn of the millennium, spending on global business travel has grown at an annual rate of 4.5% to a 2011 level of $1.02 trillion USD. Average annual growth has swung wildly – from a loss of -11.4% in 2001 as the 9/11 attacks compounded the downward pressure from the early-2000s recession – to 15.9% in 2007, the peak of a global expansion. Corporate spending on business travel hit the brakes in 2009, falling 7.5% as a result of the Great Recession.

In 2012 the business travel market continues to be dominated by a few major players – over two-thirds of global spending stems from the U.S., China and Western Europe. Spending on business travel is projected to hit $1.07 trillion this year, 4.6% growth over 2011. GBTA expects spending to advance another 8.1% in 2013 as the economy works through its current doldrums. By 2016, GBTA projects total spending on business travel will hit $1.4 trillion, representing a compound annual growth of 7.7%. However, the downside risks to the outlook for global business travel are abnormally high, hinging on the direction and severity of the crisis in the Euro-zone.

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Alexandria, U.S.A. — Economic uncertainty in Europe will dramatically slow the growth of business travel in the United States through the end of the year, according to the latest GBTA BTI Outlook – United States a report from the Global Business Travel Association (GBTA) and sponsored by Visa, Inc. In addition, ongoing concern in the U.S. economy, including low job growth, falling consumer confidence and retail sales, and slowing corporate profits, have created significant headwinds for business travel in the near term. Finally, there is increasing evidence that businesses may be entering into a holding pattern as they wait for the economic environment to solidify.

GBTA has significantly downgraded its outlook for U.S.-initiated business travel since last quarter. Despite the higher prices and relatively strong demand that have led to solid growth in business travel spend in the last few quarters; growth will moderate for the remainder of the year. GBTA now expects total business travel spending to grow just 2.2% for 2012, reaching $256.5 billion by the end of the year. This represents a downgrade of 1.4% since last quarter, when GBTA estimated growth would be 3.6%.

“Earlier this year, we created a number of shock scenarios modeling the potential impact of the European debt crisis on business travel here in the United States,” said Michael W. McCormick, GBTA executive director and COO. “In our Moderate Shock Scenario we predicted that a prolonged recession in Europe would result in a flattening of business travel spending in the U.S. Unfortunately, it now seems that this shock scenario is becoming a reality.”

“We’re entering a period of time in which many companies could overact and make significant changes to their travel budgets,” he added. “Our research has shown that businesses that slash their travel budgets end up weakening their competitive position, particularly when the economy improves.”

“Despite projected slowdowns in business travel, there is still reason to be optimistic,” said Tad Fordyce, head of global commercial solutions at Visa Inc. “U.S. travelers increased international tourism spending on their Visa accounts by nine percent in Q1 2012 with Americans increasing travel purchases on their Visa accounts by 31 percent in China. Whether for business or pleasure, Visa supports global travelers with the most widely accepted card in the world and is working with lead banks to provide consistency across card products globally.”

Looking ahead to 2013, GBTA research suggests a slight drop (-0.7%) to 435 million total person trips. On the other hand, business travel spend for 2013 is forecast to grow 4.7% to $268.5 billion. GBTA forecasts 3.6% growth in transient spend, 5.1% growth in group spend, and 7.2% growth in international outbound spend for 2013. However, if the situation in Europe worsens further, the forecast for 2013 will necessarily be downgraded, as detailed in our European Shock Scenario from earlier this year.

Avoiding the mistakes of the past

“In a challenging economy, companies may look to cut their travel spending,” continued McCormick. “But GBTA research shows that that is the exact opposite of what they should be doing. In addition to the damage that slashing travel spending will do to a company’s bottom line, cuts to travel budgets could make a bad economic situation significantly worse due to business travel’s impact on the overall economy.”

McCormick concluded: “Beginning in December 2007, we saw companies make difficult decisions with their business travel budgets to the tune of 13% from the $271 billion peak in 2007 – a peak-to-trough decline of $34.7 billion. Companies cannot afford to overreact just because there may be clouds on the horizon. Benching road warriors will only impact sales exactly when companies need to focus on growth. The return on investment for business travel is too good to pass up.”

GBTA BT — stalling

The GBTA BTI , a proprietary index of business travel activity, for Q1 2012 came in at 116, two points lower than the projected value in GBTA’s last outlook. The slightly lower value has been driven by a more rapid deterioration in Europe, slower growth in Asia, and deepening signs of weakness in the U.S. While the GBTA BTI™ is four points higher than 2011 Q1, it has been relatively flat since reaching 117 in 2011 Q3.

GBTA is now predicting the GBTA BTI to reach the pre-recession level of 120 by 2013 Q1. The revision to the forecast points to slow growth in business travel through 2013, with the GBTA BTI gaining one point per quarter over the forecast horizon.

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.

International travel – growth slows in 2012, rebounds in 2013

International outbound travel will continue to drastically outpace domestic travel. GBTA projects growth of 2.9% in 2012 followed by a more significant rise of 7.2% in 2013. GBTA has continued to pull back its projections as the trouble in Europe has continued.

Business travel to the Far East, particularly China, has been a boon for international outbound travel from the U.S. for the last few years. However, falling economic growth rates in China will likely lead to less trade and hence, fewer trips from the U.S. The projected slowdown in China and the economic challenges in Europe will lead to lower levels of international growth in the near term.

GBTA expects total international outbound trip volume to reach 6.8 million trips in 2012, only 0.4% growth over 2011. Stronger growth is expected in 2013, with 7 million trips projected, which is a 3.7% increase, but represents a full percent drop over earlier GBTA projections.

Group travel spend – holding off on growth

In 2012 Q1, spending on transient business travel is up 3.7% versus 2011 Q1. GBTA expects spending growth on transient business travel to finish 2012 at 2.4% before picking up the pace in 2013 when it will rise by 3.6%.

Group business travel has bounced back significantly from its bottom in 2009. However, GBTA expects that much like transient travel, group travel will not pick up significantly until the U.S. economy experiences more robust growth. Spending on group business travel is projected to grow 1.8% in 2012 and 5.1% in 2013.

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