Projected business travel spending growth is early indicator of rising business confidence
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ALEXANDRIA, VA—Business travel spending growth slowed through late 2012 as companies postponed investment decisions until after the US presidential election and Congressional debate on the fiscal cliff, according to the Global Business Travel Association (GBTA). But the business travel forecast for 2013 should be more positive, provided there is continued easing of economic and political uncertainty—presenting an early indication of greater corporate confidence in spending decisions.
According to the GBTA BTI™ Outlook—United States 2012 Q4, a GBTA report sponsored by Visa, Inc, US business travel spending is expected to rise 4.6 percent in 2013 to $266.7 billion, on a -1.1-percent decline in trip volume to $431.8 million person-trips for the year. The key factors in 2013 business travel spending growth are projected to be:
- Increasing international outbound travel spending, projected to rise 5.9 percent;
- Increasing group travel spending projected to rise 5.2 percent; and
- Very modest price inflation indicating that companies will be spending more real dollars on business trips.
Spending growth in 2013 should begin modestly, at 2.0 percent in Q1 and 2.9 percent in Q2, and then pick up with rates of 6.4 percent in Q3 and 7.2 percent in Q4.
“Even with an agreement to avert the fiscal cliff in the near-term, there are still many issues that need to be addressed; however, companies should now have somewhat greater confidence in their spending decisions,” said Michael McCormick, GBTA executive director and COO. “While companies will approach the first half of the year with some caution, pent-up demand to get back on the road should hopefully fuel accelerating growth in business travel spending through the end of 2013.”
The GBTA estimates that in late 2012, annual US business travel spending grew 1.6 percent to $254.9 billion, on a -1.9 percent decline in trip volume to 436.5 million person-trips. The spending increase was mainly due to rising travel rates.
- This increase in spending for 2012 was also a downgrade from GBTA’s previous forecast of 2.6 percent last quarter, reflecting the ongoing uncertainty of the fiscal cliff debate and the economic impact of Superstorm Sandy.
International Travel to Strengthen
Previously a strong driver of overall business travel spending growth, international outbound business travel stumbled in 2012, said the report, growing 0.7 percent as challenges in the Eurozone impacted trade and business confidence, causing a ripple effect that reached the shores of the US and Asia.
Although the Eurozone remains troubled, increasing industrial production and retail sales in China signal an improving economy for 2013. Among other factors, a stronger China will improve US export growth and help act as an engine for international outbound business travel. As a result, GBTA expects to see a 5.9 percent rise in international outbound spending for the year.
Group Travel to Rebound
Group travel had a challenging 2012, according to the report, with spend rising 1.3 percent for the year. This year should bring a welcome turnaround to the group travel market. GBTA forecasts that group travel spending will rebound nicely, with 5.2 percent growth for the year as the broader economy recovers.
“The projections that we see for both international and group travel are encouraging,” McCormick said. “Businesses will be looking to capitalize on growth opportunities abroad and spend more on in-person meetings and events as well. By nature, meetings are longer-lead investments that require greater confidence in the future.”
GBTA BTI™—Modest Improvement with Greater Fiscal Clarity
The GBTA BTI™, a proprietary index of business travel activity, is estimated at 117 for Q4 2012, with no movement from the previous quarter. Because of slower-than-expected US economic growth, the BTI never reached its pre-recession high of 120 in 2012. The closest it came was 118 in Q2 2012. However, the BTI is currently expected to rise steadily through 2013, reaching 119 in Q1 2013 and 125 by the end of the year.