Companies providing virtual meeting software, collaboration tools and video conferencing solutions may thrive as economic concerns continue to limit business travel growth this year and next.
Economic turmoil in Europe, slower growth in China and U.S. unemployment are expected to curb business travel growth 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) sponsored by Visa, Inc.
With disappointing job gains and the upcoming Presidential election on the horizon, businesses appear to be taking a cautious approach to their investment in travel until there is greater economic certainty.
GBTA says it expects business travel spending to grow a modest 2.6 percent in 2012 to hit $257 billion by the end of the year – but the uptick is largely caused by rising costs, not more travel.
It predicts 4.9 growth in 2013, but total trip volume is actually expected to fall by 1.1 percent, which is nothing to sneeze at when you’re talking hundreds of billions of dollars.
“Corporations are in a wait-and-see mode and holding back on investment decisions that would help boost the economy,” said Michael W. McCormick, GBTA executive director and COO.
“While companies aren’t cutting their business travel spend and we’re still seeing very modest growth, we are cautious about the outlook for the next several quarters. The looming ‘fiscal cliff’ is causing even more uncertainty, which we are monitoring with real concern. This is an economy in need of some good news to shore up business confidence and encourage more travel.”
Business travel not getting a bump from job growth
The GBTA BTI Outlook has consistently shown that business travel spending is a one to two quarter leading indicator of domestic job growth. However, this report finds that job composition is different in this recovery compared with previous ones, particularly from the perspective of business travel. Job creation has been concentrated in sectors that are less travel prone.
New retail, restaurant, and manufacturing workers tend to travel much less than their business service, financial or utility industry counterparts. As a result, business travel is not getting the bounce from employment growth in this recovery that was typical of past expansions.
The darkest cloud on the economic horizon is the so-called fiscal cliff, a combination of more than $500 billion in expiring tax cuts and automatic spending sequestration set to trigger at the beginning of 2013.
If nothing is done to soften or delay these actions, the economy will almost certainly backslide into recession. GBTA is currently developing a scenario analysis of the fiscal cliff and its impact on U.S. business travel that will be published soon.
- Business travel recovering in 2011 but growth will slow next year
- Businesses not as optimistic about conditions improving as in last two years
- U.S. economy ready to takeoff, but fiscal uncertainty blocks the runway
- “Frankenstorm” could cause severe business travel losses
- Growth slowed in Q1, but consumers still spending
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