Plan on moderate but steady growth in spending on business travel over the next two years. The total number of trips is likely to fall slightly, but the spend per trip will rise, reflecting moderate and steady economic growth.
This forecast outlined in a recent webinar detailing the Global Business Travel Association’s Business Travel Index for the first quarter of 2010. Following are highlights.
“We ended 2011 at 7.2% growth in business travel spend over 2010,” said Joe Bates, senior director of research for the GBTA Foundation. “Spending growth this year will be more modest at 3.6%. Two years of solid growth will continue into 2013.”
The one segment of business travel that is not growing is the absolute number of trips. In 2000, U.S. business travelers took 57 million trips and spent $242.9 billion. In 2011, the total number of trips was down by 22.7% to 44.5 million, while the total spend was up 3.3% to $251 billion.
That trend will continue in 2012, said Ken McGill, managing director of Rockport Analytics, which prepares the Business Travel Index every quarter.
The total number of trips is set to fall another 1% this year, while the spend increases 3.6%. Price inflation accounts for 64% of the increase in spend, and increased productivity accounts for the other 36%.
“We see road warriors taking fewer but longer trips and accomplishing more while they are on the road,” McGill said. “Despite increases in prices, we continue to see travelers on the road for longer stretches and accomplishing more. Business continues to recognize the importance of face to face contacts.”
Hotel occupancy, pricing
Look for continued increases in hotel pricing. Average hotel occupancy rates jumped 5.5% in 2011 compared to 2010, with an average rate increase of about 2%.
Occupancy is set to jump another 4% this year, Bates said, and rates will show a similar 4% increase.
“Travelers are getting back on the road in a big way, and hoteliers have room to increase their rates,” he said. “For travel managers, it is important to note that mid-level and luxury occupancies and rate growth are both outpacing the industry averages.”
Signals economic growth
Travel managers trying to figure out how to justify increased spending can take a deep breath and relax. An increase in travel spending means an increase in economic activity and corporate profits. That’s a projection to help calm even the grumpiest CFO.
The Business Travel Index (BTI) has emerged as a reliable predictor of economic ups and downs in the coming eight quarters. That means travel managers can shrug off the latest employment and jobs numbers showing a slowdown in U.S. economic growth.
Economic data showing slower growth at the end of 2011 and early 2010 was no surprise to managers who paid attention to BTI projections last year.
“The BTI is a leading indicator for all economic activity in the U.S., including employment and gross domestic product,” Bates said. “Despite continued risk, the U.S. economy is holding steady and growing at a moderate pace.”