NBTA: Biz Travel Increase Signals Economic Rebound

For the nearly 6,000 industry professionals from 40 countries in Houston for the 2010 National Business Travel Association (NBTA) International Convention & Exposition, the message delivered came across loud, clear and roundly appreciated: “Business travel is coming back!”

NBTA president and CEO Craig Banikowski noted, “Many attendees reported increasing levels of travel.”

Referring to the increased attendance at this year’s learning-begets-earning conclave, he said, “Corporate travel drives economic success, and when travel professionals are making connections and making deals, it’s a sure sign we’re on the way to recovery.”

Adding substance to Banikowski’s remarks was a report by the NBTA Foundation, the association’s research arm, maintaining that the economic recovery to date has surpassed expectations and, as a result, global business travel spend is projected to reach $896 billion in U.S. dollars this year and grow to $1.2 trillion by 2014.

Banikowski noted, “Air traffic is rising, along with average fares, (and) hotel occupancy, particularly in higher tiers, is also on the increase. However, while we believe recovery is sustainable, corporate travel managers and suppliers should be prepared for a bumpy ride.”

Of course this bumpy ride does not necessarily portend an excursion into unfamiliar territory. In fact, the Visa-sponsored report analyzing global business-travel spend revealed that business-travel spend around the world fell 8.8% in 2009—the largest drop the industry has seen since the recession in 2001 and following the events of 9/11.

Biggest Business Travel Decline—2001

Perhaps surprisingly, the report indicates that while the world experienced the worst economic recession in 2008-2009 since World War II, the decline in business travel was worse in the recession at the beginning of this decade when it fell 11.5% in 2001 and strengthened by only 2% in 2002. Additionally, most of the 75 countries covered in the study faced worse declines in 2001 than in the “Great Recession” of 2009, including the United States (-9.4% versus -9.3%), despite experiencing consecutive years of business-travel spend loss in 2008 (-3.8%) and 2009 (-9.3%).

Banikowski said, “While much of the world has just weathered a devastating recession, declines in business travel last year were not as detrimental as expected, positioning the industry to achieve a swifter recovery, which we are already seeing.”

Where’s the Growth?

The study indicates that the business-travel recovery will not be uniform across the globe. Asia, Latin America, and the Middle East are expected to grow more rapidly than North America and Europe. China, cited as the only nation that grew business travel last year (8.5%), and other Asian markets currently add business-travel spending at about four times the rate of the U.S., with China expected to grow by double digits in 2010 and add nearly $130 billion in new business-travel spend by 2014, surpassing the U.S. market in size by as early as 2015.

Another of the study’s interesting revelations was the finding that industry sectors reacted differently to the “Great Recession.” After several years of double-digit growth because of a booming economy, it was reported that business-travel spend in utilities declined by almost 14% last year but is expected to rebound quickly in 2010. Meanwhile, real estate—one of the main drivers of the global recession—is predicted to bottom this year and begin to recover slowly.

On the other hand, business-travel spending from the government sector experienced no decline thanks to the fiscal stimulus package, but is expected to grow slowly in the coming years.

The industries seen as wielding the largest projected increases in business-travel spend over the next five years include: utilities ($38.2 billion); food processing and services ($32.2 billion); real estate ($23.2 billion); rubber & plastic manufacturing ($18.2 billion); and social & personal services ($17.9 billion).

Spend by Category

Breaking down global business-travel spending by major category, the study reports that air-travel spending—about one-fourth of total trip spending—is estimated at $201 billion in 2009, down 13% from 2008. Additionally, business travel comprised 54% of total airline revenue in 2009, a percentage expected to fall this year as leisure travel begins to recover.

The study also found that business travelers are responsible for 14% of total global hotel and restaurant sales. In 2009, hotel, food and beverage spending comprised about 41% of the global business trip budget, making for a total of $359 billion, and reflecting a decline of nearly 7% as compared to corresponding spending in 2008.

Banikowski advised: “By analyzing travel spend and recovery, this report will help corporations determine the pace they should maintain in preparing travel programs for greater volume or more cost-savings opportunity.”

The “New” Business Traveler

Finally, if there is one other determining factor that needs to be taken into account regarding the viability of the business-travel recovery, it might well be the changing nature of business travelers themselves. Examining whether the “recovery” could be worse than the “cure,” American Express Business Travel’s vice president of Global Communications & Marketing Services Alicia Tillman, and vice president and general manager Lane Dubin theorized that the convergence of pricing pressures, emerging technologies, sophisticated approaches to travel management and other unforeseen events could well define “a new business traveler.”

In an evolving business-travel arena recognized as “the new normal,” the traveler-centric model unveiled by the American Express executives portrayed the new business traveler as: flexible, adaptable and very cost-conscious; willing to trade down from premium to economy or discounted coach; comfortable with staying at lower-tier hotel properties; open to alternatives to travel for doing business; embodying higher expectations in terms of technology and convenience; ready to leave his/her laptop behind; and demanding in their receipt of new solutions and services.

Summing up, American Express executives concluded that “the global recession has had a profound impact on the business-travel industry… likely resulting in irreversible change.”