Yesterday, the sun was shining. Today, dark clouds loom on the horizon. The Global Business Travel Association in Alexandria, VA, has issued a warning that its original forecast about the health of the US business travel industry in 2012 has been downgraded.
GBTA now expects total business travel spending to grow just 2.2 percent for 2012, reaching $256.5bn by the end of the year. This represents a downgrade of 1.4 percent since last quarter, when GBTA estimated growth would be 3.6 percent.
Researchers blame the gloomy view on the economic uncertainty in Europe, in its latest GBTA BTI™ Outlook – United States, a report from GBTA and sponsored by Visa Inc.
In addition, ongoing concern in the US 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 US-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.
‘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 US. 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.’
That’s not always good strategy for business, McCormick said. ‘Our research has shown that businesses that slash their travel budgets end up weakening their competitive position, particularly when the economy improves.’
One researcher offers a silver lining: ‘Despite projected slowdowns in business travel, there is still reason to be optimistic,’ said Tad Fordyce, head of global commercial solutions at Visa Inc. ‘US travelers increased international tourism spending on their Visa accounts by 9 percent in Q1 2012 with Americans increasing travel purchases on their Visa accounts by 31 percent in China.’
Looking ahead to 2013, GBTA research suggests a slight drop (-0.7 percent) to 435m total person trips. On the other hand, business travel spend for 2013 is forecast to grow 4.7 percent to $268.5bn. GBTA forecasts 3.6 percent growth in transient spend, 5.1 percent growth in group spend, and 7.2 percent 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,’ said McCormick.
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