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 now expects total U.S. business travel spending to grow 2.6% for 2012, reaching $257 billion by the end of the year. While this is a moderate increase since last quarter, when GBTA estimated growth for 2012 at 2.2%, the uptick in spend is largely being driven by rising business travel costs. Total business trip volume is expected to reach 438.1 million for 2012 – a reduction of 1.6% from last year, when total business trip volume was 445 million.
Looking ahead to 2013, GBTA research forecasts business travel spend will grow 4.9%, reaching $270 billion U.S. – which is a slight upgrade from the 4.7% growth in 2013 that GBTA forecast last quarter. Total trip volume is expected to fall -1.1% in 2013.
For 2012, GBTA now forecasts that transient travel spend will advance by 2.9%, group spend by 2.3%, and international outbound business spend – previously a major driver of overall travel spending growth – by 2.5%. These forecasts are expected to remain constrained unless overall economic momentum increases significantly.
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 U.S. 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.
