Business travel bounces back, 5% growth expected in 2013
Companies will send their employees out on the road a lot more this year, even to conventions and meetings they avoided spending money on during the economic downturn, according to a new report out today.
U.S. business travel spending is expected to rise 5.1% this year to $268.5 billion, a substantial increase from 1.8% growth in 2012, according to the Global Business Travel Association, the trade group for business travel managers.
That’s an upgrade from the group’s previous prediction for a 4.6% boost in 2013.
The group says a brighter economic outlook, greater consumer confidence, and stronger corporate profits are fueling the boost, despite recent federal government budget cuts. Additionally, industries that typically require more business travel such as business services, finance and utilities are starting to recover.
“What we’re seeing is a lot of the fundamentals in the economy are improving,” says Joe Bates, vice president of research for the association. “So despite the fact that the U.S. government is still dealing with and trying to figure out the broader situation, many other things are going on in the meanwhile, such as housing improving, car sales doing well, and business sentiment doing well.”
Business travel spending has been slowly crawling back after an extended slump during the recession, as companies saw profits drop. It reached bottom in 2009 and slowly started picking up, but experienced another decline in the fourth quarter of 2012 because of uncertainty over the U.S. presidential election and turmoil in Europe.
Now, companies are not only planning trips to visit clients and do other revenue-generating work but also to attend conventions and meetings.
Group spending is expected to increase 6% this year to $115.9 billion. Previously, the group had expected 5.2% growth.
“It’s another sign of an improving economy overall,” Bates says. “Typically when you have more concerns about what’s going to happen with the economy, the first thing people cut are those meetings and events.”
Eric Eden, vice president of marketing for Cvent, a meeting and event management technology company, says that when the economic downturn hit, event planners went from booking meeting spaces years in advance to almost at the last minute. They also moved away from large national meetings to smaller, regional ones with fewer frills.
That’s starting to change, he says.
“We’re seeing meetings with higher numbers of attendees per event, and we’re also seeing that events are being planned further in advance, which is generally a sign that people are more optimistic,” he says.
Hotels are more fully booked for meetings and are starting to charge higher rates for meeting attendees, he says.
“There’s a certain point where it goes from being a buyers’ market to a sellers’ market and I think it’s getting ready to cross that threshold where the buyers can no longer count on as good a deal because the hotels are filling up,” he says.
While spending will be up, the number of trips taken will decline 1.1% to 431.7 million trips this year.
Bates says that’s not surprising given that companies want their employees to accomplish more during each trip. A two-day trip could be extended to a three-day trip if the employee can take in more meetings or accomplish other tasks, he says. “We’re seeing the productivity of business travel improve over time,” he says.
Bates says there is a strong correlation between stock prices and business travel spending. With the stock market hitting record highs in the first quarter of this year, business travel should continue to pick up momentum in the second half of this year.
“We feel like we’re finally into a very solid part of the recovery and we suspect it will continue in the next two years,” Bates says.
Ellen Davis, who works at a marketing firm in Peachtree, Ga., says business travel has been healthy for her firm. But employees are being asked to be smarter about their expenses.
“There continues to be scrutiny over weekly expenses with a lot of encouragement to use discount booking services for hotels,” she says. “I personally avoid that as much as possible and work with my regular hotels on corporate deals.”