Signs of Optimism
By Christine Born
New economic forecasts and a long-anticipated study on the value of business, meetings and incentives-related travel are giving industry leaders reasons for optimism.
A recent Gallup poll found that Americans are more positive about most major businesses and industries this year, after being more negative nearly across the board in 2008. Among the biggest gainers since last year is the airline industry. Both the travel and restaurant rebounded, showing significant gains from last year.
At this year’s National Business Travel Association Conference, held at the end of August in San Diego, American Express Business Travel released its North America Business Travel Monitor (BTM) data and analysis including domestic and international airfare, hotel rates and car rental prices paid for the second quarter of 2009. “Despite widespread discounting and trading down in business travel, we are seeing a leveling in pricing and even an uptick in some areas in our Q2 versus Q1 data, as well as, in our monthly BTM data,” said Christa Manning, director, eXpert Insights and Research, Global Advisory Services, American Express Business Travel.
The highly anticipated U.S. Travel commissioned study from Oxford Economics, a global research firm, establishes the first clear link between business travel and business growth, delivering powerful proof to the industry’s “Meetings Mean Business” campaign. For every dollar invested in business travel, businesses experience an average $12.50 in increased revenue and $3.80 in new profits, according to the findings. It is the first time that the return on investment of business travel has been successfully measured.
“This study shows that not all spending cuts are smart cuts,” said Adam Sacks, managing director of Oxford Economics. “When companies reduce their travel budgets, there are negative consequences that we can now quantify, in terms of lost revenue and profit growth and in terms of giving competitors a distinct advantage.”
The study comes at an opportune time for American businesses that are planning their 2010 budgets and for federal policymakers looking to stimulate a struggling American economy. The study found that curbing business travel can have a strong negative impact on corporate profits. The average business in the U. S. would forfeit 17 percent of its profits in the first year of eliminating business travel, and it would take more than three years for profits to recover.
Business travel in the U.S. is responsible for $246 billion in spending and 2.3 million American jobs; $100 billion of this spending and nearly 1 million American jobs are linked directly to meetings and events, according to the U.S. Travel Association.
In related news, both Smith Travel Research (STR) and PricewaterhouseCoopers (PwC) forecast continued declines in hotel rates and revenues through 2010. While STR predicts a continued decrease in hotel occupancy, PwC expects a slight increase.
“Although recent levels of room night demand have been more favorable, the demand environment during the second half of 2009 is expected to remain challenging,” Scott Berman, PwC principal and U.S. industry leader for hospitality and leisure, said in a statement. “This, coupled with a difficult rate environment, is expected to compress RevPAR levels for the rest of 2009. In 2010, although demand is expected to start growing again, hotels are expected to face continuing pricing pressures.”
