GBTA Forecasts European Economy To Slow Business Travel Growth - Business Travel News

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GBTA Forecasts European Economy To Slow Business Travel Growth

July 10, 2012 - 12:20 PM ET

By Jay Boehmer

"Economic uncertainty in Europe will dramatically slow the growth of business travel in the United States through the end of the year," the Global Business Travel Association declared on Tuesday as it downgraded to 2.2 percent from 3.6 percent its anticipated rate of year-over-year business travel spending growth for full-year 2012.

With the revised forecast, issued in its quarterly business travel outlook, GBTA and report sponsor Visa joined a growing chorus of industry players, including Delta Air Lines, United Airlines and several airline analysts, that have predicted a slowdown in business travel growth for the remainder of the year.

GBTA now forecasts total business travel spending for the full year to reach $256.5 billion, nearly $4 billion less than its previous projection, but still up from the $251 billion GBTA reported for 2011.

GBTA attributed the projected increase in 2012 spending to sustained strength in supplier pricing, as the association expects the number of U.S. domestic transient business trips this year to decline nearly 2 percent from 2011 levels. U.S. domestic group business trips are expected to decrease by 1.5 percent, while U.S. international outbound trips are on pace to grow by a modest 0.4 percent, according to GBTA's outlook.

"International outbound travel will continue to drastically outpace domestic travel," according to GBTA, which projected spending in the outbound sector to grow nearly 3 percent this year and an additional 7 percent in 2013, even as "GBTA has continued to pull back its projections as the trouble in Europe has continued."

“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,” according to GBTA executive director and COO Michael McCormick. “In our Moderate Shock Scenario, we predicted that a prolonged recession in Europe would result in a flattening of business travel spending in the U.S. Unfortunately, it now seems that this shock scenario is becoming a reality.”

The malaise is not confined to the European continent, as GBTA also pointed to "ongoing concern in the U.S. economy, including low job growth, falling consumer confidence and retail sales, and slowing corporate profits."

While higher travel prices and stable demand have led to solid growth in business travel spending in recent quarters, businesses now "may be entering into a holding pattern as they wait for the economic environment to solidify," according to GBTA's outlook.

The association pleaded for caution. “We’re entering a period of time in which many companies could overact and make significant changes to their travel budgets,” according to McCormick. “Our research has shown that businesses that slash their travel budgets end up weakening their competitive position, particularly when the economy improves.”

While past slowdowns have brought relief to travel buyers in the form of supplier rate reductions, GBTA is not predicting any such reprieve over the next 18 months. For 2013, the association expects total demand for business travel to decline by nearly 1 percent year over year, but total U.S. business travel spend is expected to grow by nearly 5 percent to $268.5 billion—"bolstered by a rise in travel prices."

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