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Global business travel spending will increase 6.2 percent from a recession-depressed 2009, to $896 billion, according to a new report from the NBTA Foundation. Researchers expect the global figure to surpass the 2008 peak of $926 billion in 2011, with growth driven by strong trade conditions in Asia, healthy business travel volumes in the Middle East and Latin America, and double-digit business travel spending growth in several manufacturing sectors--offsetting continued weakness in Europe.
"At mid-year 2010, we have already seen many of the air and hotel indicators recovering more quickly than many analysts had expected," according to authors of the study, sponsored by Visa. "Corporate travel is only beginning to re-emerge after draconian cuts in meeting and transient budgets over the past two years." They pointed to "overall business optimism" and noted that "business travelers are moving towards the front of the aircraft once again."
Authors also wrote that business travel spending would expand more quickly in 2011, "but we do not see return to the [growth] rates experienced in 2006-2007. The global economy will simply not have the underlying vigor to push the demand for business travel forward at those lofty rates."
To update last year's study, NBTA Foundation hired research firm Vantage Strategy. To calculate business travel metrics, Vantage used travel data from suppliers, governments, a D.K. Shifflet & Associates travel panel, industry associations and travel management companies, and economic data from IHS Global Insight, Morgan Stanley, the Organization of Economic Co-operation and Development, and Deutsche Bank. Additional data was derived from a survey of more than 500 financial managers "at a representative sample of U.S. public and private companies," and other sources. "The combination of the forecast of industry sales (macroeconomic environment) and the trend in business travel spending per dollar of sales (business travel intensity and productivity) was used to generate the growth projections," according to the report.
Researchers predicted that Asian economies on average would grow "at about twice the rate of the American economy," and that Asian business travel markets would grow "at about four times the rate of the United States." Because Asian regional economic growth is "gradually becoming less export-dependent and is being driven more by domestic demand," study authors expect domestic business travel to "soar."
China was the only country covered by the research to increase business travel spending in 2009, with growth at 8.5 percent. With an estimated compound annual growth rate for business travel spending accelerating to 16 percent during the next four years, researchers expect the country by 2015 to surpass the United States as the world's largest business travel market. Just in the wholesale trade sector, China's business travel spending gains through 2014 "will be larger than the United States, Spain, South Korea, Italy, France, Canada, Brazil, Germany and Japan combined." Most other Chinese industries are expected to show double-digit CAGR for business travel spending in that time, including the construction and utilities sectors, as "large funds will be poured into infrastructure" to handle the country's economic expansion. The country's 11.9 percent economic growth in the first quarter was "the strongest in two years."
South Korea's business travel spending is expected to leap 21 percent this year, followed by 7.2 percent average growth per year through 2014. Long-term business travel spending percentage growth rates in India, Indonesia and Singapore are expected to be in the double digits. Japan's business travel spending is expected to grow much more modestly, at about 2 percent per year during through 2014. "This will be largely dependent on exports, fueled by a stronger global economy over the next few years."
Researchers expect Europe to be the only region for which business travel spending drops in 2010. "The growth and debt dynamics of some Eurozone economies remain quite precarious," according to the report. "Along with Greece, Portugal and Spain are especially vulnerable."
The United Kingdom is expected to show a marginal decline in business travel spending as it "suffers from a lack of consumer confidence" while "businesses are not willing to reinvest." The banking/finance and professional/business services sectors account for nearly 17 percent of the country's total business travel spending, and "will not recover until 2011." Longer-term, however, the United Kingdom through 2014 is expected to achieve business travel spending CAGR above 8 percent.
France also is expected to experience a marginal business travel spending decline in 2010, but will rebound in 2011 with growth above 7 percent, researchers predicted. That rebound will be driven by "a successful fiscal stimulus coupled with increased consumer confidence and demand." The country's "staple" industries of transportation services and social/personal services are expected to "fare the best" during the next few years.
Like France, Germany will see a roughly 1 percent drop in 2010 business travel spending, followed by a 7 percent gain in 2011. "Government stimulus in 2008 and 2009 has helped to ease declines in output and should help to bring about faster recovery," according to the study.
For 2010, business travel spending contraction also is expected in Spain and Greece (each down 4 percent), Ireland and Italy (each down 3 percent), and Portugal (down 2 percent).
Americas Spending To Grow Modestly
At $237 billion, the United States in 2009 remained the largest business travel market, "but its share is dropping quickly in the wake of growth powerhouses such as China, India, Brazil, and South Korea," according to researchers. U.S. business travel spending is expected to grow 2.5 percent this year, 3.2 percent in 2011 and 2.4 percent on average during the four years through 2014--"half of the world average," according the report. The government sector is not expected to keep up its strong 2008 and 2009 travel spending growth related to "bailouts and fiscal stimulus plans."
Meanwhile, Brazil this year is expected to sharply increase business travel spending, by nearly 20 percent, after a 9 percent drop last year. Researchers pointed to strong growth for the government and petroleum refining sectors.
Elsewhere in the region, the study predicted Panama's annual business travel spending would grow 9 percent on average through 2014, followed by Ecuador (7.5 percent), Bolivia (7.2 percent), Uruguay (6.3 percent) and Canada (6 percent).
Manufacturing To Lead The Way
On a global basis, the basic metals manufacturing industry is expected to increase 2010 business travel spending by the largest ratio of any in the report, more than 30 percent. It is followed by petroleum refining (22 percent) and communication equipment (15.8 percent). Other double-digit percentage gainers would include mining, textiles, education and various manufacturing sectors.
"Industries that are export oriented and with a strong presence in Asia, such as food processing, plastic manufacturing, paper, textiles and industrial machinery have been less aggressive with cuts to T&E," according to the report. "Companies in sectors that typically lead the larger business cycle would already be showing signs of improvement and, therefore, have apparently relaxed some travel restrictions. Examples include electrical machinery, industrial machinery, transportation equipment, paper, and basic metals. Sectors that were beneficiaries of fiscal stimulus programs, including government itself, may have also had reason for a less aggressive travel cost-cutting stance. Education, construction (particularly public construction) and utilities come to mind."
On the other end of the spectrum, the study predicted that the printing/publishing and professional/business services sectors would show marginal business travel spending declines in 2010, while the construction and equipment rental/leasing would increase spending by less than 1 percent.
"Industries that have proven to be travel-intense, such as business services and banking have a greater incentive to more aggressively cut T&E budgets during recession and the early stages of recovery," according to the report.
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