After growing more than 35 percent since 1998, to nearly $929 billion last year, global business travel spending in 2009 will plummet by about 15 percent from 2008 before recovering in 2010, according to research by forecasting firm IHS Global Insight and the National Business Travel Association, sponsored by Egencia. In the five years through 2013, researchers concluded, global spending--including both managed and unmanaged business travel--will experience a 1.2 percent compound annual growth rate.
"As we come out of the recession late this year and into 2010, we will not achieve the growth rates that we saw in 2006 and 2007 period," said Ken McGill, NBTA research consultant and lead analyst on the IHS Global Insight report. "The recovery, in an economic sense and a business travel sense, is tepid. The global recovery is going to take time."
The fastest growing business travel markets through 2013 predominantly are expected to be in Asia and smaller countries in Latin America, while those shrinking most include larger Latin American countries and many Western European ones, according to researchers examining all business travel spending in 72 countries. Iran tops the growth list, with domestic plus international business travel spending projected to rise nearly 9 percent in the five years from 2008. Russia is the most noticeable laggard, with its total business travel spending projected to fall 4 percent during the period.
Sector Benchmarks
Nearly every industry or sector is expected to show decreased levels of business travel spending in 2009 versus last year, "reflecting the global recession," according to an NBTA statement. The lone area tipped for higher spending in 2009 is education, at 2.2 percent. The chemicals and chemical products sector is forecast to experience the steepest decline at 20.6 percent, followed by communication equipment (down 19.7 percent) and paper and paper products (falling 18.3 percent).
NBTA and IHS Global Insight expect most sectors by next year to start rebuilding business travel spending levels, at an average growth rate of 4.2 percent over 2009. "Over the next five years, sectors that directly benefit from both infrastructure development (utilities, government and communications) and economic stimulus packages (education, construction and real estate) will experience the most significant growth in business travel spend," the researchers reported.
Business Travel Spending
2008-2013 Projections
Compound annual growth rate | | Iran | +8.8% | | Panama | +8.0% | | Vietnam | +7.3% | | China | +6.5% | | Honduras | +6.3% | | Indonesia | +5.9% | | Ecuador | +5.6% | | Bolivia | +5.4% | | India | +5.3% | | Romania | +4.9% | | Philippines | +4.9% | | Bangladesh | +4.7% | | Uruguay | +4.6% | | Senegal | +4.5% | | Jordan | +4.3% | | Sri Lanka | +4.3% | | Kenya | +4.2% | | South Korea | +3.9% | | Malaysia | +3.5% | | Taiwan | +3.7% | | Hong Kong | +3.6% | | Czech Republic | +3.5% | | Japan | +3.3% | | Canada | +3.1% | | Sweden | +1.5% | | United States | +0.3% | | United Kingdom | -0.2% | | France | -0.6% | | Australia | -0.7% | | Norway | -0.9% | | Belgium | -0.9% | | Netherlands | -1.1% | | Italy | -1.2% | | Ireland | -1.3% | | Spain | -1.4% | | Mexico | -1.7% | | Germany | -1.7% | | Turkey | -2.3% | | Brazil | -2.5% | | Russia | -3.9% |
Source: Research conducted by IHS Global Insight and the National Business Travel Association, sponsored by Egencia |
Looking back at 2008, the utilities sector accounted for the largest portion of global business travel spending--$90.5 billion. Why? According to the researchers, "every country has [utilities], and developing countries are growing infrastructure." Utilities were followed by food processing and services ($74.5 billion), real estate ($62.7 billion) and social and personal services ($61.3 billion).
The Cost Of Business Travel
According to the study, businesses on average spend about $0.011 per sales dollar on business travel. That number, researchers found, was about $0.015 in 1999 and has dropped almost every year since. A sector at the higher-spending end is equipment rental and leasing at $0.04 of business travel spending per sales dollar. At the other end, the mining industry spends "less than a tenth of a cent."
"Industry sectors with high travel spend per revenue dollar, such as real estate, government, utilities and professional services, stand to save the most from managed travel activities," the researchers concluded.
In 2008, business travel represented 2.3 percent of total materials and service costs across all U.S. industries (including government), down from 3.18 percent in 1998, according to data from IHS Global Insight, Compustat, the U.S. Bureau of Economic Analysis and American Express. Similarly, business travel as a share of profits was 5.18 percent last year, down from 7.14 percent 10 years earlier.
According to NBTA, these trends indicate "rising productivity of business travel." A statement attributed to Egencia president Rob Greyber cited "stronger travel management and greater efficiency when traveling." McGill also mentioned technology alternatives.
"It is not clear that these technologies have replaced certain levels of business travel," McGill added during a Thursday webinar on the research. "Anecdotally, there are examples where these technologies have created a situation where certain projects and certain operational management can now be more worldwide in scope, which in some companies has resulted in more business travel."
"When you look at the multinational corporation and the globalization, I foresee many people's travel increasing because when you are dealing with people from another country, you've got communication issues and personality issues," added incoming NBTA president Craig Banikowski. "So you are going to have to accomplish a lot more with a face to face meeting initially, and then perhaps be supported by technology on the back end."
When asked how much lower business travel as a percentage of sales, profits and total costs could go, McGill told The Transnational, "That is a part of the study that we are working on at this moment. In math terms, it is going to asymptote, to a certain level where you just can wring out any more business travel costs."
Gainers And Losers
At 0.3 percent, growth in the United States--by far the world's largest business travel market, accounting for "28 percent of the world total" in 2008--will trail growth in several other countries. In absolute dollars, the country's total business travel spending will increase by almost $5 billion between 2008 and 2013, when it reaches $266 billion. That overall increase would come after an expected 10.3 percent year-over-year drop in 2009. The 2009 estimate includes $36 billion for outbound international travel and $198 billion for domestic travel.
Measured by percentage growth, China (6.5 percent), Indonesia (5.9 percent) and India (5.3 percent) are among the larger countries expected to experience an increasing business travel market through 2013. Most of the other leaders are smaller countries with more modest economies.
"Once these [smaller Latin American] countries get through the commodity recession--which impacts them more than it might in the United States--business travel spending will grow relatively faster, in part because the numbers are so small to begin with," McGill said.
With the exception of Romania and the Czech Republic, none of the expected fast growers in business travel are from "emerging Europe," a region that had the highest business travel spending growth rate between 1998 and 2008, at 12.4 percent, according to the study.
Many of the countries expected to experience more contraction in their business travel spending through 2013 are in Western Europe. Others include Australia, new Zealand and Latin America's largest economies--Brazil and Mexico. The largest percentage decline among countries highlighted in the study was Russia, at 3.9 percent. Russia between 1998 and 2008 saw a 16.3 percent compound annual growth rate in business travel spending, also the largest of any country highlighted in the report.
"It is a timing issue," McGill said. "Some of these countries went into recession later--in some cases much later--than China and the United States. If we added a year or two and went out to 2015, some of these countries would change position."
According to NBTA and IHS Global Insight, the research "used a combination of public, private and custom survey-based data," including "data from business travelers, travel suppliers and various governments/NGOs." The groups also "sponsored a survey of a representative sample of U.S. businesses across industry groups seeking an array of questions regarding travel and entertainment expenditures and managed travel activity." McGill said that survey covered 500 businesses. He also said researchers collected travel survey data from D.K. Shifflet and Associates and various other "demand side measures, as well as supply side."