Global Insight and the National Business Travel Association during the next year plan to share results of research that would quantify, profile and measure business travel's size, growth and contribution to the U.S. economy. First revealed in December, the project also is designed to produce metrics on the return on investment and bottom-line impact of travel and professional travel management.
The United States Travel Association--a group of mainly travel suppliers and convention and visitors bureaus--in early March announced that a February poll of 401 business leaders by APCO Insight determined that "while corporate travel budgets are often the first target of cost-cutting measures, a majority believe that companies that increase travel budgets during an economic downturn will be better positioned to build competitive advantage. The findings illustrate the conflict within businesses that are under pressure to quickly identify cost reductions in the economic downturn. When making these reductions, businesses may sacrifice longer-term strategic and competitive advantage."
Global Insight executive vice president Ken McGill here on Monday at the NBTA Financial Forum said, "What we're trying to do is provide real, credible, defensible measures of business travel--not only how large it is and how quickly it might be growing, but also how important it is to the economy so businesses, citizens, governments and households can understand what business travel brings to the economy and to the firm. Business travel is a material input, just as steel or plastic is to a manufacturer ... if you take it away, what is the impact on sales and profits?"
Global Insight currently is crunching last year's data, but McGill offered a preview using 2007 domestic travel figures. "By our count, there were about 800 million business travel trips in 2007," he said. "They spent $264 billion; the gross domestic product impact was about $208 billion; 3.3 million jobs were supported by the fact that we are all engaged in business travel, with wages of about $133 billion.
"Business travel, by our reckoning, was 1 percent to 2.5 percent of the entire economy," McGill added. "One type of activity--that's remarkable. It compares with a number of industries that will be part of the research." Domestic business travel also equated to about 1 percent of corporate sales, McGill noted, and supported one in 42 U.S. jobs.
"We're going to look at how profits and business travel spending change over time, with an eye towards creating a rule of thumb that says, 'If business travel [spending] goes up by 1 percent, operating margin goes up by x percent,' " he added.
Asked whether the researchers are assuming that increased business travel translates into increased profits, McGill said, "We've got some assumptions that we'll test. What we want to do is pull the numbers together. It's undeniable that if you cut business travel expenditures, it may have a short-term positive influence, but what happens over time? It's not necessarily linear or constant."
On a pre-recorded promotion for the event, McGill said it was "clear" that companies benefit from continuing "sales-oriented business travel ... consistently through all stages of the business cycle," since they're going to have "orders waiting for them" when demand for their products returns.
The USTA survey found that 72 percent of executives polled agreed that "increasing travel while others are cutting back creates an opportunity to build market share and new customer relationships," while "81 percent believe that more client contact is necessary in a slow economy." While USTA found that about half of companies polled had cut travel budgets, the group's senior vice president of research Suzanne Cook said, "There are a few forward-looking kinds of companies" that had increased travel and "see this as an opportunity to gain some competitive advantages."
Meanwhile, McGill said the Global Insight-NBTA research also would study the value of travel management. "We want to quantify the cost savings as a benefit to the corporation and also look at the productivity savings associated with travel management. They support expensive people. That should be quantified. Also we want to look at travel management by going through an experiment that says, 'Do firms that have professional travel management--whether outsourced, internal or both--perform better over time than firms that do not?' "