The 30th US President during the “Great Depression” would feel right at home with today’s pro-business lobby; Calvin Coolidge tried to cut back the federal government and was famous for saying “The chief business of the American people is business.” However, that does not explain why forecasters today still rely on business spending trends to predict overall economic outlooks in many areas of the economy. Particularly, travel.
But msnbc.com is among sites predicting that travelers and others who want to know where the economy is headed this new year should take notice of predicted airline prices and the projected cost of checking into a hotel.
“The more companies spend on business travel, the more likely the economy is inching closer to a recovery, and a new report hints at that very possibility for 2012,” says the site.
The reference was to the Global Business Travel Association’s Business Travel Quarterly Outlook, which monitors business travel spending among US companies. Its prediction: spending on business travel is expected to top $163 billion this year. That’s a welcome increase of 4.6% over 2011.
“The forecast follows a stronger 2011 than anticipated,” the report found.
Overall, the fact that business travel is up at all - even though it’s not a dramatic rise - is a good sign for the travel industry and the world economy.
“Business travelers are a big driver of the economy,” says Michael W. McCormick, executive director and COO of the global association. “The amount of revenue dollars and tax dollars that are created by business travelers being out there is a great way to measure the health of the economy.”
Modest Recovery of Business Travel in 2012
He added that while the economic recovery is still modest, “we see business travel remaining healthy and growing at a steady rate that outpaces GDP growth.”
But he is far from alone in that conculsion.
Egencia, an Expedia, Inc. company, in its 2012 Corporate Travel Forecast says top corporate travel destinations will be slightly higher overall in Europe, North America and Asia-Pacific. Based on Egencia’s 2012 Global Corporate Travel Forecast, average airline ticket prices will be “slightly up” at 4% for both North America and “slightly to moderately up” at 6% for Asia.
“The hotel environment continues to show signs of year-on-year growth relative to increased corporate demand, resulting in improved hotel occupancy worldwide,” the group says.
In key destinations for 2012, Egencia forecasts average daily rate increases of anywhere from 2% (Europe) to 7% (Asia Pacific), while it will be up 5% in North America.
Chris McGinnis, an expert on travel trends who is director of Travel Skills Group Inc., says as a result of “gazing into his crystal ball,” he sees slow growth for corporate travel budgets this year. The good news is that I don't think we will see as many budget cuts and controls as we've seen in recent years,” he writes.
Increased demand for travel in 2012 will result in higher prices for transportation, fuel, lodging and food, with the biggest jumps in big coastal cities such as New York, Boston, Washington DC, Los Angeles or San Francisco,” he says.
Airfares in the US are now 10%-20% higher than they were two years ago. They “should remain that way as airlines continue to reduce capacity, consolidate, or, in the case of bankrupt American Airlines, shrink their way to profitability,” says McGinnis.
Any uptick of the economy is welcome. But there is some bad news as well. Any increase in rising travel costs is expected to come from higher travel costs rather than more business trips.
Key Statistics – World Business Travel (source: Global Business Travel Association’s Business Travel Quarterly Outlook, GBTA)
- GBTA found that the person-trip volume was up 3.1% in the third quarter of 2011, while total business travel spending was up over 8% for the quarter.
- The number of US-initiated international business trips in 2011 is expected to hit 6.8 million when fourth-quarter numbers are accounted for, an over 3% increase on 2010.
- GBTA forecasts that business travel spend will increase by nearly 5% in 2012 on a slight (0.8%) decline in person-trips.