As Global Growth Slows, U.S. Execs Still Conservative on Business Travel

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Published October 09, 2012

| FOXBusiness

Business travel in the U.S. is expected to remain sluggish through at least the end of the year as financial turmoil in Europe, a slowdown in China and the U.S.’s stubbornly high unemployment rate drive conservative spending by business executives.

Total U.S. business travel spending is expected to grow 2.6% in 2012, reaching $257 billion by the end of the year, according to a report released this week by the Global Business Travel Association.

That’s a moderate increase from last quarter due to higher travel prices, but it has been offset by a 1.6% year-over-year decline in business trip volume to 438.1 million.

“Corporations are in a wait-and-see mode and holding back on investment decisions that would help boost the economy,” GBTA Chief Operating Officer Michael McCormick said in a statement.

It’s a trend of conservatism that has been seen across industries in the U.S. – from retailers like Target (TGT) remaining cautious on holiday hiring to C-level executives staying clear of risky mergers and acquisitions – amid continued economic uncertainty.

GBTA said the “darkest cloud” on the economic horizon is the so-called fiscal cliff, a combination of more than $500 billion in expiring tax cuts and automatic spending sequestration set to trigger early next year.

It also pointed to an expected decline in imports and exports to China and the rest of Asia over the next six quarters that it says will inevitably lead to a decline in business travel there from the U.S.

Despite the international headwinds, GBTA projects international outbound spending will grow 2.5% in 2012 followed by a 7.7% increase in 2013.

The group, whose research was sponsored by Visa (V), sees total U.S. business travel spending growing by 4.9% to $270 billion next year, a reflection of rising costs, offset by a 1.1% decline in total trip volume.

“While companies aren’t cutting their business travel spend and we’re still seeing very model growth, we are cautious about the outlook for the next several quarters,” McCormick said.

The leading industry group for business travelers has long said that job growth is correlated with an increase in business travel spend, however that doesn’t appear to be the case in this recovery.

Jobs are growing in sectors such as retail, restaurant and manufacturing that are far less prone to send employees on business trips.

Only once the pace of job growth starts to pick up in sectors like business, service, financial and utility that are more associated with business travel, will it start to catch up with the slowly recovering U.S. unemployment rate, the GBTA said.

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http://www.foxbusiness.com/travel/2012/10/09/us-execs-not-jumping-to-send-workers-on-business-trips/