Industry Research

International Travel Drives Business Growth

Martin Romjue
Posted on December 18, 2013

ATLANTIC CITY, N.J. — Foreign regions are growing faster in international business travel activity than the U.S., with much of that growth coming from an accelerating Chinese economy, according to the Global Business Travel Association.

The surge in global business travel was a keynote topic Oct. 28 during LCT Show East in Atlantic City. Limousine operators learned from Mike McCormick, COO and executive director of the GBTA, what to expect in the business travel market.

“In 2016, China will grow past the U.S., which will be No. 2,” McCormick told attendees. “The world order is changing for business travel. You have to think differently about your business.”

The top five markets for business travel in 2012 were: U.S., China, Japan, Germany and the U.K. “China’s growth has been phenomenal. China has grown by four times since 2005, and is expected to grow at double-digit rates,” he said.

Business and corporate travel overall provide 61% of sales revenue for U.S. chauffeured transportation providers, according to the 2013 LCT annual Fact Book survey of limo operators nationwide. The fortunes of the industry are tied to trends in business travel. The GBTA’s Biz Travel Index (BTI) forecast, which assesses the overall size of the global business travel industry, estimates it will reach an index level 64% higher than in 2005. At $1.16 trillion, business travel is one of largest industries in the world.

“2013 will be back to the same level as before the crash in 2009,” McCormick said. “But it’s still harder than it was then; international outbound growth is driving the recovery, not the U.S. Your travelers are going to different parts of the world they didn’t have to go before.”

And while group and meeting travel is growing, much of that increase has been price driven, not the result of more transactions. “We’re probably not feeling the full recovery taking effect, but growth will continue to come. It will just lag a bit.”

2009 was all about looking for recovery outside of the U.S., McCormick said. Business travel is a leading indicator for the economy because companies want to grow topline revenue. “They send people out on the road. They still need one-to-one relationships and human contact.”

That point was underscored by some high-profile GBTA convention speakers: Presidents Bill Clinton and George W. Bush spoke at the 2012 event while First Ladies Barbara Bush and Hillary Clinton, also a former U.S. Senator and Secretary of State, spoke at the event in August. “They all talked about the importance of face-to-face contact in this era of technology,” McCormick said. “Hillary Clinton is the most traveled Secretary of State in U.S. history.”

While the economy recovers and drives demand for such contact, it is doing so at a slower pace and with less lucrative jobs being added when compared to previous recoveries, McCormick said. Nevertheless, 2014 will see more “noticeable” growth in business travel transactions overall, at 7.2%, with a 2.2% rise in actual trips.
The only real wild cards in the economic and business travel equation are the political fights in Washington, D.C., over government shutdowns, budgets and debt ceilings, which can seriously disrupt business travel and stability, McCormick said. In the latest government shutdown in October, 57% of business travel professionals surveyed by the GBTA canceled meetings or business opportunities, 50% cancelled travel bookings, and 48% delayed government business.

The GBTA’s executive director, Mike McCormick, gave a keynote presentation during LCT Show East that covered growth in international business travel, economic trends and challenges, and ways the GBTA advocates on behalf of the business travel sector that can improve the business climate for limousine operators.

The GBTA’s executive director, Mike McCormick, gave a keynote presentation during LCT Show East that covered growth in international business travel, economic trends and challenges, and ways the GBTA advocates on behalf of the business travel sector that can improve the business climate for limousine operators.

“In keeping our country open for business, it is hard to believe that in a global economy, we have to have that discussion and debates,” he said. “You don’t get rides and trips back. That’s money out of your pocket. It also matters in our reputation overseas. There is a real impact when they think twice about doing business here.”
McCormick warned the next challenge will be another possible shutdown standoff in February 2014. “We have to stay open for business. We have to stay vigilant. We are one of the world’s largest industries; we drive other industries, we fuel other industries.

To advance the health of business travel, the GBTA stays active on numerous political and policy fronts. McCormick outlined three of the key issues the GBTA emphasizes:

1. Fair tax burden: Business travel is taxed at the level of sin taxes, such as those on cigarettes and liquor. The GBTA has to fight tax burdens constantly, often in whack-a-mole fashion. For example, car rental taxes have increased 800% since 1990, most of which go toward pet projects on the state and local level such as stadiums. The GBTA is trying to address this problem at the federal level by getting a bill sponsored to end discriminatory taxes against rental car companies. “The fact we can get a bill introduced should make state and local governments think twice about levying taxes on business travel,” McCormick said.

2. Passenger facilitation: The GBTA has worked hard to get pre-check done with the Transportation Security Administration for business travelers, which includes a rapid expansion of the pre-check population. That makes it easier for chauffeured customers to get in and out of airports, and the reliability for timing airport trips makes limo service more predictable for drop-offs and pick-ups.

3. Investment in infrastructure: The GBTA is advocating for an upgrade to the U.S. air traffic control system, which is still rooted in a 1950s-era network and equipment. Airliner routings have not changed in decades. “You have better ability with GPS in a car than do air traffic controllers. We’ve been working to get funding to get GPS for airplanes. We are beta-testing a system with Alaska Airlines. It’s a lot of hard work to get there, but it’s a system that will save time and fuel, shorten flight times, relieve congestion in the Northeast, make it better during bad weather to reroute flights, and make it better for all operators to do their jobs.” Such a system would boost U.S. competitiveness in a global economy and travel market, he added.
McCormick reminded and reassured limousine operators that while economic disrupters come and go, “at the end of the day it is service and relationships that matter the most.”

“The secret to success in business is to keep showing up,” McCormick said, citing a stock-phrase in business. “But my secret is, don’t give up the fight.”

Global Business Travel Association

  • 6,000-plus members
  • 7,000 attendees at annual GBTA convention
  • About 50% of members are buyers; 50% are suppliers
  • Members manage more than $340 billion of global business travel and meetings expenditures annually.

China Travel Outlook
The GBTA commissioned Rockport Analytics to create a semi-annual business travel outlook for China. It provides insights for corporate travel professionals and the broader business community into both short- and long-term trends in Chinese domestic and international outbound business travel activity. Results from the study released in October include:

  • After expanding by 7.5% in Q2 of 2013, China’s economic growth has consolidated and is expected to register 7% to 8% for 2013.
  • Chinese authorities are working to rebalance the economy to stimulate domestic investment and consumer demand. The export sector continues to be affected by weak economic performance in the U.S. and Europe, with export growth being driven mostly by intra-regional trade.
  • Despite weaker than expected business travel growth in H1 of 2013, China should surpass the U.S. as the world’s most dominant business travel market by 2016.
  • China’s total business travel spending is forecast to increase by 14.3% in 2013 to $224 billion. The projected expansion of 17.2% in 2014 is more than twice the rate of the U.S.
  • Domestic business travel continues to outperform international outbound (IOB). In 2013, domestic travel spend should grow 14.3%, followed by another 17.2% in 2014.

European Travel Outlook
The Western nations of Europe are the largest hubs of chauffeured luxury vehicle activity outside of the U.S. Most of the foreign limousine operators attending LCT trade events come from Europe. A GBTA semi-annual analysis of the five most critical business travel markets in Europe, which comprise 70% of the business travel in the region — Germany, the UK, France, Italy and Spain — offers the following highlights:

  • Business travel spending among the five markets is expected to hit $183 billion, 3.3% growth compared to 2013. This projected gain would be the largest in Western Europe since the Great Recession.
  • Germany remains the largest business travel market in Europe, reaching $50.5 billion in 2012. This is expected to increase 5% in 2013 to $53 billion.
  • The U.K. has the second highest level of spending on business travel in Western Europe — $40.6 billion in 2012 — expected to advance 1.6% in 2013 to $41.3 billion.
  • Spain, Italy and France will all see their business travel markets contract in 2013 by -6.7%, -3.9% and -2.3% respectively.
  • In 2013, domestic business travel will fare better than international outbound in all five markets except for the U.K.

Source: GBTA

Related Topics: business travel, corporate travel, economic outlook, GBTA, Global Business Travel Association, international, LCT-NLA Show East, Mike McCormick

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