U.S. business travel will continue to grow only moderately in 2016 as global uncertainty looms. This is one of the key findings from the GBTA BTI™ Outlook – United States 2016 Q1, a report by the GBTA Foundation, the education and research arm of the Global Business Travel Association (GBTA), sponsored by Visa, Inc.
For the second release in a row, our forecast for U.S.-originated business travel has been slightly downgraded. The new report projects that business travel volume growth will increase slightly in the first quarter of 2016 – growing 1.8 percent on a year-over-year basis due to a number of domestic and international factors that are causing global uncertainty and corporate caution.
While the latest GBTA business travel forecast found that 2016 will look very similar to previous years with anemic but steady growth, there is cause for optimism about 2017 as the health of the global economy becomes clearer and a number of factors including the U.S. presidential election and the possible “Brexit” of the United Kingdom from the EU become resolved later this year.
“If the past several years could be summed up as, ‘cautious but slow growth,’ 2016 is looking like it will be summed up as, ‘uncertainty causing slow growth.’ Thankfully, a much brighter 2017 appears on the horizon,” said Michael W. McCormick, GBTA executive director and COO. “There are a number of factors leading to uncertainty, which is affecting growth in both our sector as well as the overall global and domestic economies. However, these issues will likely resolve themselves later this year and create more confidence for individuals and organizations alike in 2017.”
While business travel continues to experience a similar pattern of growth it has endured for the past several years, the overall health of the business travel industry remains one of the strongest barometers of the health of the overall U.S. and global economies as an indicator of business confidence, economic growth and market stability.
Some key findings from GBTA BTI™ Outlook – United States 2016 Q1 include:
- In the fourth quarter of 2015, 125.1 million person-trips were generated in the United States and $72.4 billion was spent on business travel activity. This represents flat year-over-year growth in trip volume and 0.7 percent growth in business travel spending.
- Financial market volatility has ratcheted up in response to weaker global economic growth and its impact on commodity prices, exchange rates and corporate earnings. And weak supply-driven oil prices continue to add to the state of confusion.
- Faltering share prices and falling bond yields have put many businesses into a cautionary mood. A growing number of business have been re-instituting cost control efforts and revisiting hiring, capital expansion plans and travel budgets.
- Price growth is expected to normalize in 2016, growing 2.5 percent, followed by a more significant gain of 4 percent in 2017.
- Price growth in the hotel market continues to outpace inflation in all other key business travel segments. Average daily rates (ADR) rose an estimated 5.1 percent in 2015 to $115.
- U.S. Business travel spending is expected to increase 1.9 percent in 2016 to $295.7 billion and business travel volume is forecasted to increase 2.1 percent to 508.6 million trips.
“With both business travel volume and travel costs forecast to rise in 2016, it becomes more important for corporate travel programs to closely manage expenses,” said David Henstock, VP, global commercial solutions, Visa Inc. “With Visa’s electronic payment options, businesses can optimize their travel programs by gaining insight into travel spend globally, and realizing efficiencies in reconciliation and reporting.”
Despite the slow year-over-year growth, caution at home and uncertainty in the global economy, the outlook for business travel in the coming months and years remains positive. It is estimated that there will be over 500 million business travel trips taken in 2016 and more than $295 billion spent on business trips this year. Though these numbers do not represent significant growth, they do represent positive growth that lays the foundation for a much-improved business travel outlook in 2017.