U.S. Business Travel Spending Growth Slows in 2015

Airfares Drop Due to Plunge in Oil Prices, But Rising Ancillary Fees Negate Savings

Alexandria, VA (October 13, 2015) – U.S. business travel spending will increase by 3.1 percent in 2015 and 3.7 percent in 2016, yet the global oil price collapse and economic weakness in China, Russia and the Middle East dampen the outlook for growth this year and next.

These findings are part of the GBTA BTI™ Outlook – United States 2015 Q3, a report by the GBTA Foundation, the education and research arm of the Global Business Travel Association (GBTA), and sponsored by Visa, Inc.

“Growth in U.S. business travel spending is softening as result of the uncertain macro-economic environment,” said Michael W. McCormick, Executive Director and COO of the Global Business Travel Association. “While the number of trips are up, total spending per trip is down. That can be linked to growing uncertainty and risk associated with the global economy, especially in China, Russia and the Middle East and the global collapse in oil prices. This should sound a clear note of caution for the overall U.S. economy.”

The Outlook released today represents a downward revision from the one released in July, when growth was projected to grow at 4.9 percent in 2015 and 5.4 percent in 2016. The revision can be attributed to three key factors:

1) U.S. companies are becoming far more selective in authorizing business travel abroad as a result of global economic uncertainty and risk. While we expect 5.4 percent growth in International outbound business travel volume this year, spending growth rates will be slashed by more than 50 percent from 2014 (from 8.6 to 3.4 percent).

2) Inflation in the business travel sector will be nearly flat (0.5 percent) in 2015 and modest (3.0 percent) in 2016, primarily due to the collapse of global oil prices. While the volume of U.S. originated trips will increase 0.7 percent from 495.8 million in 2014 to 499.2 million in 2015 and 514.8 million in 2016, the total growth rate for spend is actually down. This is especially true in two areas – air travel spending, which will decrease by 3.4 percent in 2015, and ground transportation spending, which will decrease by 7.7 percent.

3) Actual (as opposed to projected) business travel figures, which were revised to indicate higher trip numbers and lower spending figures for 2014 (see note below).

“According to the U.S. BTI forecast, companies are looking for ways increase business travel while still keeping costs in check,” said David Henstock, VP of Global Commercial Solutions, Visa Inc. “As companies look for efficiencies across their organization, electronic payments play a key role in helping both buyers and suppliers in the travel industry manage expenses and drive savings to their bottom line.”

The study also finds that the collapse in global oil prices is finally beginning to impact consumers, particularly when it comes to air travel spending. In 2015, the average airfare for a domestic roundtrip is $379, compared to $392 in 2014.

*Source for Historical Data: US DOT – Projection for 2015 is from GBTA Foundation

However, the benefit and savings from these lower fares is likely to be negated by increasing ancillary fees. During this same time period there has been an almost steady year-over-year increase in airline revenues from these extra fees.

Additional Business Travel Data

Individual Travel vs. Group – Revised figures indicate that group business travel significantly outperformed individual business travel for the second year in a row, as spending grew 7.1 percent in 2013 and another 6.1 percent in 2014. In 2014, spending on group business travel ($126.5 billion) exceeded spending on individual business travel for the first time since we started tracking business travel activity in 2008. The BTI Outlook predicts that group trip volume will grow 0.5 percent this year and another 3.3 percent in 2016. Spending on group business travel is expected to grow 3.2 percent and 2.7 percent in 2015 and 2016, respectively.
Individual volume soared in 2014, growing 6.7 percent, but total spending on individual trips actually fell 0.3 percent over the period as many overnight business trips were displaced by day trips. We expect this trend to reverse somewhat in 2015 as volume grows 0.6 percent and spending grows 2.8 percent. In 2016, individual volume is projected to grow another 3.1 percent to 319.3 million trips and spending is projected to grow 4.3 percent to $130.2 billion.
The continued declines in oil prices have led us to lower our expectations for price increases in key business travel categories like ground transportation, rental cars and airfare. Lower energy prices coupled with relatively weak economic growth will keep travel price inflation in check through the end of the year. We expect our business trip-weighted Travel Price Index (TPI) to grow only 0.5 percent in 2015 before accelerating 3 percent in 2016.

“As we look to 2016, we remain optimistic that business travel growth will accelerate,” explained Joseph Bates, GBTA Foundation Vice President of Research. “As business travel increases, so too will growth in the overall economy.”

Note on Annual Revision – One major change reflected in our forecast is an annual revision of last year’s final trip volume and spending estimates. This revision occurs once per year as final data for 2014 are collected and vetted. In 2014, we revised the total number of domestic person trips completed in the U.S. to 488.6 million. This is up from the 476.0 million previously reported and represents growth of 4.2 percent over 2013 (annual growth was previously reported at 1.5 percent). While total domestic volume was revised upward for 2014, the final tallies led to a slight downward revision in domestic spending. The 2014 domestic spending total of $252.9 billion was revised down to $248 billion, growing 2.9 percent over 2013.

The GBTA BTI™ Outlook – United States report is available exclusively to GBTA members by clicking here and non-members may purchase the report through the GBTA Foundation by emailing pyachnes@gbtafoundation.org. To view an abstract of this research, please click here.

CONTACT:

Colleen Gallagher, +1 703 236 1133, cgallagher@gbta.org
Scott Gerber, +1 202 463 0067, scott@vrge.us

About the GBTA Foundation
The GBTA Foundation is the education and research foundation of the Global Business Travel Association (GBTA), the world’s premier business travel and meetings trade organization headquartered in the Washington, D.C. area with operations on six continents. Collectively, GBTA’s 7,000-plus members manage more than $345 billion of global business travel and meetings expenditures annually. GBTA provides its growing network of more than 28,000 travel professionals and 125,000 active contacts with world-class education, events, research, advocacy and media. The Foundation was established in 1997 to support GBTA’s members and the industry as a whole. As the leading education and research foundation in the business travel industry, the GBTA Foundation seeks to fund initiatives to advance the business travel profession. The GBTA Foundation is a 501(c)(3) nonprofit organization. For more information, see gbta.org and gbta.org/foundation.