Will the Italian Business Travel Market Take a Roman Holiday?

Of the five European countries included in the most recent GBTA Foundation Western Europe BTI Report – the U.K., France, Germany, Spain and Italy – Italy is the most perplexing. While it, like the other nations, will experience slow and steady growth for 2016 and 2017, it won’t grow at the same rate as neighboring Spain, France or Germany. Italy is, however, one of the catalysts for ensuring that Europe’s recent economic recovery has come to the Continent’s southern nations and has not just been confined to the larger, northern ones.

Italy, along with the other nation’s that were examined for the Western Europe BTI Report, make up 70 percent of Western Europe’s business travel market, and serve as a strong indicator for the European business travel market more broadly. Taken together, the business travel trends of these five countries demonstrate that Western Europe’s business travel confidence and demand is growing due to a number of positive factors that are projected to continue into next year.

Like its neighboring European economies, Italy is expected to see growth in business travel spending in 2016 and 2017, though it will not experience the same higher rates as other Euro countries. It will, however, see growth rates of 3.6 percent and 3.5 percent in 2016 and 2017, respectively for its business travel market.

According to the Organization for Economic Cooperation and Development and FocusEconomics, Italy’s economy is projected to experience a 1.0 percent to 1.4 percent increase in its GDP in 2016 and 2017, which while low comparative to the growth rates of Italy’s northern neighbors, it is at least steady and consistent – with more robust growth anticipated on the horizon.

As Italy’s labor market improves and the government budget deficit continues to decline amid increasing tax revenue and declining interest payments on that debt, Italy’s business travel spending is expected to continue to rise, albeit at modest levels. However, Italy’s public debt as a percentage of GDP is the fifth largest in the world and second largest in the Euro zone, 132.6 percent against GDP in 2015. This sizable debt has a huge impact on the business travel market and will likely hinder investment prospects in the near-term.

Despite Italy’s significant debt, inflation continues to remain at historic lows, which should suppress travel-related goods and service prices in the next couple of years and therefore consumers and corporations should experience cost savings that will help drive Italy’s business travel in 2016 and 2017.

While Italy’s overall business travel market has seen modest growth recently, its domestic business travel market – which accounts for 90 percent of Italy’s total business travel market – saw a decline in 2013 before rebounding in 2014. Since then, Italy has experienced slow and steady growth in its domestic business travel market and is expected to do so again in 2016 and 2017 at rates of 3.0 percent and 3.4 percent, respectively.

Domestic business travel will benefit from low oil prices and an improving labor market, yet weaker global demand, political instability and high unemployment rates of 11 percent will likely suppress Italy’s growth prospects. It will not, however, suppress growth enough for Italy to experience a decline either in economic or business travel-related activity. Given Italy’s mixed-bag of positive and negative economic data, slow and steady growth is probably the best to be expected.