While Americans traveled more in 2012 than they did the year before, in business travel news, the U.S. Travel Association reports that slow growth is to be expected in U.S. travel due to unstable economic factors and lower business confidence. Business travel is also expected to trend downward starting in the new year, according to a 2013 forecast, which could mean increased challenges for businesses.
Forecasts for travel in 2013
The state of the economy — and the pending “fiscal cliff” — is just one factor playing into predictions that the travel business will encounter a downward course.
Rising costs of travel may also contribute to decline in the coming year. The most recent reports show costs of domestic airfare and car rentals had already increased slightly during the third quarter of 2012.
According to Chris Davis in “Travel Leaders Corporate: Q3 Domestic Air Costs Up, International Down,” a November 29, 2012 post to Business Travel News, domestic travel costs are all up compared to 2011, while their international counterparts are all seeing decreases in costs due to Europe’s continuing economic uncertainty. Some of the additional findings by Travel Leaders Corporate, a travel management company, include:
- Average domestic air travel costs rose from $400 to $412 (with additional increases expected in the first two quarters of 2013)
- Domestic car rental prices increased from $147 to $168, while the per-day cost fell to $46 to $44.
‘”It continues to intrigue me that despite consolidation in the car rental segment of our industry, the three major car companies remain very competitive with corporate pricing as daily rates trend downward,” said Travel Leaders Corporate President David Holyoke in the post.
Reasons for slowed growth
The travel industry as a whole is affected by varying economic factors, which some predict will moderate down the line. In a November 4, 2012 post to Press of Atlantic City, “Vegas Wire: U.S. Travel Association predicts travel growth will decrease in 2013,” David Huether, senior vice president of research and economics for the U.S. Travel Association, pointed out durable goods as one such factor. In August, there was a 13.1 percent decrease in sales of durable goods, and only a 9.9 increase in September. Plus, business confidence is taking a plunge while consumer spending is growing at a higher rate than disposable income.
“I think that’s an unsustainable path,” Huether said.
What this means for business travel
With travel costs fluctuating toward the end of this year, it’s important to note that any increases in business travel spending is not due to people taking more trips, but because of the increased costs to travel. A major finding by the Global Business Travel Association, released in a post to NBC News, “Business travel growth sluggish, report says” by Tanya Mohn, shows that job growth is not generating more business travel as has been the case in past economic recoveries. Instead, job gains reportedly are concentrated in areas that are less prone to business travel, with a worsening gap predicted for the future. Slower growth in China and the Far East, the shaky economy in Europe, and domestic unemployment are cited as causes for curbed business travel growth. Other factors cited by Mohn include:
- Slowing of group travel
- Unpleasant business travel policies (i.e. crowded flights, problems with airport security, airline delays)
- Increased investment in videoconferencing
With business travel statistics the way they are, businesses are holding back on making any drastic changes, Michael W. McCormick, executive director and chief operation officer of the GBTA, said in the article.
“Corporations are in a wait-and-see mode and holding back on investment decisions that would help boost the economy,” McCormick explained.
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