Business Travel Spending Increases Create Continued Economic Optimism
As you may have seen we just released our third quarter business travel forecast on Tuesday. Very much in line with last quarter’s forecast, U.S.-generated business travel spend is expected to increase by 6.8 percent to $292.3 billion in 2014.
The forecast showed business travelers spent an estimated $72.8 billion on U.S.-originated business travel during the second quarter of 2014, a 7.1 percent year-over-year growth despite a slight year-over-year reduction of -0.1 percent in the total number of trips taken in that quarter. A similar trend was seen across the 2014 calendar year in group business trips – travel to business meetings or conferences. The number of trips is expected to dip 3.3 percent, while spending on group business travel is expected to increase by 5.9 percent.
The continued strong demand in business travel spending is a positive sign for our economy. Companies are continuing to make investments in growth by spending money to put their people on the road. As always, business travel drives business growth.
However, the increase in spending does not come without any concerns. Travel costs are expected to increase 2.9 percent this year and an additional 3.5 percent in 2015, led by rising food and beverage costs, hotel prices and airfares. These rising prices play a role in the increase of business travel spending. It’s too soon to tell how it will play out, but we are paying attention to this dynamic as companies plan their 2015 budgets so we can see whether increased prices across the air and hotel sectors will have an impact on business travel demand.
There is still reason to be optimistic though. Households and businesses are feeling good about the near-term future and their spending behavior will soon begin to reflect that sentiment. In addition, businesses are poised to step up their investment in equipment, information technology and structures, which will be accompanied by gains in business travel spending.
Another positive indicator is international outbound (IOB) travel. GBTA forecasts U.S. IOB to grow in volume by 5.6 percent in 2014 and another 6.5 percent in 2015 – a key indicator of the global economic recovery.
For now, the story is continued confidence in the overall economic recovery. We will pay close attention over the next quarter to determine if this rising optimism will stay on track.