Looming fiscal cliff presents unique challenges for business travel sector
Thursday, November 15, 2012
Whether they choose to stay in serviced apartments, corporate housing or hotel chains, today's business travelers face unprecedented challenges. Maximizing productivity without compromising on quality remains one the greatest difficulties for frequent travelers, and the need to secure cost-effective flights and accommodations has never been greater. However, the actions of the government could soon have a detrimental impact on business travel in the U.S., according to a research report published by the Global Business Travel Association (GBTA) Foundation.
Plunging off the fiscal cliff
The results of the GBTA study indicate that, if action is not taken to address the looming expiration of tax cuts and automatic reductions in spending, known collectively as the "fiscal cliff," the business travel sector in the U.S. could lose more than $20 billion in revenue over the next nine quarters. This scenario represents a decline of approximately 32 million business trips, equivalent to a drop of 2.5 percent.
If the government takes action to address the problem, business travel in the U.S. would actually increase as a result of stimulus spending caused by lower rates of taxation and increased government spending. While this may seem like good news for executives, corporate apartment service providers and other associated businesses, data from the GBTA indicates that much of the growth in spending would actually be attributable to inflation.
"Given business travel's indispensable role in spurring economic growth, these findings dramatically illustrate the potential impact of the fiscal cliff on the overall economy," said Joseph Bates, vice president of research at the GBTA Foundation. "Falling over the cliff would set back the clock substantially for business travel and every other sector of the economy in the near term."
A sign of things to come
According to Paul Krugman, a Nobel Prize-winning economist and regular contributor to The New York Times, the deepening financial crisis observed in the Eurozone is a sign of the potential damage that government inaction could have on the U.S. economy.
In a recent opinion-editorial, Krugman pointed out that slashing government spending and raising taxes could have disastrous results on an already-fragile economy. Business travel, industrial production and other key economic sectors would be hit hard by austerity policies, and general unemployment could rise significantly, as it has in many European countries.
Regardless of whether the government acts to prevent the looming crisis, business travelers face many challenges in the year ahead.