New study claims business travel keeps profits buoyant
Thursday, May 9, 2013
In tough economic times, the decision to cut back on business travel is a difficult one for many organizations. Sending executives to international destinations can prove costly, especially given the increases in corporate airfare that have been reported in recent years. However, according to a recent study, companies that maintained corporate travel spending fared significantly better during the worst days of the recession than those that did not.
An economic powerhouse
The study, which was conducted by researchers at Oxford Economics and commissioned by the U.S. Travel Association, revealed that business travel is one of the nation's most important economic drivers. In 2012, U.S. organizations spent a total of $225 billion on corporate travel, which, in turn, supported 3.7 million jobs and contributed $35 billion in tax revenue.
A key finding of the report indicated that, after declines in 2008 and 2009 at the height of the recession, business travel spending increased during 2010 and 2011, and now, many organizations have reached corporate travel spending levels similar to those reported prior to the global economic crisis.
While this is excellent news for companies hoping to put the past few years behind them and expand in the coming months, the study also revealed a connection between business travel spending and economic resiliency. Researchers analyzed historical data from 2007 to 2011 and found organizations that maintained business travel spending posted higher profit margins than those that reigned in corporate travel as a cost-cutting measure. In fact, the return on investment is so high, researchers determined that for every dollar spent on business travel, organizations received a return of around $9.50.
In addition to providing businesses with a way to maintain growth in a challenging economic climate, corporate travel is also proving a boon to the accommodations sector. According to USA Today, business travel represents the most significant growth vertical for the hospitality industry. However, for service providers offering corporate suites in chain hotels, profit margins are razor thin, and competition is heating up for guests.
Although this might be unwelcome news for chain hotels, it represents a major opportunity for service providers offering alternatives to typical accommodations. As companies seek to maintain business travel without sacrificing profits, serviced apartments and furnished extended stay units could become increasingly popular with budget-conscious travel management professionals. These suites are ideally suited to the needs and expectations of today's executives, and offer the quality of high-end boutique hotels with a price that is sure to please even the most discerning corporate travel buyer.