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GBTA BTI™ Outlook – Brazil (Select Pages)

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The GBTA Foundation, the education and research arm of the Global Business Travel Association (GBTA), commissioned Rockport Analytics, LLC to build the first-ever semiannual business travel outlook for Brazil. Sponsored by Visa, the purpose is to provide corporate travel professionals and the broader business community insight into both short- and long-term trends in domestic and international outbound business travel activity.

The full report is available for purchase for non-members and at no cost for GBTA members. To learn more about the Global Business Travel Association please visit www.gbta.org.

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GBTA BTI™ Outlook – Brazil (Select Pages)

  1. 1. GBTA BTI™ Outlook – Brazil Prospects for Domestic & International Outbound Business Travel 2013-2014 2013 H1 Our near-term Outlook for Brazilian business travel has been slightly upgraded from our expectation in 2012H2. The improvement is being driven by better prospects for domestic business travel over 2013 and into 2014. We expect total Brazilian BTS to grow 14.3% in 2013 and another 16.1% in 2014.
  2. 2. GBTA BTI™ Outlook – Brazil 2013 H1 Page 10© February 2013 GBTA and its affiliates. All rights reserved. Members may copy this publication in its entirety for internal company use. The GBTA Foundation estimates that Brazil’s business travel industry currently ranks 8th in the world, up one spot in the rankings from 2011. We expect Brazil to continue to climb the rankings as a major business travel market, surpassing both France and Italy over the next few years. Brazilian international outbound business travel (IOB) grew significantly faster than domestic travel spend through 2010 but has slowed its pace in 2011 and 2012. Rapid growth in export volume drove this trend over the last 10 or 15 years, but the slowdown in the global economy, particularly in some of Brazil’s major trading partners – China, the U.S. and Europe – have led to a softening of IOB volume and spend expansion. Domestic business travel has also grown aggressively over the last decade as well, albeit not as quickly as IOB. Domestic business travel has expanded 8.3% per year, on average, over the last 12 years. A major impact on the near term future of domestic business travel in Brazil lies in whether the country’s infrastructure can keep pace with economic growth, a feat that has yet to be accomplished. The Brazilian government, however, is taking strides to make the necessary improvement by selling billions of dollars in assets to private investors through long-term concession deals that would give the winning bidder the right to operate roads, rails and ports. Business Travel Spending Drivers & Productivity4 Forecasting domestic and IOB business travel spending requires that we find the strongest and most reliable correlations with Brazilian economic and market indicators. The indicators are chosen based upon both statistical testing and economic fundamentals. In the case of Brazilian domestic business travel spending, a strong correlation was found between Brazilian job growth and travel spending. Expanding employment is indicative of rising business confidence, improving top line performance, and increasing traveler populations. Other economic drivers, such as retail sales, business confidence, investment spending, and GDP, also demonstrate strong correlations with domestic business travel spending. In the case of IOB spending, we found strong statistical relationships with merchandise trade, exchange rates, the GDP of principal trading partners, oil prices, the level of foreign direct investment (FDI) and business confidence. Outbound travel is clearly driven by Brazilian trade performance, both on the export and import side of the ledger. Capital flows, notably FDI, is also a strong driver of IOB travel spend. Forecasting business travel activity must also take into account underlying secular trends. One of the most critical is travel productivity. Like other input materials and labor, travel’s productivity rises over time. That is, over time less travel spending is required to support each additional sale. In other words, businesses have been successful in extracting more and more value from each business trip. Brazilian business travel productivity has been growing by about 2.8% per year since 20005. This means that as Brazil’s output expands, slightly less business travel spending is required (per Real) to support sales, operations, education/training, customer support, and other trip purposes. 4 For more information see GBTA BTI Outlook Report –Brazil 2012H2. 5 Global Business Travel Spending Outlook 2012‐2016, GBTA Foundation & Visa, Inc., July 2012 Country 2012 Total Business Travel Spending ($USD) 1 U.S. $256.5 2 China $202.1 3 Japan $66.2 4 Germany $50.3 5 U.K. $40.5 6 France $36.3 7 Italy $33.6 8 Brazil $31.1 9 S. Korea $31.1 10 Canada $22.5
  3. 3. GBTA BTI™ Outlook – Brazil 2013 H1 Page 12© February 2013 GBTA and its affiliates. All rights reserved. Members may copy this publication in its entirety for internal company use. Domestic travel spending growth in Brazil was cut in half in 2012, falling from 20.5% to 9.4%, but is set to pick up the pace again in 2013 with projected growth of 12.9%. We expect it to continue to grow in the double-digits in 2014, with more robust growth coming early in the year. An excellent indicator of IOB business travel prospects is found in premium class air passenger counts and revenue passenger kilometers. According to previous research conducted by the GBTA Foundation and Boeing, a significant portion of premium passengers are business travelers6. The adjacent charts show the top IOB premium travel markets from Brazil by both Revenue Passenger Kilometers (RPKs) and total passengers. In terms of passengers, the U.S. is the top outbound premium travel market followed by Argentina. In passenger kilometers flown, however, The European countries of France, Italy, the UK and Germany are significant IOB destinations and leapfrog Argentina in the rankings. The top 10 IOB markets comprise nearly 70% of total premium travel from Brazil. Brazilian IOB spending growth recovered somewhat in 2012 but is still down significantly from the high growth years of 2010 and 2011. We expect 2013 to bring a robust recovery to Brazilian IOB as Europe recovers and China regains strength. After 9% growth in 2011, IOB spending is on target to expand 20.2% this year and another 36% in 2014, a return to 2010 growth rates. Brazilian Business Travel Spending Forecast Summary 6 Consumer Choice in Premium Air Travel: Traveler Profiles & Motivations, GBTA Foundation, July 2011 BTS 2010 2011 2012e 2013f 2014f In millions of current USD Brazil Domestic $18,369.0 $22,136.0 $24,222.6 $27,339.6 $30,326.9 % change 14.4% 20.5% 9.4% 12.9% 10.9% Brazil IOB $ 5,124.8 $5,417.3 $5,935.8 $7,134.8 $9,700.5 % change 36.3% 5.7% 9.6% 20.2% 36.0% Total $ 23,493.8 $27,553.4 $30,158.5 $34,474.4 $40,027.4 % change 18.6% 17.3% 9.5% 14.3% 16.1%

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