Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

GBTA BTI™ Outlook – United States: 2013 Q3 (Select Pages)

282 views

Published on

Business travel spending is expected to see a robust year in 2014 fueled by steady corporate profits, increases in business investment and an improving U.S. economy. However, the ongoing government shutdown and potential default could derail progress and is already impacting business travel sentiment.

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.

Published in: Travel, Business
  • Be the first to comment

  • Be the first to like this

GBTA BTI™ Outlook – United States: 2013 Q3 (Select Pages)

  1. 1. 2013 Q1 2013 Q3 GBTA BTI™ Outlook – United States Prospects for Domestic & International Outbound Business Travel 2013-2014 2012 Q2
  2. 2. 33 GBTA BTI™ OUTLOOK – UNITED STATES 2013 Q3 © October 2013 GBTA and its affiliates. All rights reserved. Members may copy this publication in its entirety for internal company use. GBTA BTI™ Outlook –United States 2013 Q3 PROSPECTS FOR DOMESTIC & INTERNATIONAL OUTBOUND BUSINESS TRAVEL 2013-2014 Executive Summary  Our 2013 Q3 outlook for US business travel has been slightly downgraded from last quarter. In the second quarter of 2013, 66.9 million person-trips were generated in the US and $112.7 billion was spent on business travel activity. This represents an annual decline of -1.3% in volume and growth of 1.5% in spending. In total, we expect business travel volume to fall -0.6% in 2013 to 451.7 million person-trips; spending will pick up 2.9% growing to $269.5 billion USD.  Signs of improving growth are developing across many segments of the U.S. economy… with the notable exception of all levels of government. The private sector will continue to drive moderate gains through 2014 through sustained consumer spending, more robust business investment, and rising housing activity. Meanwhile, exports will take a backseat and the government sectors will provide a distinct headwind. After registering essentially flat in 2012Q4, GDP has slowly gathered momentum. The most recent release (2013Q2) reported growth at 2.5%.  Expectations for renewed business investment spending come from the confluence of a number of strengthening leading indicators. First, corporate profits and cash flow remain strong. Secondly, management sentiment has brightened considerably in the past few months. Thirdly, postponed capital purchases have created some degree of pent-up demand. Finally, modest-yet-sustained top-line revenue growth requires new and replacement equipment to maintain production, productivity, and competitive advantage. Importantly, these same conditions also suggest improved business travel activity ahead.  Housing activity is also a tide that is lifting many economic boats. Improved housing sales in the face of constrained inventories has pushed up prices (in many markets at double-digit rates), sparked increased household durables sales, and boosted the construction sector. Very few segments of the economy provide the kind of economic catalyst for growth as does housing. Given its direct and indirect positive effects, continued housing market improvement is paramount to a more robust U.S. economy for the remainder of this year and beyond.  Consumer spending is yet another bright spot in the current economic landscape. Moderate job growth and (very) slowly rising incomes have helped to improve consumer confidence and spur personal consumption expenditures -emphasis on the words “moderate” and “slow”, however. Personal consumption did expand by 1.8% in 2013Q2, down from 2.3% in the first quarter. There is another force at work providing a slight headwind for consumer spending, however–deleveraging. Given the economic challenges of the last few years, households have rapidly retired existing debt and largely avoided new borrowing. Despite new auto loan activity, slowly increasing revolving credit, and rising student loans, households are still taking a conservative stance toward new debt providing a slight headwind for new consumer spending.  Looking ahead to 2014, we expect gathering momentum to continue through next year and beyond resulting in sustained growth with low inflation. Economic growth will largely come from the private sector, particularly housing and business investment, given the fiscal challenges that exist at all levels of government. Moreover, tepid global growth will keep export contributions relatively small through 2014. Finally, the uncertainty created by (a) the upcoming debt ceiling debate, (b) continued Sequestration, and
  3. 3. 66 GBTA BTI™ OUTLOOK – UNITED STATES 2013 Q3 © October 2013 GBTA and its affiliates. All rights reserved. Members may copy this publication in its entirety for internal company use. Expectations for renewed business spending come from the confluence of a number of strengthening leading indicators. First, corporate profits and cash flow remain strong and growing. Companies have both the internal means to self-finance equipment expansion and the collateral to borrow. Secondly, management sentiment has brightened considerably in the past few months (see adjacent chart). Thirdly, postponed capital purchases have created some degree of pent-up demand that should start to be released in the quarters ahead. Finally, modest- yet-sustained top-line revenue growth requires new and replacement equipment to maintain production, productivity, and competitive advantage. Importantly, these conditions also suggest improved business travel activity ahead. Housing activity is also a tide that is lifting many economic boats. Improved housing sales in the face of constrained inventories has pushed up prices (in many markets at double- digit rates), sparked increased household durables sales, and boosted the construction sector. Very few segments of the economy provide the kind of economic catalyst for growth as does housing. The adjacent graph charts the progress of new housing starts, both single and multifamily units, from the peak of the housing bubble in early 2006 to the trough of the Great Recession on through to the latest data (July 2013). Multifamily construction had already been rising rapidly as newly formed households and families displaced by foreclosures flocked to apartment units. With slowly rising job growth and still-favorable mortgage rates, record affordability also has single family dwellings getting into the growth game. Perhaps the best news is that there is still a long way to go before record-low inventories are replenished, particularly considering the current rates of sales for new and existing homes.
  4. 4. 1313 GBTA BTI™ OUTLOOK – UNITED STATES 2013 Q3 © October 2013 GBTA and its affiliates. All rights reserved. Members may copy this publication in its entirety for internal company use. BUSINESS TRAVEL QUARTERLY OUTLOOK DETAILS Total U.S.-Originated Business Travel Spending & Trip Volumes3 Our forecasts for U.S.-originated business travel spending and Person-Trip volume have been slightly downgraded from last quarter’s outlook (GBTA BTI™ Outlook – United States, July 2013). Total business travel volume is almost on par with our expectations from last quarter, while our spending forecast is slightly lower – mostly the result of lowered expectations for travel price inflation. In the second quarter of 2013, 66.9 million person-trips were generated in the US and $112.7 billion was spent on business travel activity. This represents an annual decline of - 1.3% in volume and growth of 1.5% in spending. In total, we expect business travel volume to fall -0.6% in 2013 to 451.7 million person-trips; spending will pick up, however, by 2.9% growing to $269.5 billion USD. We see both the US and global economies continuing to pick up momentum into 2014, which will help to accelerate the growth in business travel. We expect volume to grow 1.7% to 459.2 million person-trips and spending to pick up 7.2%, growing to $288.8 billion USD. Group Meeting & Convention vs. Transient Business Travel Group travel outperformed transient business travel in 2010, mainly the result of a cyclical snapback from the Great Recession – a period when spending on group business travel experienced double-digit annual declines. In 2011 and 2012, however, the global recovery stalled as Europe entered into Recession, China’s growth slowed, and the economic recovery in the US was anything but robust. Those woes weighed on the volume of group business travel, which fell -0.6% in 2011 and eked out a gain of only 0.5% in 2012. Despite negative volume growth, spending on Group business travel received a significant boost from rising travel prices and higher spend per trip in 2011, growing 7.2%. In 2012, spending on group slowed to 3.3% as inflation slowed, the economic recovery pumped the brakes and meeting planners were forced to deal with smaller budgets. Transient has been a bit more resilient over the last couple years. Through the economic recovery firms have continued to invest in activities (like transient business travel) that support top-line growth. In 2012, there were a total of 281.6 million transient Person-Trips, 3.2% growth over 2011. 3 Includes all U.S. domestic business travel plus international outbound trips

×